From COVID-19 to conflicts like the Russia-Ukraine war to rising costs from inflation and food supply chain issues, the last two-and-a-half years have not been easy for any of us. COVID-19 has impacted nearly every facet of our lives worldwide, but it has had a particularly strong impact on food security. World hunger and poverty has already been a major issue across the globe, and COVID-19 has only made things worse. According to the World Food Program (WFP) the number of severely...
Small Business Challenge: Payroll and Vendor Payments
Nearly 1/3 of small businesses struggle to pay vendors, bank loans, and their staff. The issue is usually not a result of low sales, rather, an issue in payment processing. For some businesses, it takes up to a month for banks to process each payment. With some payment processing solutions, banks will charge YOU, the merchant, a percentage of each sale you make. If you have a great sales day you could lose up to .10-cents for every dollar you earn. This not only takes your hard earned money but your time too. Find out about some more issues that your small business may face, and some solutions to make sure your business remains a success:
- One of the largest challenges facing new companies is complying with all government regulations in terms of payroll. What makes this such a risky situation is the punishments that can be given if you do not meet standards. No one wants to give away a percentage of their revenue, but if you don't numerous sanctions and fees can begin to pile up. This restricts your cash flow even more and greatly reduces your chance of success. In some cases, people who fail to pay taxes and other fees can face legal troubles.
- Your best chance at preventing setbacks is staying informed. There might be one group that wants you to be prepared more than yourself and that is the government. 81% of tax revenue is a result of income and payroll taxes, which equates to roughly 3.18-trillion dollars. It is safe to say that the government will verify your information under a very large microscope. With that being said, usually there are other government agencies who will assist you in preparing your business, and do it for free. Some private companies also specialize in helping your business getting started through mobile applications and other communication channels.
- Many payroll issues can come from human error. No one is perfect, but most people expect their business to be. In order to ensure perfection, utilize the technology available in today's day and age. Modern-day accounting is done through websites and special software, and for many companies so is payroll. Websites/Applications such as Namely, Intuit Quickbooks, and Paycom have created user-friendly systems that not only cover payroll, but they also manage benefits, time/attendance, and other HR needs. Extra benefits that come with companies like Intuit Quickbooks is they also calculate payroll tax, and they file your State and Federal taxes removing any chance for scrutiny.
- Vendor Payment:
- One of the most important vendors that you must pay in your small business is distributors a.k.a the people whom you get your products from. Now, this is one of the biggest challenges a small business owner may face. Trying to sell your goods at a reasonable price is usually based on how much you get them for from the distributor. It is just as important to get your goods at a low price as it is to sell them at a low price, because if you don't someone else will. A safe plan to making sure you don't pay too much is only set a certain amount aside for your goods. Fight to keep that payment low that way you can retain some money for the other vendors in this list you may need.
- Almost like a car, you always run into maintenance issues. A business is no different. Things come up and some of that is under your control and others are not. For instance, damage due to a storm is a very common issue and rather than run to an insurance company who will jack-up your rates, it may be smart to keep a stockpile of money yourself to care for those types of issues. Other costly fixes fall under the umbrella of routine maintenance. As much as people want to be experts sometimes you must defer to someone's better judgment when they tell you something is wrong. This means that staying in front of risks before it becomes an issue might be your best choice. Now, how do you prepare? Well, manage your money well. Do not roll out your wallet for every innovation or market trend that comes through. Measure your Risk vs. Reward and see if it is something that can bring you immediate funds or a progressive system, then analyze if something may need more attention in the present future.
- Managing your money made be one of the more stressful areas as a business owner. Between the taxes, bills, and distribution fees you may be up to your eyes in numbers, but thankfully there are people out there who specialize in this type of work. The next vendor you want to make sure you are budgeting for is an Accountant/Financial Planner. Accountants and Financial Planners can ensure that you are storing the proper amount of money each month, quarter, or year to prepare for different vendor payments. If accounting is new territory to you then this may be your best choice, as Accounts Receivable/Payable can be head-turners for novice business owners. As mentioned above, trying to do things yourself is great, but when it comes to accounting, missing one digit can be costly for a business especially if it is a government document. Play it safe and defer to professionals. For some, that is not an option but luckily there are plenty of options and software companies created for people who want to track their accounting like Intuit Quickbooks which also tracks your payroll. Next to distribution an accountant might be the biggest thing you budget for.
- Lastly, the vendor you might think you have to pay is your payment processor or whoever manages your transactions. You might not think this is a cost that you'd have to pay attention to, but some processors actually take money on each sale you make and the total amount of sales. Some take 10-cents for every dollar you earn and have other hidden fees just waiting to make a quick buck off of you. Banks and other processors may also hold your profits for weeks, if not, months. If any of the situations above require an immediate payment then you may be in a world of trouble with your profits being held. Fortunately, if you are reading this blog then you are with the right people. At goEBT, we charge one flat rate each month which keeps the money in your pocket.
- The proper payment systems will make all the difference when it comes to everything listed above. Without it, you won't have the money available to you at the time of payment. One of the most important issues involved in paying vendors is paying them on time. It's always a challenge to find good help, but when you do find it make sure you're punctual. Just like you need your money, they need theirs as well and it reflects well on your business. There are 100's of options and opportunities for the situations listed above. It is up to you to decide what to do, but much of what is listed is some of your best, most proven options so choose wisely.