It can be difficult for any small business owner to make biweekly payroll every two weeks. To make matters worse, while employers who pay their staffs on a biweekly basis typically only have to write checks twice a month, there are two months every year where three checks are required.
Depending on your small businesses’ pay schedule, July may be one of those three-check months. In other words, if one of your company’s paydays falls on July 1, you’ll also have to send checks out July 15 and July 29.
While employees might look forward to three-check months as soon as they’re able to identify them, small business owners—particularly those with cash flow problems—cannot afford the same luxury. In addition to still needing to pay landlords, suppliers, vendors, and utility companies by the end of the month, owners have to figure out how to scrape together enough money to cover an additional paycheck.
This is often easier said than done—even for small businesses that have attractive financial statements. According to our recent research, 64% of small businesses are routinely affected by late payments. So even if a business has a zillion dollars in accounts receivables, those assets can’t be directly converted to paychecks until clients actually pay their bills.
Have you had a hard time writing three checks to your employees during a single month? Are you dreading having to do it this month or later on in the year? If so, consider these three tips:
Plan ahead for biweekly payroll as early as you can
Instead of flipping over your calendar and realizing that biweekly payroll means you need to pay your employees three times this month, you’d be much better off planning ahead far in advance. That way, you would realize in January, for example, that you’d need to write three checks in July (if your company’s pay schedule warranted it)—giving you enough time to figure out your course of action.
Switch pay periods to the 15th and 30th
You may not be able to do this overnight, but if three-check months have been a problem for you, it may be time to switch your pay schedule. Instead of writing checks every other week, you can pay your workers twice a month, on the 15th and the 30th. Those payments will be slightly larger than biweekly payments, but your salary expenses will be spread out more evenly across the year.
Use an invoice-clearing service like Fundbox
Rather than waiting for customer checks to come in to convert your accounts receivables to cash, you can use an invoice-clearing service like Fundbox to advance payments on outstanding invoices. For a small fee, Fundbox gives you the cash you need to grow your business quickly. You then have 12 weeks to repay the advance, plus the fee. Running into a pinch during a three-check month? Use Fundbox to ensure your employees get paid on time.
Three-check months can throw a wrench into your operations—but only if you let them. The good news is that by doing your due diligence ahead of time and becoming familiar with the financial tools at your disposal, you should find it considerably easier to absorb the extra pay period twice a year.
