In this blog, we go through:
Payroll is one of the most essential elements being in business as an entrepreneur. As the business owner, if you are not on payroll and performing good habits, you may run into some disadvantages for your company, as well as, your personal life. Avoid those future disasters by getting the foundation right the first time around as a business owner on payroll. Greg Crabtree, author of “Simple Numbers, Straight Talk, Big Profits!”, advocates to not only pay yourself but do not under or overpay in order to keep the business numbers in check and accurate.
Importance of Getting Yourself on Payroll
Opportunities from Potential Investors
Being on payroll not only shows that you are getting paid, but it also shows responsibility and commitment. This is one of the many aspects that investors look for when they are interested in potentially investing in a business. Investors that see business owners paying themselves, it gives them a sense of relief that the business owner is highly committed to keeping the business running.
Important Business (or Non-Business) Applications
With that said, not only do investors show interest in seeing business owners pay themselves, the banks and other financial companies also view it as highly important. Without seeing this, the business may not be able to apply for important business loans or programs. Without simply putting yourself on payroll, you are at a disadvantage when it comes to these opportunities or even tax benefits. This includes but not limited to PPP, loans, and even mortgages. Without proof of income, receiving these will be at a low chance without being seen on consistent payroll. Here's a video on a few ways to increase the chances of your business receiving a loan.
Accurate Numbers for Business
Last but surely not least, being a business owner showing on consistent payroll helps prove accurate numbers for business. Without this, the numbers on reports are fake and skewed. This altogether shows false information to both investors, banks, etc. So, limit the distortions of the business’s health in numbers and get on a consistent market-based salary.
Best Practices for Business Owners on Payroll
Use ACH Payments
A possible payment method is to do an Automated Clear House (ACH) transfer from the business bank account. There is also the option of writing a check, but the ACH transfer is much more efficient and the way to go for the future of money transfers and payments.
Separate Business and Personal Finances
The act of using business finances with personal is called comingling. One of the best ways to separate business and personal finances is to open up a business checking account. You don't know where the money is really going when you are comingling, especially as the business grows it will make things less clear. By comingling, it also distorts how profitable the business actually is, therefore it is hard to see how healthy the business is in actuality. When you and your business are ready to bring on a bookkeeper, they are going to want business and personal finances separated, otherwise it is going to be very complicated and difficult to get the bookkeeping done.
Consider Payroll Service
Handling payroll can become complicated and a bit tricky. Consider reaching out to a professional service to take care of it so you don’t have to deal with it by yourself. Financial GPS recommends Gusto as the prime payroll service. However, every business has different needs. So, chat with us today for more information.
Establishing best practices for payroll is important to any business. Whether it’s investors or financial companies providing loans, being able to show proof of having been on payroll consistently in order to even qualify is one of the most crucial initial steps. If you have any questions for more information on Financial GPS’s services, chat with us today.