When Contractors Ask - Which payroll option we recommend we usually say Direct Deposit. The reasons are simple and as usual related to our primary role as "Profit And Growth Specialists For Contractors" and our Primary Mission which is helping you, the men and women of the greatest industry on earth, construction industry to achieve your definition of success. You deserve to be wealthy because you add value to other people's lives.
The First Option - Paper check looks like the least expensive. Calculate payroll hand write or print a paycheck, hand it to your employee and done.
Like the Iceberg there are costs you see and costs you don't see. It is the hidden costs that cause your Profit and Loss to look bad at the end of the year.
What Is The First - Thing an employee does after getting a paper paycheck? They go to the bank or the check cashing store and get cash!
If They Are Paid For Travel Time - To and from the jobsites they will typically cash their paycheck on the way to the jobsite or take a break as soon as the bank opens.
There Are Three Costs - To consider:
#1 Travel Time - See What Is Ten Minutes Costing Your Company and Multiply By Three! Because it will take ten minutes each way to detour to and from the bank or payday advance company plus ten minutes inside the building.
For Example: You pay your employee $25.00 per hour that means Every Ten Minutes Of Doing Personal Business On Company Time Costs You $5.94 Multiplied By Three Equals $17.82. If Your Company Earns 10% Net Profit Then You Need To Sell Another $178.20 Worth Of Work To Make Up The Loss You Suffered.
If there is more than one worker in the company vehicle simply multiply everything by that number
See The Chart Below:
Every Ten Minutes Your Construction Worker Costs You $5.94
#2 Cost Per Mile - To operate the company vehicle which varies depending on the type of vehicles your company uses. Generally numbers we see are range from $1.25 to $1.75 per mile. This takes into account Fuel + Insurance + Repairs + Maintenance + Registration + License divided by the number of miles driven. In this example we estimate a three mile detour at the middle range of $1.50 per mile = $4.50
#3 Delays On The Job - In construction you are dealing with project based system not an operations or manufacturing based operation. Every additional day you have to mobilize and de-mobilize costs you money. For example if it takes (15) minutes for (4) workers to get setup in the morning and the same amount of time at night your total costs could be $121.92
Total Cost For Paper Checks - Between $15.00 and $50.00 per employee. To get the actual results for your company some analysis would need to be run or you would simply look in your Business Process Management System (BPM) for the answers.
The Second Option - Direct deposit could cost an additional $5.00 per payroll and $0.99 per deposit. Direct deposit drops into your employee's bank account one minute after midnight on the day payroll is due. The cost of having a Professional Bookkeeper prepare the payroll is less with direct deposit because of the time saved in preparing and printing the paper checks, setting them aside for you to sign them, stuffing them in the envelopes and taking time to pass them out.
The Third Option - Debit Card is similar to direct deposit. The difference is the employee does not need a checking account.
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About The Author:
Randal DeHart, PMP, QPA is the co-founder of Business Consulting And Accounting in Lynnwood Washington. He is the leading expert in outsourced construction bookkeeping and accounting services for small construction companies across the USA. He is experienced as a Contractor, Project Management Professional, Construction Accountant, Intuit ProAdvisor, QuickBooks For Contractors Expert and Xero Accounting Specialist. This combination of experience and skill sets provides a unique perspective which allows him to see the world through the eyes of a contractor, Project Manager, Accountant and construction accountant. This quadruple understanding is what sets him apart from other Intuit ProAdvisors and Xero accountants to the benefit of all of the construction contractors he serves across the USA. Visit http://www.fasteasyaccounting.com/randal-dehart/ to learn more.
Our Co-Founder Randal DeHart - Is a Certified PMP (Project Management Professional) with several years of construction project management experience. His expertise is construction accounting systems engineering and process development. His exhaustive study of several leading experts including the work of Dr. W. Edward Deming, Michael Gerber, Walter A. Shewhart, James Lewis and dozens of others was the foundation upon which our Construction Bookkeeping System is based and continues to evolve and improve. Check out our Contractor Success Map Podcast on iTunes and Follow Randal on Google+