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    Why It Pays To Offer Your Construction Employees Payday Advances

    Posted by Randal DeHart on Wed, Feb 15, 2012

    Sometimes Construction Company Employees Need A Little Cash Between Paydays

    Owning a contracting company with employees and a burning desire to generate a profit means you need to do whatever you can within reason to help keep them focused on their job.

    If a need arises for cash between paydays they have several options and here are two of them:

    Option #1 - They get a payday loan from one of the many companies that offer that service.

    • A typical 14-day advance of $100 will cost them roughly $15 which is approximately 391 percent annual interest rate.

    • If they do it regularly it can cause your good employee to get deeper and deeper in debt which means their cash flow problem gets worse not better.

    • When do they visit the payday loan store? If they are paid for travel time to and from the jobsites they will typically do it on your time. Run the numbers and you will know it takes roughly ten minutes each way for the detour to and from the payday advance company plus ten minutes inside the store which totals 30 minutes.

    • For Example You pay your employee $25.00 per hour and they waste 30 minutes:

      • Ten Minutes spent on personal business during company time costs $5.94

      • Multiplied by three to get to 30 minutes = $17.82.

      • If your company earns 10% net profit you need to sell $178.20 more work to make up the loss you suffered.

      • See the chart below:

    Actual Construction Worker Cost Per Hour

    Every Ten Minutes Your Construction Worker Spends Getting Cash Costs You $5.94

    We Live In A World Of What Is; NOT A World Of What Should Be - Randalism

    Cost Of Unproductive Construction Worker

    Option #2 - Put a process in place from your Business Process Management System (BPM) for employee loans or advances, whatever term you use to describe it.

    • Never, ever charge interest on the "loan" they will not like it and they will get even.

    • Make it Fast And Easy. Give out cash and have them sign a simple I.O.U. or write a quick note on a piece of paper.

    • Understand that unlike a Promissory Note, where the borrower is in control of making repayments, the employer can control repayments of an employee loan. It is very important for you, the employer, to get written authorization to deduct money from any payroll check. You need to be specific about the reason for deduction; repay cash loan / advance.

    • The employee loan or debt agreement below also makes provision for the full amount to be deducted should the employee resign. The employer would therefore be wise not to extend loans greater than the weekly / monthly salary. A more extensive agreement should be drawn up for longer term or large loans. Your labor laws may also limit deductions to a percentage of gross remuneration, so check with your local laws or your attorney before extending credit.

    Free Sample Employee Loan Agreement
    • Put the paper in the Petty Cash box, give it to your bookkeeper or better yet if we are doing your bookkeeping send it to us or send us an email and we will take care of the paperwork for you.

    • Give cash, do not write a check because they will simply visit the bank, check cashing store and cost you money like in the example above.

    • In QuickBooks Setup An Employee Loan Process and the related report to keep track of loans and repayments. The report will appear in QuickBooks as follows:

    Fast-Easy-Accounting-Report-Employee-LoanWhenever you issue a loan record it in QuickBooks and the report will show an increase in that persons loan account. Whenever a payment is made through payroll or if they pay it back via cash or check make the appropriate QuickBooks entry and the report will show a decrease in that persons loan account.

    Whenever an employee loan account has a zero balance their name does not appear.

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    This Is One More Example of how Fast Easy Accounting is helping construction company owners all across the USA including Alaska and Hawaii put more money in the bank to operate and grow your construction company. Construction accounting is not rocket science; it is a lot harder than that and a lot more valuable to people like you so stop missing out! Call Sharie 206-361-3950 or sharie@fasteasyaccounting.com and schedule your no charge one-hour consultation.

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    About The Author:

    Randal DeHart, PMP, QPA The Construction Accountant 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+

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