When you have employees- You may find yourself in the position of needing to help them maintain focus on their job and help them avoid distractions.
Employee Loans Are - A hotly debated subject. Please read this article and do whatever is best for you and your company.
Whatever Is Best For You - I am just trying to present as many ways as possible for you to increase your company profits so you will have more money in the bank to operate and grow your business.
Right - One on side are the business owners who sincerely and passionately believe employees should be responsible for themselves and the boss is not their parents. Over the last 30+ years of studying Profit and Loss Reports I have found them to be Right.
Rich - On the other side are the business owners who understand the employer picks up where the employees parents left off and over the years of watching the Profit and Loss Reports I have found they are Rich.
If An Employee - Has a need for cash between paydays they have several options and here are two of them:
The First Option Is - They get a payday loan from one of the many companies that offer that service.
The 14-day advance of $100 could cost 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. 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 payday advance company plus ten minutes inside the store.
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. See The Chart Below:
The Second Option Is - You have a process in your Business Process Management System (BPM) for employee loans or advances, whatever term you use to describe it.
Understand the Randalism "You can be right or rich...pick one" If providing employee loans goes against your principles don't do it. If it aligns with your principles do it. There is no right or wrong answer.
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.
We have included a FREE Sample Employee Loan Agreement Below:
Check with your attorney before using the sample 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:
Whenever An Employee - Loan account has a zero balance their name does not appear.
For Construction Company Owners who do not need the full power of QuickBooks for contractors and want 24/7 online access we offer Xero Accounting Online and we have custom setup for construction companies. Click Here For More.
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.
Profitable Contractors and Construction Company owners have known about the value of outsourced bookkeeping services and contractor coaching services like ours for a long time and now you know about it too!
We Scan Your Receipts And Invoices link the appropriate transactions to QuickBooks or Xero Accounting Online depending on the construction accounting service you are using and provide ongoing Cloud Based Contractors Bookkeeping Services by accountants who understand construction.
About The Author:
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+