Don't Get Caught in the Cash Flow Trap

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Whether you are a new staffing company getting ready to kick off your business or an old seasoned veteran running your day to day business we can all learn a little something when it comes to cash flow.

We use payroll taxes as an introduction to the many ways staffing companies might mishandle trust fund payroll taxes  and get themselves into trouble.

In 2014, Paulette Bryant was sentenced to 36 months in prison, one year of supervised release, and ordered to pay restitution of $2,914,931. Her crime? Tax fraud through her temporary staffing agency. Bryant previously pleaded guilty to obstructing and impeding the IRS’s collection of payroll taxes. https://www.irs.gov/uac/Examples-of-Employment-Tax-Fraud-Investigations-Fiscal-Year-2014

Banks, payroll funding companies, and your own personal savings can only go so far in providing cash flow to run your day to day operations. The challenges for all staffing agencies is their ability to manage the funding of labor for services until the client company pays its invoices.  Staffing agencies need to stop the temptation of using money that is not ours or theirs to use.

It is imperative for staffing companies to understand their cost and the breakdown of labor and taxes.  To understand the federal and state deposit methods and times.  Missing deposit dates and paying penalties will kill any normal company, but a staffing company is a small business on steroids, because of the vast volume of payroll dollars.  Missing any payments could mean thousands of dollars in governmental penalties. 

You’d be surprised at the number of agencies that get their back to the wall, don’t pay their payroll taxes, and instead use these funds as operating capital.  Too many times they use this money for survival mode or most likely “a temporary fix” with the mindset that they will put it right back.

http://www.flexiblefund.com/when-temporary-staffing-payroll-taxes-become-operating-capital-effects-on-payroll-funding/

What's the Answer?

So how do you fix this method of madness? Disciplined leadership. You have to force yourself to pay as you go. if you can align yourself with a pay as you go system, then setting up procedures within your staffing company will go a long way.

Make it clear to yourself that payroll tax trust money does not belong to you, and you need to get it out of your hand (bank account) as soon as possible. Working within your means is working only with your profit to fund your day to day operations.

http://lwstax.com/everything-you-need-to-know-about-payroll-taxes/


Five Cash Flow Tips to Strengthen Your Business's Outlook

  1. Separate your personal and business finances
  2. Use accounting software to break out payroll taxes
  3. Track every transaction and payment
  4. De-clutter your desk and keep yourself organized
  5. Review your records of payments frequently
Mark Leonard