0413: The Ugly Truth About Doing Your Construction Company Payroll


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By Randal DeHart and Randal DeHart | Construction Accountant |PMP | QPA. Discovered by Player FM and our community — copyright is owned by the publisher, not Player FM, and audio is streamed directly from their servers. Hit the Subscribe button to track updates in Player FM, or paste the feed URL into other podcast apps.
This Podcast Is Episode Number 413, And It's About The Ugly Truth About Doing Your Construction Company Payroll

Still Doing Your Payroll?

At face value, it seems like a great idea. If you're a small construction business owner with just a few employees, you probably think hiring a payroll specialist is an expense that you can avoid. You feel that you can handle it yourself. You have the best intentions to keep your staff paid and on time. What could go wrong, right? Well, lots. Here are 3 reasons why you should stop: It's a time waster

If you don't have a finance background, you'll likely spend a substantial amount of time calculating employees' work hours, computing for taxes and other deductions, creating payslips, processing, and filing.

Even if you have a bit of a bookkeeping background, are you sure you want to spend your precious time doing these tasks instead of focusing on your construction business's core aspects?

You don't need to study the ins and outs

Sure, you can learn about relevant tax adjustments and benefits procedures if you want to. But then again, you'd be spending more time educating yourself, not to mention the possibility of making costly mistakes.

On the other hand, a payroll specialist knows the ins and outs of taxes, overtime, contributions, sales commissions, and bonuses. The bottom line is: another professional can do it better, and while they're at it, you can get back to doing what you do best-- like growing your construction business!

It may cost you more to do it yourself

One of the most common mistakes of construction business owners is that they think they're saving money by doing everything on their own. Remember, time is money-- and as mentioned earlier, instead of dedicating your time doing tasks such as payroll, you can spend it more efficiently on business activities that drive profits and growth.

If you get your payroll wrong or fail to do it on time, you can get penalties that are not fun. These are also avoidable if you entrust a payroll specialist.

A Better Approach

If you think hiring a full-time in-house payroll staff is not practical, you can always come to us and let us take care of your payroll. Whether you need weekly, fortnightly, or monthly processing, our team is flexible enough to do it for you.

When contractors ask us which payroll option we recommend most, often we say Direct Deposit. As usual, the reasons are simple and related to our primary role as "Profit And Growth Specialists For Contractors" and our mission, which helps you - the men and women of the most significant industry on earth - the construction industry, to achieve your definition of success.

Option 1 - Paper check looks like the least expensive. Calculate payroll, handwrite or print a paycheck, hand it to your employee, and done.

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 job site, they will typically cash their paycheck to the job site or take a break as soon as the bank opens. Having this scenario in mind, 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, which 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, you need to sell another $178.20 worth of work to compensate for the loss you suffered.
          • If there is more than one worker in the company vehicle, multiply everything by that number.

#2 Cost Per Mile - To operate the company vehicle, which varies depending on the type of vehicles your company uses. Generally, the numbers we see 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 systems, not operations or manufacturing-based operations. 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 set up 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 look in your Business Process Management System (BPM) for the answers.

Option 2 - 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. Having a Professional Bookkeeper prepare the payroll is less with direct deposit because of the time saved in making 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.

Option 3 - Debit Card is similar to a direct deposit. The difference is that the employee does not need a checking account.

Final thoughts

As payroll experts in the construction industry, we can keep your employees happy with timely and accurate wages, maintain tax compliance, and significantly ease your back office burden. Profitable construction companies have known the value of outsourced bookkeeping services. Remember, you deserve to be wealthy because you add value to other people's lives.

So get in touch with me today and give yourself the peace of mind you deserve!

About The Author:

Sharie DeHart, QPA, is the co-founder of Business Consulting And Accounting in Lynnwood, Washington. She is the leading expert in managing outsourced construction bookkeeping and accounting services companies and cash management accounting for small construction companies across the USA. She encourages Contractors and Construction Company Owners to stay current on their tax obligations and offers insights on how to manage the remaining cash flow to operate and grow their construction company sales and profits so they can put more money in the bank. Call 1-800-361-1770 or sharie@fasteasyaccounting.com

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