There is probably nothing more gut-wrenching for a business owner than not having the funds to cover payroll. It’s a cash-flow nightmare on many levels: personal, business and legal. When you aren’t able to pay on time, it can set some pretty uncomfortable consequences into motion.

There are ways to make sure you can hand out paychecks on pay day, some better than others. And there are several very important reasons to avoid missing payroll. Don’t let temporary lack of extra working capital keep your small or mid-size business from success.

Good Reasons to Avoid No-Pays:

• Your Employees: The people who make it possible to keep your business going should be at the top of your list of priorities. Besides a moral obligation to the people who make your business possible, you have some practical reasons to always pay employees as promised.
• Morale: When employees question a small business’s financial stability, it can affect their productivity and commitment to their jobs. You want your employees to enjoy a healthy morale.
• Quality: Low morale and fear of being out of a job can cause employees to seek out new jobs. You stand to lose your workforce, including your most prized employees.
• Cost: An employee that hasn’t been paid has the right to file a state wage claim against you, which can result in a fine. State laws and penalties vary, so check with your state’s Wage and Hour District Office to find out what you would be up against.
• State and Federal Law: Along with the fines that might come your way if an unpaid employee files a state claim, you could also realize penalties from the Department of Labor. The Fair Labor Standards Act (FLSA) requires employers to pay non-exempt employees at least minimum wage for hours worked, including overtime calculated on a weekly basis. Most states mandate weekly, biweekly, semimonthly or monthly pay.
• Payroll Taxes: If you get behind in payroll you run the risk of IRS fines. Payroll taxes will not go away, so keep up with them or you will be penalized as much as 50 percent of the total owed. If it comes to these or any other solution because you’re short on cash in your business, it’s time to take a good, hard look at your company’s operations and look for areas that can be improved.

If you’re a business owner, you’ll likely need extra working capital from time to time. Lack of funding for payroll is one of the most important things you could possibly address. Your employees are essential to your success, so be sure to get the help you need to pay them on time.

If you’re struggling with this issue, breathe a sigh of relief knowing that Reliant Funding is an option for you. We were created by entrepreneurs who understand the unique needs of small and mid-sized business owners.