If you are paying your employees on a biweekly basis and you have 3 payroll periods in a month, it can catch a business owner or nonprofit executive director by surprise. There are some immediate and long-term solutions to make sure you can make payroll.

Every business or nonprofit leader has experienced a missed payroll

According to Stephen Halasnik, a serial entrepreneur, who has built 7 companies over a 25-year span, “every business owner or nonprofit executive director has had a Oh **** moment when cash flow is down and payroll is due. 3 payroll periods months are usually when having a lack of cash is really a problem. That doesn’t mean your company isn’t doing well because sometimes there is a hiccup in customers paying their bills”. 

The best thing to do is to have a plan but of course, when that first potential missed payroll happens, you need to solve that problem first.What can happen when you can't pay your employees

Before you can plan, you need to make payroll now

Unlike years ago, when commercial banks were the only option for a line of credit, private companies have replaced banks for lines of credit. Companies like Financing Solutions are now the leader in providing Lines of Credit to small businesses and nonprofits because Financing Solutions recognized a decade ago that there was a lot of good small business and nonprofits that were unbankable due to collateral and other bank requirements. Financing Solutions felt there were many companies that would easily be able to pay back a draw on their line. Lines can be set up in 48 hours or less and require only a 2-minute online application and a few documents. The line costs nothing to set up and nothing when not being used. When the line is used, it can be paid back at any time resulting in a very economical way of making payroll or addressing any unexpected expenses or opportunities. Financing Solutions believes that every business owner should have a line of credit.

It’s illegal to delay or miss payroll

What most people don’t know is that it is actually illegal to miss or delay payroll and the resulting consequences could be huge penalties and audits. In addition, anyone who has ever delayed payroll, even for a few days, has learned about how many of your employees actually live paycheck to paycheck. If you have ever had the unfortunate event of having to tell your staff that payroll will be delayed, you have experienced the parade of people coming letting you know that they don’t have enough money to pay x or y. 

Don’t lose the respect you built

As the leader of your company and nonprofit, you spend a lot of time building respect from your employees and also trying to create a great work environment. Your employees expect you to make sure the company is financially healthy so they can have a predictable income. If you tell your staff that payroll will be delayed, that ruins the trust you worked so hard to build and it is really hard to have employees forget about a delayed payroll regardless of the excuse. 

Mark your calendar

There are some additional steps you can take in the future to make sure you are aware of 3 payroll months. Mark in your calendar to remind you one month out when there is a 3 payroll month or ask your bookkeeper to let you know. It might allow you to delay paying an expense during that critical time period.

Years and Months with 3 payroll periods (companies running biweekly payroll will require 3 checks in that month)

  • 2019: March, May, August, November
  • 2020: January, May, July, October
  • 2021: January, April, July, October, December
  • 2022: April, July, September, December
  • 2023: March, June, September, December
  • 2024: March, May, August, November
  • 2025: January, May, August, October
  • 2026: January, May, July, October
  • 2027: January, April, July, October, December
  • 2028: March, June, September, December
  • 2029: March, June, August, November

Have a meeting

Schedule a meeting every two weeks to discuss and review which customers are past due on paying their invoice and have someone call those clients to make sure the payment is in process.

Another good suggestion to improve cash flow is to review how your whole billing process works. When are your invoices actually going out, are they going to the right person, what is your customer’s approval process, can you bill your customers more often, are there clients that you can personally visit and ask them to pay you sooner, can you get paid via credit cards or PayPal. If you have a meeting to discuss the potential solutions to improving cash flow, and you follow up to make sure you are executing on those solutions, you will find that your cash flow will improve significantly. 

Planning and even just discussing how to improve cash flow goes a long way toward solving many types of business problems. It sometimes takes one event, like a 3 payroll period month, to realize that you have to plan better.