Despite not being in the United States for long, the coronavirus (or COVID-19) has already had an enormous impact. Schools and businesses have closed, many states and cities have issued shelter-in-place orders, and citizens are wary about what the future holds. Fortunately, Congress has stepped up to battle the economic fallout of the coronavirus with a $2 trillion stimulus package — the largest in history. The primary focus thus far surrounds payouts to taxpaying citizens, but what about small businesses? Thankfully, this stimulus package also offers relief for small business owners, too.
Most notably, the plan sets aside $350 billion for small business loans. The Paycheck Protection Program will provide loans that are backed by the Small Business Administration. Under this program, small businesses and nonprofits may receive up to $10 million to cover payroll, utilities, mortgage interest, and rent. The amount that a borrowing business qualifies for is based on its payroll from January 1 to February 29. If the borrower uses the funds for the aforementioned expenses and maintains the size of its full-time workforce, the principal of the loan will be forgiven.
These SBA-guaranteed loans will be available through banks and other traditional lenders and will have a maximum interest rate of 4%. To qualify as a small business, applicants must have 500 or fewer employees. While SBA loans typically have lengthy application processes, the Paycheck Protection Program will expedite the process so that businesses can have faster access to funds.
The Paycheck Protection Program isn’t the only relief offered to small business owners. The stimulus package also provides companies with tax relief to help further ease the burden caused by the pandemic. Businesses can take advantage of a 50% refundable payroll tax credit, which not only helps small business owners but also keeps more workers employed. Employer Social Security payroll taxes will be delayed, and net operating loss-reduction rules will be less stringent.
Finally, the stimulus bill sets aside $425 billion for the credit facilities of the Federal Reserve. Part of these funds will be available to small businesses, giving owners more funding opportunities to recover and get their businesses back on track.
Experts argue that more relief could be provided for small businesses, sole proprietors, and the self-employed. Whether or not additional aid will be available in the future is currently unknown. However, the stimulus package as it stands offers much-needed funding opportunities for businesses that have been — or will be — hit hard by the coronavirus.
In addition to the SBA loans outlined in the stimulus bill, the SBA is also offering additional aid to small businesses with its disaster relief loans. It’s another option to consider if the coronavirus has impacted your business.
Whether you’re an employee or an employer, everyone around the world is feeling the effects of the coronavirus pandemic. It’s easy to get wrapped up in panic or fear about what’s currently happening and what’s around the corner. Here at Merchant Maverick, we’re offering our support through our coronavirus hub. There, you can find the latest information about how to weather the COVID-19 storm as a business owner. We offer tips, advice, and resources that can help you keep your business on track. We understand the importance of small businesses, and we want to provide continued help and support when you need it the most.
The post How The New Coronavirus Stimulus Package Could Help Your Small Business & Employees appeared first on Merchant Maverick.
The retail industry is facing massive, unprecedented closures as the novel coronavirus spreads throughout the country and state and city governments announce “shelter in place” orders. In much of the United States, the only type of retail stores that remain open are superstores and “essential retail” stores that sell food, medicine, or other life-sustaining goods. While business is thriving for major retailers, such as Costco, Walmart, and Amazon, small retailers are bearing the full brunt of this crisis. In this article, we want to be informative about the effects on retail, but we won’t stop there — we will also give actionable steps to help your retail store survive and even stay profitable during the outbreak.
What Coronavirus Means For Retail
The retail sector has been particularly hard-hit by the COVID-19 pandemic, as much of the industry is deemed “nonessential” — though states have some leeway in how they define what is and what isn’t essential retail. In a growing number of states, residents have been advised to shelter in place and only leave the house to buy food or medicine. Even in regions without strict shelter-in-place orders, many governors and mayors have called for the closure of nonessential retail businesses. As COVID-19 cases continue to mount, most or all of the United States may soon be under such orders.
This grave situation requires the closure of a large portion of small retail businesses, though it is still possible to sell online. In fact, eCommerce sales are expected to surge in 2020Â as consumers stock up on essentials, such as food, healthcare items, cleaning products, household items, and even consumer electronics to stay entertained while at home.
Generally, the following types of stores are considered essential retail and can remain open for in-person sales:
Grocery stores
Liquor stores (depending on the state)
Healthcare supply stores
Marijuana dispensaries (depending on the state)
Convenience stores
Farmer’s markets
Superstores (Walmart, Target, Costco, etc.)
Gas stations
Drug stores/pharmacies
Hardware and home improvement stores
Office supply stores
Pet stores
Telecommunications stores
Auto parts stores
Pretty much all other types of retail stores are considered nonessential retail and have been forced to close in many states and cities. As follows are some examples of nonessential retail businesses (though this list is certainly not comprehensive):
Clothing and shoe stores
Hobby and craft stores
Furniture stores
Jewelry stores
Cosmetic stores
Book stores
Sporting goods stores
Malls
Of course, you’ll need to check with your local authorities to find out if your retail store must close or if it can remain open.
Demand Changes
Some retailers may find their goods in high demand, while others may be in less-popular industries and will have to get more creative about how they run their business. As mentioned, essential goods — soap, food, cleaning products, and, of course, toilet paper — are seeing record-high demand. Many nonessential retail goods, such as clothing and fashion, are expected to be harder hit.
Social Distancing
Social distancing is being mandated by a lot of states, so even if your store remains open (at least, for the time being), social distancing will affect foot traffic and people’s desire to go shopping. In some cases, stores are limiting how many people can enter the premises at the same time to allow for adequate social distancing.
Increase In Online Shopping & Deliveries
Because of social distancing, there has been an upsurge in online shopping and an increased need for curbside pickup or delivery options. Especially as Amazon Prime shipping times increase — Prime delivery times on some items are now as long as a month — this may result in higher demand for smaller retail businesses that offer online sales, as these businesses may be able to provide a level of service that big-box stores are unable to offer right now.
10 Tips To Keep Your Retail Business Strong During COVID-19
If your retail business can adapt to these strange new times, you have the potential to keep it going strong throughout this crisis.
Create An Online Store
If your retail store is strictly brick and mortar, now is a great time to add an online store. Plus, there are many easy eCommerce platforms out there to get a site up and running quickly. Retailers should also promote their online buying and shipping options for their store (if you’re still open), especially on social media and via email marketing. Learn more about how to start an online store by checking out the resources listed below.
Further Reading
The Beginner’s Guide to Starting an Online Store (eBook)
What The Coronavirus Means For eCommerce & What Your Business Can Do About It
Shopping Cart Comparison
Offer Personal Shoppers
There are a couple of ways your business can use personal shoppers to deliver products to customers without them having to enter your store. The first way is for your employees to act as personal shoppers for customers by taking their orders online or over the phone and personally delivering them. The second way is to use a third-party delivery service, such as Shipt or Instacart. Note that third-party delivery services may charge a fee and only deliver for certain industries.
Further Reading
Third-Party Delivery Services For Restaurants & Retailers: Your Best Options
Add Curbside Pickup
In addition to or instead of delivery services, it may make sense for your retail business to offer a curbside pickup option for those who don’t want to go out to shop. Customers order online, choose a “pick up in-store” option, and when they arrive at the store, an employee comes out and delivers the order. Some big-name retail stores that have implemented curbside pickup options include Target, DICK’s Sporting Goods, Books-a-Million, and DSW.
Create Subscription Boxes
Subscription boxes are a great way to supplement income and increase brand awareness. Mail may be one of the few ways people can still buy (nonessential) things in the near-term, and subscription boxes will likely become even more popular as consumers remain more or less stuck at home. Plus, subscriptions can help your business guarantee regular monthly income.
Further Reading
How To Start A Subscription Box: 7 Steps To Launch A Thriving Business
Appeal To Consumer Needs
As shoppers are encouraged to self-isolate and practice social distancing, think about what your business can offer during this difficult time. For example, art stores can provide drawing kits for kids home from school; gyms can provide online workout recordings; travel companies can offer discounts for planning 2021 vacations; landscaping business can build indoor garden starter kits; beauty stores can offer sample boxes or at-home spa kits.
Host Virtual Events
For retailers that have strong communities, consider hosting virtual events on Facebook or another online video platform. For example, board game stores can host virtual competitions; bookstores can create a weekly book club discussion (and customers can pay for that book to be shipped to them); cooking supply stores can offer weekly bakeoffs or demonstrations (and customers can buy kits with the tools and ingredients they’ll need).
Get Creative With Marketing
Even in these trying times, you can still market your business and the products and specials your retail business is offering. You can grab customers’ attention using email, text, and social media —Â while appealing to consumer needs and respecting social distancing guidelines. Read up on what other small and large brands are doing and start thinking about what you can offer that no one else is. Even if you’re brand-new to email marketing, now is a great time to start.
Further Reading
How To Create A Successful Email Marketing Strategy
Simple Email Marketing Best Practices Every Merchant Should Know
Communicate With Customers
Be clear with customers about your hours and how you’re handling the virus in general. Even if you have to close your business, it’s good to let people know, and if you are able to reopen your shop, make sure you tell customers about that too. Let your fans know if you’re offering curbside pickup, deliveries, subscription boxes, a percentage of your sales donated to a charity to fight COVID, or anything else. Again, you can use email marketing for this purpose.
Limit Expenses
In addition to trying to create sales, another huge part of successful cash flow management and managing a financially strong business is limiting unnecessary expenses. Sadly, this may mean cutting your payroll or closing locations. You might also consider reducing your interest costs by consolidating all of your outstanding debt into one low-interest loan and putting any new business expenses on a 0% APR credit card.
Further Reading
How To Use (& How To Avoid Using) Business Credit During The Coronavirus Pandemic
Consolidating Small Business Debt: A Complete Guide
0% APR Credit Card Offers: The Complete Guide
Don’t Be Afraid To Ask For Help
Some businesses might just need a helping hand to get through this rough patch instead of closing down altogether. A couple of examples of how you could obtain assistance include starting a business crowdfunding campaign or applying for an SBA Disaster Loan. Refer to the list below for resources on financial assistance and loans — many loans are 0% interest right now.
Further Reading
Small Business Loan Resources & Guides For Businesses Affected By The Coronavirus
What SBA Disaster Loans Are & How To Qualify For One
Can’t Make Your Credit Card Payments Due To The Coronavirus? These Credit Card Issuers Are Offering Assistance
The Fed Has Cut Interest Rates To A 12-Year Low: Here’s What It Could Mean For Your Business
Keeping Your Employees & Customers Safe From Coronavirus
If your brick-and-mortar retail store is open in any capacity, you need to educate yourself and your employees about how coronavirus is spread. Then, you can provide helpful tips on how to keep the virus from spreading to employees and customers in a store environment.
Encourage Good Health & Hygiene
Educate your employees and enforce proper hygiene practices to ensure they follow the necessary health and safety protocols to prevent the spread of disease. This includes both cleaning and employee health practices. Specifically, make sure you are following the CDC’s Interim Guidance for Businesses and Employers to Plan and Respond to Coronavirus Disease 2019 (COVID-19).
Revisit Sick Leave Policies
Make sure you and your employees understand your store’s sick leave policy. Update the policy if needed and help employees feel stable in their income so that they can stay home if need be. To prepare for a probable increase in employee absences, you might consider cross-training employees so that your store can continue to operate even if key employees are not present. Again, you can find advice on employee sick leave policies in the CDC’s official COVID-19 guidance for businesses.
Have Clear Communication
People are understandably worried. Customers and employees want to know what you as a business owner are doing to keep them safe, so be sure to communicate clearly about the measures your business is taking and help ease those fears. You should help employees, in particular, feel safe and hopeful during this time, maybe consider giving your employees a way to give back or options to hold their job if they choose not to come to work right now.
Keep Calm & Sell On
This is a tough time for the retail industry, for America, and the world overall. Nevertheless, you will make it through this; we all will. By exercising patience, diligence, and ingenuity, retailers can keep their business safe, operational, and even profitable during these unprecedented — but temporary — times. Again, eCommerce will play an especially vital role for retailers in the age of social distancing and beyond. While brick-and-mortar retail will likely not disappear entirely, now is the perfect time to augment your online sales options.
Do you want to read more about how small businesses can manage during the coronavirus pandemic? Refer to our hub dedicated to this subject: Coronavirus (COVID-19).
The post The Business Owner’s Retail Guide To Surviving The Coronavirus appeared first on Merchant Maverick.
This isn’t the kind of article we enjoy writing. Sadly, as the global COVID-19 pandemic wreaks havoc on our world and our institutions strain to cope with it all, scores of businesses are facing the excruciating reality that remaining in operation just isn’t feasible. As terrible as it is, there are steps you need to take to ensure that the pain of closing your business isn’t even more devastating to your employees and your finances than it needs to be.
In this article, we’re going to detail what you need to do to make sure that closing a business isn’t any worse than it needs to be.
Closing A Business Isn’t Just A Matter Of Locking Your Doors
It may seem like adding insult to injury, but closing down a business involves much more than just locking the doors and selling off your equipment. It involves taking legal and administrative steps that may vary depending on the nature of your business and the particular local, state, and federal laws that apply in your situation.
It’s a lot to handle — and it comes at a time when you’re unlikely to be prepared for the emotional toll of it all. However, we’re here to help.
The Essential Doâs & Donâts Of Closing Down A Business
Closing your business is never an easy thing to do — particularly at this moment in history. Here’s a quick rundown of what you should do — and what you shouldn’t. Don’t worry; we’ll go into more detail later.
Do: Communicate the situation with employees and customers
Do: Make arrangements with any service providers
Do: Notify the relevant government agencies as required by law
Do: Talk to a lawyer and/or an accountant
Do: Make a plan of action
As for the don’ts:
Don’t: Panic (I know — easier said than done, right?)
Don’t: Just lock up and disappear
Don’t: Ignore any bills or creditors
Give Notice That Your Business Is Closing
Emotionally, this may be the hardest part of the whole process. Nonetheless, those affected by your business’ closure deserve nothing less than your full honesty and frankness.
Of course, I should note that if yours is a solo business operation — either as a sole proprietor or as the lone LLC owner — the decision is yours alone, but if you have partners and/or investors, you’ll need to get everyone on the same page first.
Notifying Employees
As you likely realize, your employees should be the first to hear the truth, given that they will be the people most impacted by the closing. You’ll need to let your employees know what your closing date is and ensure that arrangements to give them their final paychecks are made, along with any severance pay you’re going to offer. Regarding final paychecks and severance pay, state law may dictate how you handle these arrangements, so you may need to consult an attorney for guidance.
Other important things you’ll need to hash out with your employees include the need to reimburse them for any work-related out-of-pocket expenses they may have incurred and collect the company property they may be using, such as vehicles, laptop computers, and work phones.
Have a look at the U.S. Department of Laborâs Employment and Training Administration Fact Sheet to learn more.
Notifying Customers
Your customers will also need some advanced notice of your plans. Make an announcement — a public one and one to subscribers to your customer mailing list, should you have one — and fill everyone in on such details as how long your gift cards will be honored for.
Notifying Government Agencies
This may vary depending on your industry and where your business is located, but you will likely need to notify federal, state, and/or municipal authorities about your shutdown plans. Steps you may need to take include filing dissolution notices and canceling any relevant permits, licenses, registrations, and even trademarks. Again, contact a lawyer if you’re unsure of your exact legal obligations here.
Notifying Creditors
This step may be one of the trickier ones. How you deal with your creditors in this situation will depend on your type of business and the type of debt you owe. Depending on your circumstances, your creditors may have to wait a set period before attempting to collect, or they may be able to try to collect immediately. If you have a financial advisor you can contact regarding your debts, now would be the time to do so.
For more information, read our post: Canât Make Your Credit Card Payments Due To The Coronavirus? These Credit Card Issuers Are Offering Assistance
Notifying Service Vendors
The paid services you use on a continuous basis — from your cleaning service to your payment processor to everything in-between — will need to be notified of your business’ intent to close.
Some of your service cancellations will likely be quite straightforward. Others, such as your credit card processor, may be trickier. Your processor may have put an ETF (early termination fee) into your service contract. You may be on the hook for this, though some merchant accounts and processors are more generous than others in this regard.
As for contracts with your point-of-sale or eCommerce provider, if you’ve been paying per year, you won’t get a refund on the remaining portion of your agreement, but you also won’t face any additional charges. With other software contracts and services, cancellation terms may vary, so you’ll need to ask your vendors questions about anything you’re unsure about.
Close Up Shop For Real
As your business approaches its final operational day, you’ll need to do what you can to wrap things up. Depending on the stock and supplies you’ll have on hand, you should consider measures such as clearance sales to sell your remaining inventory. The quarantine policies of your area will determine whether the sale should be online-only.
Returning Leased Or Rented Equipment
If you have any hardware or other equipment that you’re renting or leasing, it will need to be returned (and you might want to monitor your tracking numbers for anything in the mail). In the case of credit card terminals, you may need to be especially careful — any free equipment needs to be shipped back in a timely manner, or you may be hit with some outrageous fees. See our article on credit card terminal leases to get a sense of the pitfalls here.
Liquidating Any Remaining Assets
You’ll need to sell off the remaining fixtures in your business as well. If, after your closing date, you have any remaining assets, you can try to sell the items online or work with a liquidation company to get back some of the value.
Luckily, you should be able to sell your remaining inventory online — and if your warehouse is still full of stock, you have the option of contacting a merchandise liquidator.
Closing Up The Property
Finally, you’ll have to take the step of dealing with your lease. Contact the property owners to come to an arrangement for doing this. If the property belongs to you, you may not need to take immediate action, though the price of real estate may go down in the months ahead.
Deal With Your Business’ Outstanding Financials
As you close up shop, you’ll have to deal with any outstanding financial concerns you have. You may have several such concerns, which is why the order of resolution is crucial.
Collecting Any Outstanding Accounts Receivable
Many businesses may have outstanding balances owed by clients. While this obviously isn’t an ideal time to try to collect on balances owed, it’s only going to get harder from here, so you’ll want to try to collect now if you have any hope of seeing that money again.
If possible, you should try to collect before your official going-out-of-business announcement so your clients don’t feel as though they can just wait for you to disappear. Offering discounts to those who pay immediately may also be wise, as it increases the likelihood that you’ll get at least some of your money back.
As it turns out, you do have another option in this situation: you could sell these balances to an invoice factoring company. Check out our explainer article on invoice factoring if you’re curious as to how it works.
Filing Income Tax
At this point, you’ll need to complete your final income tax filing. Read our complete guide to small business taxes for more information. And for additional tax tips, have a look at our tax tips for small businesses.
Remember that this process will vary depending on whether your business is an LLC, a sole proprietorship, a corporation, etc.
Filing Sales Tax
Likewise, you’ll need to do your final sales tax filing. We’ve published a small business sales tax guide for those interested.
Dealing With Payroll
This step will involve making out your final checks to your employees, completing payroll taxes, and issuing severance pay. Again, you’ll need to follow federal, state, and municipal laws regarding your workers’ final checks and severance pay.
Your final payroll should resemble your year-end payroll. To that end, here’s a guide to doing your year-end payroll.
Paying Any Outstanding Debts
Your debts will need to be paid before you can claim any of your remaining financings. Pay off your loans and all other bills to the greatest extent you can.
Monitor & Keep Records Of Your Business
So you’ve completed the closing process and your business’ shutdown is now finalized. Unfortunately, you may still have business-related matters to deal with.
The law may require you to keep your financial records and tax filings for a certain length of time. Consult a lawyer or CPA if you’re unsure what you need to keep and for how long.
You should also monitor your bank account for any suspicious deductions from companies your business has worked with in the past. Unfortunately, many business owners find themselves still being charged by service providers 1-2 years after closing, so you’ll want to nip this in the bud.
Additional Resources For Closing Your Business
The IRS provides an online guide to closing your business and the steps you need to take to do so.
Likewise, the SBA offers a published guide to closing your business.
FindLaw offers a guide to closing down your business with a particular focus on the legalities involved.
The legal site Nolo.com offers this 20-step checklist for closing your business.
Closing Down Your Business Isnât Easy, But Doing It Correctly Is Important
You may not feel highly motivated to do your due diligence at a time like this. This is entirely understandable. Nonetheless, if you don’t want to find your business running afoul of employment law — and if you don’t want creditors harassing you and asking for money at a time when you’re least equipped to deal with it — you’ll want to make a good-faith effort to close down your business the right way.
Again, the more complex your business, the greater the likelihood is that you’ll need to enlist the help of an attorney and/or a CPA.
Here is a link to our COVID-19 resource hub â we’ll be adding to our pandemic-related informational resources on a continuous basis. You may also want to check out our Small Business Outbreak & Pandemic Guide: Coronavirus Edition for more on how to deal with this unprecedented situation.
Looking for more help? Check out these resources from Merchant Maverick:
How to avoid defaulting on a business loan
Small business guide to filing for bankruptcy
Guide to business interruption insurance
The post How To Close A Business appeared first on Merchant Maverick.
Over the past couple of weeks, we’ve witnessed a lot of changes. In an attempt to slow the spread of the novel coronavirus (COVID-19), state governments have taken some dramatic measures, closing schools, banning public gatherings, and temporarily closing the dining areas of bars and restaurants.
During such an uncertain time, many business owners are wondering what impact this virus will have on their businesses. In eCommerce, in particular, there are mixed worries. While some sellers are concerned about selling out of high-demand products, others are worried about supply chain, or that they won’t be able to ship their products to an anxious nation.
In this article, we’ll be explaining a few of the eCommerce trends and concerns related to COVID-19. We’ll also be giving some tips and resources to help you stay profitable and safe during this time.
How Coronavirus Is Affecting The eCommerce Industry
Let’s first take a look at a few of the ways the coronavirus is affecting online sellers.
Increase In Sales
Already, we’ve seen consumer buying habits shift during this crisis. First, hand sanitizer vanished from shelves. Then it was toilet paper. Now, following guidelines to practice social distancing, many people are staying at home. Instead of tackling the crowds at grocery stores, many consumers have taken their shopping online, purchasing household goods like cleaning products, medical supplies, paper products, and shelf-stable foods.
There is some evidence that online sales will increase during this crisis. Sales on grocery delivery services such as Amazon Fresh and Instacart almost quadrupled between March 12th and 14th compared with the same period last year (Rakuten Intelligence). And according to research from Marketing Land, this year online spending is supposed to reach 12% of total retail spending (up from 11.4% in Q4 2019), depending on the virus’s impact on the economy. As more people turn to online shopping, you can expect to see an increase in sales among some industries.
Possible Delivery Changes
With an influx of online orders, it is possible that there will be changes and delays in shipping times. A surge of packages could overwhelm shipping carriers’ abilities. In response, Amazon is currently offering customers the option of choosing No-Rush shipping to allow Amazon to serve customers with the most urgent needs first.
Worries about shipment times are further complicated by Amazon’s recent announcement regarding Fulfillment By Amazon. On March 17th, Amazon announced its plan to serve customers by placing a hold on warehouse deliveries. They are currently only accepting deliveries of household staples, medical supplies, and other high-demand products. This rule will be in place until April 5th at the earliest. This rule could be a major obstacle for some sellers who usually rely on Fulfillment By Amazon. Amazon states that if your inventory runs out in their warehouses, you can continue to sell on their platform, but you must organize delivery of products on your own.
Concerns About Supply Chain
We have already seen the coronavirus disrupt the supply chain. Ever since the virus began to ravage China, it has closed down many manufacturers, leading to significant delays in shipments, even as Chinese factories begin to reopen. Now, concerns are turning to other global factories. According to research by Statista, 44% of the American retailers who participated in one survey expect to face production delays, and 40% expect to have inventory shortages throughout the year.
Changes In Industry Demand
While some industries may see an increase in sales, others, like salons and services, may see a decrease because of social distancing. Below, we’ll mention trends we expect to see among some eCommerce industries:
Fashion: Fashion purchases related to travel (i.e. swimsuits and luggage) will likely decline.
Health & Wellness: Spending on health and wellness products have already increased, especially on products directly related to reducing the spread of the virus (face masks) or handling its symptoms (cough medications).
Household Goods: Online purchases of household supplies such as detergents, foodstuffs, paper products, and cleaning supplies are expected to increase as consumers limit their time spent in public.
Books & Movies: Purchases on books and movies, especially on digital streaming, are expected to increase.
8 Tips For eCommerce Business During COVID-19
Despite all of the difficulties that the coronavirus has brought, merchants are still pressing on. Here are a few of the strategies that other merchants are using right now to deal with the uncertainty of the current times.
Take A Deep Breath & Create A Plan
I encourage you to take a minute to step away from the constant stream of media. Go on a walk, and take a few deep breaths. Good decisions are not made in the fog of panic. Make sure you have steadied yourself and eased away some of the anxiety before you start making big decisions for your business.
Now that you’ve had a minute to refocus, it’s time to create a game plan. Take a serious look at your business and identify areas of strength, areas of risk, and areas of need. Do you need to limit purchases or reduce advertising in order to keep up with an increase in sales? Or, do you need to find another sales niche in order to target a new market? Are there any risks or needs in your supply chain?
Once you’ve identified these three areas in your business, you can start formulating plans to address them.
Find Your Sales Niche
Do your best to find a new sales niche within the changing landscape. As schools close and parents begin working from home, customers are looking for ways to meet their new needs. Consider what your customers’ needs might be and work to develop a solution for them. For example, if you sell art supplies, you might create an art kit for parents to buy from their children who are suddenly stuck at home. Or, if you sell personal care items, try creating an at-home spa kit for people who looking for comfort in a stressful time.
You might even try reaching out to your customers via email or social media to find out what they need. Then, work to develop a marketable solution for that new need.
Adjust Your Marketing
You’ll likely need to change your marketing strategy in order to better fit with the changing economic environment. Americans will be spending an increasing amount of time at home. Consider investing in marketing that you can direct to consumers in their homes. Now might be a good time to invest in video advertising that can be broadcast on local TV or even featured in some YouTube videos. Continue investing in advertising on social media and search engines. People are looking to the internet for both news of the current crisis as well as diversion and distractions, so investment in online advertising has the opportunity to reach many eyes.
You should also carefully consider the content of your marketing. For example, as more people stay home and cancel trips, you should rethink any of the travel-based summer marketing you may have had planned. Focus instead on summer marketing that prioritizes living locally.
You should also come up with a few marketing themes that are line with new policies surrounding social distancing. As big brands like KFC and Hershey’s pull ads that feature actors licking food from their fingers and hugging, you should also consider the way your advertisements will be received in a health-conscious culture. Keep in mind that some actions featured in your former advertising could be considered inconsiderate in the current crisis. Consider featuring families at home or people engaging in solo outdoor activities. Do your best to stay relatable in changing the cultural norms.
Maintain Good Relationships With Customers
One thing that hasn’t changed in the past few weeks is your relationship with your customers. Keep this relationship strong by communicating frequently with the people you serve. Let them know about any measures you have taken to ensure their safety and to prevent the spread of the virus. Be honest and upfront with any potential delays in shipments and production. Customers want to be able to anticipate the arrival date of their products, and advising them of any delays beforehand can help customers shift their expectations early on.
If your supply chain has been significantly affected by the coronavirus, you might also consider putting a note about your inventory issues on relevant product pages. Mark products that are out of stock, and enable pre-ordering for those products if you’d like. Letting your customers know about potential fulfillment delays before they place an order will go a long way in keeping customers happy.
Analyze Your Cash Flow & Expenses
If you haven’t already, take a serious look at your cash flow. Are you able to make payroll for the foreseeable month? Will you be able to purchase inventory?
If things are tight, you may be able to get a working capital loan. A loan will give you the flexibility to make the moves you need to make, even while revenue is low. The US Small Business Administration announced on March 12th that they will be providing disaster assistance loans for small businesses impacted by the novel coronavirus. For more information, check out the SBA announcement and our article: What SBA Disaster Relief Loans Are & How To Qualify For One.
Work On Other Productive Tasks
If your orders have slowed, and you find that you have a lot of time on your hands, now might be a good opportunity to turn your attention to a project you’ve been putting off. If you have the resources and abilities, try giving your website a new look. Easy-to-use website builders like Squarespace, Shopify, Wix, and Weebly, make this a task that you can do on your own. Or, perhaps now is a good time to create an emergency plan for what you’ll do if the current condition stretches out beyond a couple of months. Alternatively, you could spend available downtime strengthening your marketing campaigns. Hopefully, that will help you to get the orders coming in soon!
Take Care Of Yourself & Your Employees
Your businesses can’t operate without people, and your people need to stay safe right now. If it’s possible, organize a way for your team to work from home. Here at Merchant Maverick, we’ve been a remote team for years. We use communication tools (like Slack and GSuite), as well as project management software, to plan, organize, and execute our projects.
If working remotely isn’t an option, make sure you follow government guidelines about social distancing and that you provide sick time for anyone who may need it. Let’s take care of each other in this stressful time.
Give Back To Your Customers & Community
Giving back is one of the best ways to feel better during a stressful time. Look for opportunities to support at-risk groups in your community. We’ve been particularly inspired by this list from Forbes of 50 ways larger companies are helping their communities.
At Merchant Maverick, we are giving back by working to supply business owners with the tools they need to overcome this crisis. We hope the resources in this article have been helpful to you, and we hope you are able to find help elsewhere on the site as well.
Getting Your eCommerce Business Through Tough Times
There’s no doubt that things are hard right now. But keep hope in knowing that your business has overcome hard times before. The businesses we’ve come to know here at Merchant Maverick are innovative, resilient, and resourceful. We can get through this together.
Take a look below for a list of resources that can help you find solutions to the current crisis:
Merchant Maverick Resources
Our Hub for Coronavirus (COVID-19) Guides & Resources
Small Business Outbreak & Pandemic Guide: Coronavirus Edition
What SBA Disaster Relief Loans Are & How To Qualify For One
Coronavirus Survival Guide For Restaurants
How To Use (& Avoid Using) Business Credit During The Coronavirus Pandemic
External Resources
Facebook’s Business Resource Hub
CNBC Article: Treasury and IRS to delay tax payment deadline by 90 days
US Small Business Administration (SBA) Webpage: SBA to Provide Disaster Assistance Loans for Small Businesses Impacted by Coronavirus (COVID-19)
The post What The Coronavirus Means For eCommerce & What Your Business Can Do About It appeared first on Merchant Maverick.
The novel coronavirus global pandemic is quickly reshaping American life as we know it. As a small business owner, you’re no doubt concerned about how COVID-19 will affect your livelihood. Restaurant owners especially face challenges due to restrictions on gatherings of people, local quarantines and curfews, and just the general fearful atmosphere that has your most loyal patrons now fearful to leave their homes.
Nevertheless, people still have to eat.
While it’s hard to predict the future as things are changing so rapidly, it seems likely that many restaurants will remain open throughout this pandemic, if only in a limited capacity—i.e., for delivery and takeout. We’re here to help you weather out this storm so you can stay open, or at least stay in business, even if you must close your restaurant temporarily because of COVID-19.
Keep reading to learn how your restaurant business can adapt to new business conditions in the age of coronavirus, including resources on how you can save your business from closing and even continue serving customers during this crisis.
Whatâs Going To Happen To Restaurants As Coronavirus Spreads?
As more and more cities are affected and local governments declare emergencies, all businesses should be prepared for a downturn. This downturn will almost certainly be temporary, and it will be worse in certain regions than in others, as outbreaks are occurring in different regions at different times. However, it’s becoming pretty clear that no customer-facing business—retail, restaurant, health and beauty, service etc.—will be unaffected.
As a result of the worrying spread of COVID-19, many restaurants are temporarily shutting their doors, reducing their seating capacity, or restricting business to only take-out and delivery.
Will the government mandate a shutdown of all restaurants? Well, some state and city governments have already done this as of the time of writing this article, and more will likely follow suit. However, delivery and take-out are not included in those closure orders thus far, and some governors and mayors are only ordering restaurants to operate at half-capacity. Of course, it’s very possible that measures may become stricter in the coming days and weeks.
White House guidelines issued March 16 recommend against gatherings of only 10 or more people over the following 15 days, and that all restaurants close (dine-in service) in states with evidence of community transmission; however, at the time of writing, those announcements were just guidelines and not mandated orders.
Is Your Business Prepared For A Pandemic?
So, is your restaurant business ready to deal with the coronavirus pandemic? Have you actually ever thought about what to do if thereâs ever a large-scale crisis? It might seem like it’s too late, but you can still prepare for what changes might be ahead, including even future pandemics or national emergencies. While everyone’s hunkering down, the internet makes it possible to communicate with employees and customers, and even apply for and access emergency funds during this time of crisis.
5 Essential Things You Can Do To Prepare For A Community Health Crisis Or Other Disaster
As a restaurant owner, there are some basic things you can and should be doing from a business management/community health perspective. These actions apply not just to the current health crisis, but also to protecting your business from future crises.
Revisit Health & Safety Policies
This may seem kind of basic, but it’s nonetheless important. We’re talking handwashing techniques, proper sanitation, and when people should stay home from work. You can help protect your business, employees, and patrons by implementing some stricter health and safety policies, today.
To inform such policies, be sure to consult the official CDC guidelines for businesses regarding COVID-19 and all local ordinances and guidelines. You can also find some helpful information about maintaining worker health in the U.S. Chamber of Commerce Toolkit for Coronavirus.
Revisit Employee Attendance Policies
Do you have an overly strict attendance policy? You’ll probably need to relax this policy — at least for the time being — so that people donât feel tempted to go into work when sick. Make it easy for your employees to make the right choice.
Again, be sure to consult all local laws and ordinances. For example, the city of San Diego has ordered that the city’s businesses can no longer require a doctor’s note when an employee is sick, as they don’t want doctors to be burdened by paperwork instead of helping sick patients.
Analyze Your Cash Flow
Cash flow is super important, now more than ever. Take a look at where things are right now and what you anticipate your cash flow will be over the next few months—including worst-case scenarios. How much do you have on hand? How much do you need to keep the lights on? When are your next bills due? Are you eligible for a cash-flow loan if you need one? Check your POS reports for changes. Your revenue may be down, but by how much? Donât just rely on âimpressionsâ or visual scans.
Here’s a good resource you can use right now to analyze your business’s cashflow: How To Calculate & Analyze Business Cash Flow
Check Your Business Insurance Policy
Familiarize yourself with your business insurance policy. What does it cover? How much does it cover? Here are some resources we have on business insurance:
Business Insurance For Florida Small Businesses
Business Insurance For Startups: How Much It Costs And Why You Need It
How To Get Business Insurance In 4 Easy Steps
Do I Need Business Insurance?
Own A Business? Here Are 7 Types Of Business Insurance You May Need
Monitor News & Policy Changes
While it’s not necessarily helpful to obsessively check the news all day for developments (though it can be hard not to right now), it’s important as a business owner to stay on top of all local, state, and national health policy changes that could affect your business. Find a reliable source of news for health updates specific to your city, and make sure your device is set up to receive alerts so you get all the relevant updates.
Of course, you’ll need to make sure you’re adhering to all current policies so that you don’t get shut down. For example, you’ll need to adhere to social distancing policies from the CDC which recommend that customers be seated at least 6 feet apart and that dine-in seating is reduced to 50 or less. Depending on your state or city, there may be additional guidelines you must follow.
5 Strategies To Keep Business Going In A Tough Time
Okay, so weâve covered basic emergency preparedness. Now, what can you do to keep your restaurant going during a time of crisis? Here are some ways restaurants can cut costs and/or keep money flowing in.
Implement Takeout & Delivery
Offering takeout and delivery is important when people do not want to dine-in or you’re unable to offer dine-in service due to the current emergency policy in your area. As mentioned, some governments are mandating that restaurant dining rooms close or operate at half-capacity. You can offer a takeout and delivery option via an online restaurant ordering system that works with your restaurant’s website, or you can offer delivery via a third-party delivery service.
While third-party delivery services typically take a big cut of the sale—as much as 30 percent—during the crisis, food delivery services like Uber Eats, GrubHub, and Seamless are currently suspending their commission fees to independent restaurants. These services are also instituting “no contact” food delivery policies in adherence with social distancing recommendations.
Sell Gift Cards
People in our communities cherish their local businesses and want to help them out. After all, you want the businesses you love to frequent to still be around after the current crisis ends. If your restaurant offers gift cards, people can buy a gift card now (providing the money you so desperately need at the moment) and redeem it later once your regular operations resume.
Here’s an excellent resource that can help you set up gift cards for your small business if you haven’t already: How To Implement A Gift Card Program For Small Business: What You Need To Know & How To Get Started
Adjust Your Menu & Hours
This is a time to trim the fat and focus on just the essentials. This is the time to update your menu and drop high-cost/low-profit items, and slow-moving items. Focus on what’s cheap, popular, and in-season. Further reading:Â 14 Ways To Create, Implement, & Maintain A Great Restaurant Menu
Many restaurants are adjusting their hours to save money and also to minimize risk. You might consider temporarily closing during your least-busy days or hours to save costs, or getting nixing your happy hour when people would be less likely to practice social distancing.
Communicate With Customers
Most businesses have an email list and/or a social media presence. Even if you’re not sure if you do, check your point of sale. POS systems like Square automatically collect customers’ email addresses and other contact info so you can reach out to them. Whether you are closing or staying open, be sure to contact your customers to let them know what precautions you are taking against coronavirus and any adjustments your business has made to your hours, sanitization policies, or anything else.
If your restaurant is closing temporarily, you may just want to reassure customers that you will reopen when it’s safe and perhaps encourage them to purchase a gift card in the meantime.
Advertise & Promote
If you’re still open, you need to let customers know, and entice them to buy food from you. For example, you can use social media, text marketing, and email to offer some specials for takeout. You may even want to use online advertising in the form of pay-per-click ads and (paid) social media ads on Facebook and Instagram. As far as what foods to offer for your promotions, you will especially want to focus on selling meals that are super cheap to make with high profit margins.
What To Do When A Temporary Slow-Down Becomes The Worst-Case Scenario
What are your options when things start going from âwe need to tighten our beltsâ to âhow long can we keep the lights on?”—or worse, when government orders force closure?
What measures are being taken now to help small businesses after the COVID-19 outbreak? Here are some steps governments are taking to help businesses affected by COVID-19:
The SBA has announced it will provide disaster relief loans up to $2 million for small businesses affected by COVID-19. Here is SBA’s news article about coronavirus SBA loans and its guidelines for businesses re: COVID-19.
The Fed has cut interest rates to zero to help businesses and consumers during coronavirus—This means your business could qualify for a very low-interest loan.
State and city governments have announced various measures to help small businesses during the crisis; for example, the city of San Jose, California voted to adopt a temporary 30-month moratorium on evictions for small businesses and residents of the city, which has been hard-hit by the virus.
The U.S. Chamber of Commerce is lobbying to cancel payroll taxes for April and May (this has not been made into law yet).
Some more things you can do:
Check Your Local Chamber Of Commerce to find out about coronavirus disaster relief programs for small businesses in your state and city, such as eviction moratoriums, payroll and sales tax relief programs, low-interest loans, etc.
Communicate With Your Creditors and also with your vendors, your landlord, etc. Everyone is hurting right now and they will likely be willing to work with you, especially if you can negotiate arrangements for when things pick up. Some credit card issuers are even offering special relief programs. It’s better to be proactive than to get behind and then ask for help.
Check Your Business Interruption Insurance Policy if you have one. Your policy must include communicable disease coverage for it to cover coronavirus-related losses.
Here is more coronavirus-related information and resources for restaurants compiled by the National Restaurant Association: Coronavirus Information & Resources.
Being Proactive Is The Best Way To Protect Your Business (& Your Customers)
Why is it so important for businesses to get ahead instead of just waiting this crisis out? Well, even if you have to close or drastically reduce your operations, you still have the ability to take actions that can lessen the impact of coronavirus on your restaurant. You can:
Promote your takeout and delivery services
Communicate with your customers
Sell gift cards
Apply for disaster-relief financing
Negotiate with your creditors
At the end of the day, we’re all in this together. Also, state and local governments are very motivated to reduce the impact of this crisis and small businesses, which are the backbone of the American economy. Seek out the resources for small business help because they do exist.
Read our Small Business Outbreak & Pandemic Guide: Coronavirus Edition for more actionable information for small businesses during the COVID-19 pandemic.
The post Coronavirus Survival Guide For Restaurants appeared first on Merchant Maverick.
COVID-19, a novel coronavirus, has spread throughout the world, creating a pandemic while also spreading fear and uncertainty. Small business owners are particularly feeling the pain, as many not only have to worry about the health and safety of their loved ones but also about how to keep their businesses afloat. Some states, including Ohio and Illinois, have already shut down bars and dine-in services at restaurants through the end of March. Stores are shortening their hours, laying off workers, and taking other steps to prevent the spread of this virus.
Unfortunately, even a two-week closure could be enough to cripple some small businesses. Shuttered businesses aren’t bringing in revenue, but they still have bills to pay. In China, where the novel coronavirus originated, it is being reported that the economy has taken a serious hit since the first cases were diagnosed in January. This troubling news leads us to wonder where our own economy will stand when this virus is eradicated. Fortunately, the Federal Reserve is offering some relief.
Federal Reserve Cuts Interest Rates To 0%
In a move not seen since the financial crisis of 2008, on March 15th, 2020, the Federal Reserve cut interest rates a full percentage point to 0%. Benchmark interest rates ranging from 1% to 1.25% have been slashed to 0% to 0.25%. This interest rate reduction is a proactive move to help stabilize markets and keep borrowing costs low for consumers and businesses. For small business owners, being able to receive low-cost funding could be the difference between recovery and bankruptcy.
Lowered interest rates will remain in place indefinitely. According to the Federal Reserve, this safeguard will continue until it is “confident that the economy has weathered recent events.” Even when the threat of the virus disappears, there will still be economic challenges, but this measure and other actions taken by the Fed will hopefully ease the financial impact that we face in the months ahead.
Other Moves Made By The Fed
In addition to slashing interest rates, the Federal Reserve is making additional moves to counter the negative economic effects of the coronavirus. This includes bond purchases — or “quantitative easing” — that will help keep borrowing rates low for consumers and small businesses. The Fed announced plans to purchase at least $700 billion in mortgage-backed securities and Treasury bonds to further stabilize loans.
The Federal Reserve has also reached an agreement with five other central banks to lower rates on currency swaps and to help financial markets through these difficult times.
To allow banks to continue lending, the Federal Reserve has also dropped a requirement for these institutions to hold cash that’s equal to 10% of customer deposits. Instead, these funds can now be used to continue to issue loans. Financial institutions also are allowed to use cash buffers put in place following the recession of 2008.
What Does This Mean For Small Business Owners?
As a small business owner, you may be wondering what this means for you. These changes were put in place to help alleviate the pandemic’s impact on the economy and small businesses just like yours. Lowered interest rates, additional funds to be used for lending, and other measures taken by the Fed mean that you still have access to affordable loans to keep your business operating.
While uncertainty lies in the months ahead, it’s important for small business owners to take advantage of funding opportunities to keep their doors open. Whether you need a loan now to meet payroll or you need one in the near future as the economy recovers, know that there are options. For starters, take a look at Small Business Administration (SBA) loans, which have always been known for their low rates and favorable terms. In addition to its traditional lending products like the 7(a) loan, the SBA has also announced that it will be offering disaster relief loans to businesses affected by the coronavirus. Qualifying businesses may receive up to $2 million in working capital to replace lost funds as a result of the worldwide pandemic.
It’s easy to let anxiety take over with so much uncertainty ahead, but know that there are options available for your small business. During this time, it’s important to explore your funding options so that you can keep yourself and your employees safe while doing what’s best for your business.
The post The Fed Has Cut Interest Rates To A 12-Year Low: Hereâs What It Could Mean For Your Business appeared first on Merchant Maverick.
Clover is a big name in small business point of sale and if you’re currently in the market for a POS system, it’s likely that Clover is on your radar. But with so many different entities selling Clover, it can be difficult to gauge how much you should pay for a Clover system or what’s a good deal (and what’s not).
There are three aspects to Clover pricing: one-time hardware costs, monthly software costs, and ongoing credit card processing fees. In this article, I’ll break down how much you can expect to pay in each of these areas, and where you can find the best prices for Clover POS.
Who Sells The Clover POS System?
Many different entities sell Clover, ranging from national banks and merchant services companies to even retailers like Sam’s Club. The following are some popular Clover POS system vendors:
Bank of America Merchant Services*
Clover.com
Dharma Merchant Services
First Data/Fiserv*
Leaders Merchant Services*
Merchant One*
National Processing
Payment Depot
Sam’s Club Merchant Services*
Wells Fargo Merchant Services*
*Not a recommended Clover reseller
Generally, we recommend purchasing your Clover system directly from Clover.com or from a high-quality Clover reseller such as Payment Depot, Dharma Merchant Services, or National Processing.
How Much Does A Clover Credit Card Machine Cost?
As with the cost of POS systems in general, Clover hardware pricing depends in part on where you purchase it, as well as which pieces of hardware you want to include in your POS setup.
A Clover Station is the largest, most complete Clover POS setup, and includes 14″ swiveling POS screen, cash drawer, and receipt printer. The Clover Mini has a smaller swivel-screen and can be used by itself or with a Station. The Clover Flex is a handheld smart terminal with an even smaller screen that can also be used by itself or as part of a larger Station setup. Finally, the Clover Go is a mobile credit card reader that connects to an app on your iOS or Android device.
All Clover devices sync together so you can pretty much mix and match them however you like. For instance, you could have a Clover Mini with a cash drawer as your main terminal, while also using a Clover Go for occasional mobile sales. Or, you might just use a Clover Station and nothing else, or a Clover Flex with a Clover Mini, etc.
The following prices are what you can expect from Clover.com directly. Other Clover vendors vary in their pricing, and we recommend you do your research to compare prices to find the best options out there.
Clover Station for any business: $1,399. Includes Station, cash drawer, and receipt printer with customer-facing display and NFC. Including Clover Mini: $1,749.
Clover Station for full-service restaurants: $1,349. Includes Station, cash drawer, and standard receipt printer (kitchen printer sold separately). Including Clover Flex: $1,699.
Clover Mini: $749. Has built-in scanner and receipt printer but does not include cash drawer.
Clover Flex: $499. Has built-in scanner and receipt printer but does not include cash drawer.
Clover Go: $69. Includes Micro USB charger. Charging dock sold for an additional $29.
Additional hardware add-ons, such as scales, barcode scanners, kitchen printers, and debit PIN pads can drive the price up further.
Various vendors may offer lower prices on Clover hardware (Clover.com hardware prices are MSRP), but those lower prices may come with a catch, such as having to sign to a long-term merchant services contract for payment processing. Many Clover vendors also offer the option to lease your Clover POS, but we never recommend leasing your POS system. It’s always a much better deal to buy your system outright, or pay for it installments if the vendor offers 0%-interest financing.
To learn what each of the Clover hardware devices can do and which ones you need for your business type, I recommend reading our dedicated reviews of the Clover Station, Clover Mini, Clover Flex, and Clover Go. My post on The Best (And Worst) Companies To Get a Clover Credit Card Machine From also has more information on the different Clover hardware options and how much you can expect to pay from different vendors.
Understanding Clover Fees For POS Software
Clover charges monthly fees for its software, letting you choose from several different plans that offer different features. You can also purchase additional software features from Clover’s App Store.
Here are Clover’s monthly software plans:
Register Lite Plan: $14/month
Best for businesses with credit card sales of less than $50,000/year
Flat-rate processing at 2.7% + $0.10 (if plan is purchased directly from Clover)
Features include:
Accept all credit and debit cards, including chip (EMV) cards
Accept contactless (NFC) payments
Track cash payments
Process payments when offline
Send paperless receipts
Accept on-screen signatures & tips
Ring up items, discounts, & tax
Charge taxes at the item level
Process refunds
Theft protection (set employee permissions)
Employee management (payroll, shifts)
Export basic reports (sales, tax, payroll)
24/7 support
Liability protection up to $100,000 in the event of a data breach
Access to 200+ apps and integrations on Clover app market*
Monitor activity, sales, & refunds remotely
Track sales with item-level reporting*
*Available on Flex, Mini, & Station only
Register Plan: $29/month
Best for businesses with credit card sales of more than $50,000/year
Flat-rate processing at 2.3% + $0.10 (if plan is purchased directly from Clover)
Pre-authorize credit cards (for bar tabs, reservations)
Build your mailing list automatically*
Read customer feedback, and reply with coupons*
Create a simple, custom loyalty program*
Fire orders to a kitchen printer or other stations
Add gratuity to checks
Manage tables
*Available on Flex, Mini, & Station only
Dining Plan: $69/month
Best for full-service restaurants
Flat-rate processing at 2.3% + $0.10 (if plan is purchased directly from Clover)
Includes everything in Register plan, plus:
Floor Plans app: Build dynamic floor plans that match your layout
Orders app: Set up order types and categories; move or transfer orders; fire orders directly to kitchen or prep stations; add items to partially paid orders
Apply service charges to large parties
Split checks in any proportion
Run reports per revenue center (patio vs. bar)
Other bundled that come pre-installed: Bar Tab Auths, Tips, Shifts, Discounts, Happy Hour
As you can see, the Register Lite plan is best for very light, low-volume users who don’t need to do things like process exchanges, manage inventory, or accept tips. For most retail or quick-serve businesses, the Register plan is best, especially considering the lower rate for payment processing. Full-service restaurants may benefit from the Dining plan, but it depends on your needs; you might be fine with just the Register plan. Note that Clover used to offer Payments Plus, which was free and more limited in features. However, that plan has been discontinued.
Still, $14/month to $29/month is pretty affordable for a POS, especially since Clover doesn’t charge extra for additional registers or devices. Of course, Clover apps might add to the cost if you need specialized features. But again, most businesses will find everything they need in the $29/month plan.
Note that while most Clover providers sell Clover software services, those companies often charge their own markup on top of Clover’s monthly fees.
How To Navigate Clover Credit Card Fees
Clover is always offered in conjunction with a merchant account, whether you buy it from Clover.com or elsewhere. Clover.com offers a flat-rate pricing structure, whereby you pay 2.7% + $0.10 or 2.3% + $0.10 for all card-present transactions (and 3.5% + $0.10 for card-not-present transactions, regardless of plan).
Clover’s flat-rate pricing scheme is straightforward and doesn’t include any extra merchant services fees. Generally, flat-rate processing works great for small, low-volume businesses. The processing fee on the Register plan (2.3% + $0.10) is quite competitive, especially compared to Square’s rate (2.6% + $0.10). (Note that Clover merchant accounts are still subject to underwriting and approval—make sure you read the fine print as you sign up.)
Not all Clover sellers offer flat-rate processing; some providers like Payment Depot offer interchange-plus rates, which might work better for higher-volume merchants processing more than $10K/month. Other less-desirable Clover vendors offer tiered pricing or enhanced billback pricing, which are both confusing and expensive. And still other vendors offer flat-rate processing, but at rates higher than what Clover.com offers. For example, Bank of America sells the Register plan with 2.7% processing.
How Much Should You Pay For Cloverâs Point Of Sale System?
All in all, most businesses can expect to pay somewhere around $1,400 for a complete Clover Station setup, with a $29/month software fee, and credit card processing fees of 2.3% + $0.10. As mentioned, Clover.com is a good place to buy your Clover devices and your system’s associated software and payment processing account. However, choosing one of the top-rated Clover providers could also be a good bet.
Whatever you do, beware of sub-par resellers offering expensive leases and tiered pricing. If you don’t buy directly from Clover.com, make sure you shop around and understand what fees are being absorbed or passed onto you in other forms.
Finally, if you’re not 100% sure whether you want to use Clover as your POS, you might also want to evaluate some of the best Clover alternatives.
The post How Much Does Clover POS Cost? Everything You Need To Know About Clover Pricing appeared first on Merchant Maverick.
The year-end payroll gauntlet is fast approaching. With the holiday season in full-swing, taxes around the corner, and fourth quarter payroll requirements looming, there is a lot of pressure on business owners to complete these tasks smoothly and accurately (especially since even simple mistakes may accrue fines and fees). If you’re looking for a simple guide to walk you through your year-end payroll responsibilities, we’ve got you covered.
We’ve broken down the year-end payroll process into 10 easy steps. This way you can close out your payroll and ensure that you file all of the proper tax forms on-time. To make things even easier for you, we’ve also created a printable Year-End Payroll Checklist so you can mark your progress.
Small Business Year-End Payroll Checklist (PDF)
You can print the Year-End Checklist now and use it to follow along, or you can jump right in.
How To Complete Year-End Payroll
Year-end payroll is all about balancing your books, ensuring you’ve paid people the right amount of money, and double-checking that you’ve sent the right amount of taxes to the government. By the end of January, employees should have access to a W-2 or 1099, which is a record of payment received and taxes paid. You will also need to submit wage and tax information to the Social Security Administration (SSA) and the Internal Revenue Service (IRS).
Payroll is a year-long process: keeping your records updated as you go throughout the year will help with any end of the year accounting and paperwork management. Even if you outsource payroll, there is information you should verify and deadlines you shouldn’t miss. (Also, now is the perfect time to review your company’s payroll choices. Anything you/employees want to change before the new year?)
As always, the exact process for your payroll processing is dependent on your state and industry, so use these steps as a guide and verify with an accounting or bookkeeping professional.
Step 1: Verify All Employee & Company Information
As the year winds down, you will need to ensure that all of the information for your company and employees are correct. First, verify that your company name, tax IDs, and company tax information is updated and accurate. Next, make sure that your employee information is up-to-date. For employees, check the following:
Employee’s name is spelled correctly
Correct Social Security Number
Updated/accurate employee addresses
Lived-in/worked-in jurisdictions
If you find any discrepancies between recorded information and accurate information, update your files and/or let your payroll service provider know of any changes.
Step 2: Verify Wages, Taxes, & Benefits
After you’ve checked and made sure all your employee and company information is accurate, the next step is to run through and verify that your wage, tax, and benefit numbers match up with your payroll numbers. Here’s what you’ll need to verify:
Yearly PTO accrual
Worker status (active, terminated, on leave)
Filing status (exempt or non-exempt)
Number of exemptions
Year-to-date wages and taxes
Pre-tax amountsÂ
Most of the information above is on an employee’s W-4 form. Employees can change their tax information with the government at any time, so this is where you may find and remedy discrepancies. Bonus: Many payroll software programs have reporting features that will do this work for you.
Step 3: Order Your W-2s
If you run payroll yourself or if you do not have a payroll provider that manages your W-2s, you will need to order paper forms from the Internal Revenue Service. A W-2 is a tax and wage statement for your employees. Contractors will receive a 1099 form. You can also file these forms online on the IRS website. Paper forms take 10 business days to mail, so plan ahead and order these in December.
Step 4: Manage Paid Time-Off
What is your company’s paid-time-off (PTO) policy? Do you offer PTO as a lump sum at the start of the year or does your PTO accrue as the year progresses? Will your employee’s PTO reset in January? What happens to the unused time?
Some states have mandates on whether or not a company can clear PTO, so check with your accountant or bookkeeper about the laws in your state. If you pay-out accrued PTO, you will need to manage that payment with the last paycheck of the year and keep a record of that payment for tax purposes.
Step 5: Decide On Bonuses
If you are awarding bonuses, those payments must go out with the last paycheck of the year. You will need to keep a record of bonuses given for tax purposes.
Step 6: Update Your Compliance Posters
In November or December, it’s important to order your new labor law posters for the upcoming year. These posters are federally mandated and expected to be displayed in a conspicuous place where all employees can read them. Failure to post updated labor law posters could result in fines, fees, or even labor lawsuits.
Step 7: Update Payroll Information
Before you run your first payroll of the new year, you will need to update your payroll information. That includes checking for new tax rates, making adjustments to employee information, balancing PTO, and tweaking yearly deductions.
Step 8: Deliver W-2s/1099s To Employees
Your employees need their W-2/1099 forms documenting their pay and taxes for their own tax filings. You have a legal responsibility to deliver pay and tax information to employees by January 31st.
Step 9: File Your W-2s/1099s
File all W-2s and 1099s with the Social Security Administration by January 31st. (You may also need to file W-2s with your state or county, depending on location and local tax laws.) In addition to each W-2, you will send a W-3 form; this form is needed for each employee and is a summary of the information on the W-2.
Step 10: File Tax Forms 941, Form 940, and Form 944
Forms, glorious forms! You will need to pay your federal unemployment tax (FUTA) from the fourth quarter with Form 940. You must also file federal income taxes and FICA (social security and medicare taxes) through Form 941. The last form (Form 944) is an annual return of all paid payroll taxes. All are due by January 31st.
Payroll Year End FAQS
Still have questions about closing the books? Here are the most popular year-end payroll questions. Don’t see your question? Leave a comment below.
What does year-end payroll mean?
Year-end payroll is about checking that the numbers to ensure your payroll reports add up to the money you’ve given and withheld during the calendar year. This is the last opportunity before you file your taxes and year-end forms to reconcile any discrepancies, change or update information, or adjust payroll choices for the new year.
What year-end payroll forms do businesses need to file?
So many forms. The good news is that many of the payroll software options available offer tax and year-end payroll support, and many of these forms can be filed online. (Always check with your accountant or bookkeeper about your specific state and industry requirements.) Here are the most important year-end payroll forms you will need to file:
W-2 Form: This form reports wages and withholdings to the IRS
W-3 Form: This is a summary of the information in the W-2s. This goes with employee W-2s to the Social Security Administration.
1099 MISC: This is a statement of income for contractors.
Form 1096: If you’ve paid any contractors and given them a 1099 MISC, you will need to summarize that payment information and submit it to the IRS with this form.
Form 940:Â This is the form needed to pay your Federal Unemployment Tax (FUTA) liability to the government.
Form 941:Â This form is due quarterly and reports employee payroll taxes collected for each quarter. Payroll taxes include federal income taxes, social security and Medicare taxes.
Form 944:Â If your payroll taxes are less than $1000 annually, you may qualify to pay these taxes yearly instead of quarterly. Small businesses that qualify will fill out a Form 944 instead.
Form 1095-B: If you offer health insurance, you will need to send this form to the IRS and to your employee to document that health coverage.
When does year-end payroll have to be submitted?
All the forms related to year-end payroll reports are due by January 31st to their respective locations.
What year-end tax forms do employers have to provide their employees and contractors?
Employers need to send their employees a copy of their W-2 and contractors a copy of their 1099-MISC. This accounts for wages paid and taxes withheld.
When do employers need to complete their employee W-2s?
All W-2s need to be filed with the social security administration with copies sent to employees by January 31st.
When do employers need to complete their contactor 1099-MISCs?
All 1099-MISC forms must be sent to the IRS with copies sent to those who received nonemployee compensation by January 31st.
Get Started With Our Year-End Payroll Checklist
Small Business Year-End Payroll Checklist (PDF)
It’s understandable if all the steps above feel overwhelming. It’s best to think about year-end payroll like this: This is when you account for the wages and taxes you’ve paid and withheld throughout the year.
As you look to settle books and wrap up your fourth quarter taxes, you might find that you’re interested in outsourcing the task next year, if you don’t already. Some payroll software companies like Gusto and Intuit offer tax services as part of their payroll programs. Whether you’re running payroll yourself or outsourcing, use our Merchant Maverick Year-End Payroll Checklist to get started, and check out our other great payroll and tax resources for more help running your small business.
What Can I Write Off As A Small Business Tax Deduction?
Everything You Need To Know About Small Business Payroll
What Are Payroll Taxes? And How Do You Calculate Them?
Small Business Accounting: How To Close The Books At The End Of The Year
The post Small Business Payroll: Your Complete Year-End Payroll Guide appeared first on Merchant Maverick.
It’s that time of year again — time for holiday parties, sparking lights and decorations, and gifts under the tree. As a small business owner, the holidays can add even more to your already full plate (and no, we’re not talking about your big family dinner). One of the most wonderful times of the year can quickly become one of the most dreaded for small business owners and entrepreneurs because of one little phrase: year-end accounting.
Despite being a hassle, though, year-end accounting serves several important functions. The year-end accounting process helps you prepare for tax time. You’ll also run critical financial reports that give you a clear picture of the financial health of your business. This helps you determine any action you need to take in the future to stay on track, boost your profits, or hit other company-wide goals.
Every business owner needs to do their year-end accounting. The good news, however, is that there are steps you can take to simplify the process. Some of these steps can be done at the end of your company’s calendar or fiscal year, while other steps are performed on an ongoing basis. Integrate these tips into your accounting workflow to save time, avoid overlooking errors, and be prepared for your year-end accounting process.
Use Accounting Software
If your business isn’t already using accounting software, what are you waiting for? Today’s accounting software allows you to keep your transactions organized and automates processes such as reconciling bank accounts or sending payment reminders. Depending on the software you choose, you’ll have access to a variety of accounting features that can help you throughout the year … and at the end of the year. This includes invoicing, estimates, expense tracking, inventory management, and time tracking. Your accounting software also allows you to run important financial reports needed for year-end accounting. If you’re new to accounting, don’t worry — most software is easy enough for anyone to use, even if you didn’t major in accounting! (If you don’t believe us, check out our top easy accounting programs.)
The software you choose should fit the needs of your business. For example, if you operate a small business with a handful of clients and only need basic features like invoicing and reporting, free accounting software may work for you. If you have a larger business with more extensive accounting needs, there are plenty of paid options available that offer additional features at an affordable price.
As the end of the year approaches, selecting and learning how to use your new accounting software can be a burden to a busy business owner. If your end-of-year to-do list is too long to add a new task, take some time to at least explore your options so you can have a fresh start for the new year.
Regularly Invoice Customers
Regularly invoicing your customers is necessary for a number of reasons. Not only does this help improve the cash flow of your business, but it also saves time with year-end accounting. In other words, don’t wait until the last minute to invoice your customers — make life (and year-end accounting) easier by invoicing your customers throughout the year.
The same holds true for invoice reminders. Your customers and clients get busy, too, and can easily overlook an invoice. Sending out payment reminders helps you get paid faster, improving your cash flow and reducing the number of unpaid invoices you have to deal with at the end of the year.
Your invoicing software or accounting software makes it easy to send invoices and payment reminders, as well as receive payments from your customers. Of course, features vary based on the software your business uses, but many programs offer recurring invoices and automated payment reminders that help you get paid faster with less work on your end.
Keep Track Of Your Income & Expenses Throughout The Year
For a business owner, there are few things more stressful than shuffling through receipts, invoices, and bank statements to get your finances in order. Not only does waiting until the last minute create more work for you (or your bookkeeper), but rushing through makes it easier to miss errors that can affect everything from your financial statements to filing your taxes. Don’t wait to track your income and expenses. Simplify your year-end accounting by tracking income and expenses throughout the year.
You can track your income and expenses through your accounting software. At a minimum, you should include the date of the payment, the amount of the payment, and the payor or payee. For further organization, you may even break down your income streams and expenses into categories if this is an option in your accounting software.
Like many of the other steps in this article, the benefit of tracking your income and expenses is two-fold: it simplifies your year-end accounting and also allows you (or your accountant) to more easily find tax-deductible expenses.
Reconcile Your Bank Accounts Every Month
Accounting is all about balance, and reconciling your bank accounts can help ensure you maintain that balance. To put it simply, reconciling your accounts means that you compare documentation (such as invoices or bills) to ensure they match the transactions in your bank accounts. Sound difficult? Not to worry — your accounting software can come to your rescue again.
Sure, you could sit down and manually compare your bank statements with your bills, receipts, and invoices … or you could let the software do the work for you. Many programs offer a reconciliation feature that lets you securely connect to your business bank accounts. The information is compared to transactions that have been input into your software. If the numbers don’t match up, you know that there’s an error somewhere in your accounting — maybe you forgot to enter an expense, for example. Bank reconciliation goes beyond just user error; it is also a way to detect bank errors or even fraudulent activity.
Reconciling your bank accounts should be a regular bookkeeping task that your business performs at least once per month. Balancing the books and detecting errors on a regular basis is far easier and less time-consuming than waiting until it’s time to do your year-end accounting. Plus, if you notice an error at the end of the yar, it may be too late to set it right.
Separate All Personal & Business Expenses
In a perfect world, all small business owners would have their personal and business expenses separated by using different bank accounts. Unfortunately, this isn’t the case for all businesses. If you use one bank account for personal and business expenses, those will need to be separated as part of your year-end accounting process.
Why separate your expenses? Two words: IRS audits. If the IRS has reason to believe that you’re writing off personal expenses as part of your business, you could be audited. And if you don’t have your finances in order, you’ll find it more difficult to get through this audit, potentially paying more money due to poor record-keeping.
Fortunately, some accounting software provides easy, hassle-free options for separating your expenses. If you don’t have separate bank accounts, look for a program that offers this feature, such as Wave. You should also consider opening a business bank account for improved organization heading into the new year.
Count Your Inventory At The Beginning Of The Year
While your accounting software may have an inventory tracking feature, you should never skip over manually counting your inventory. By counting your inventory, you can verify that the data in your software is correct. Your inventory at the beginning of the year should match the closing inventory from the previous year. Counting your inventory is also a way to calculate the cost of goods sold, and is required for several tax forms.
There may be discrepancies in your accounting software and your manual count. This isn’t uncommon and could be due to a number of reasons, such as broken products or items that were stolen. Identifying these discrepancies keeps your books accurate and prevents interruptions to your business, such as unexpectedly running out of stock.
You may also find that you need to clear out some stock as you head into a new year. Products that are obsolete or aren’t selling, for example, can be sold at a reduced price or even donated, which may qualify as an additional tax deduction. Need more year-end sales advice? Check out our top holiday sales tips.
One thing to note is that your inventory should be counted on a day that your business is closed. Products should not be shipped or sold until the inventory is counted and reconciled in your accounting software to ensure accurate counts.
Run Year-End Reports
Running financial reports is a critical step in year-end accounting. These reports give you a clear picture of how your business is doing financially. These reports are also used when filing your tax return. In addition to showing how your business performed through the year, you can also use these reports to set budgets and goals for the year ahead.
There are a few reports that you should always run at the end of each year. These include:
Profit & Loss Statement: A summary of costs, expenses, and revenues that show whether the business operated at a profit or a loss.
Balance Sheet:Â Summarizes the company’s assets, liabilities, and equity.
Expense Report:Â A report that tracks expenses necessary for business operations, including reimbursable travel expenses of employees.
Mileage Log:Â A report that reflects the beginning and ending mileage on a vehicle used for business purposes.
Payroll Summary:Â Summarizes data for paid employees, including wages, taxes, and deductions.
Sales Tax Summary:Â A summary of the sales tax you have collected, as well as sales tax you have paid toward your expenses.
You may opt to run additional reports to have a more comprehensive view of the financial state of your business, such as a Statement of Cash Flows or Sales By Item. You should also consult with your accountant to find out about other reports that may be required for filing your tax return.
Most accounting software allows you to easily run at least basic reports, such as P&L Statements and Balance Sheets. For more advanced reporting, a software upgrade may be required. Always make sure to check each report for accuracy. Once you’ve confirmed that your reports are accurate, it’s time to analyze your business performance. Did you meet your financial goals? Are there areas for improvement? Use this data to set a budget and financial goals for your business for the year ahead.
Take Care Of Year-End Payroll
As the end of the year approaches, you can tackle year-end payroll tasks. While some tasks are better reserved for the month of December, you can actually get a jump on completing these tasks by starting in October or November.
To get started, first verify that your company information, such as tax ID numbers and mailing address, are accurate. Next, verify the information of your employees and contractors. This includes taxes, wages, Social Security number or Tax ID, filing status, and mailing address. If information is incorrect, an employee or contractor should review and submit an updated W-9 or W-4.
Also make sure that you prepare in advance for payroll periods that fall during the holidays so there isn’t a delay in payments. In December, you can also run payroll for employee bonuses and make any necessary adjustments.
The Payroll Summary that was mentioned in the previous section should be used to verify that all information is correct. Once you’ve confirmed that all employee information and payroll summary data is correct, you can gather the documents you need to send out 1099-MISC forms and/or W-2s in January. If your payroll processor or accountant will be sending out these tax forms, make sure that everything is in order and you have all required documentation in order to have the forms prepared and mailed out prior to the deadline.
Lock Your Closing Periods
Once you’ve completed your year-end accounting, it’s time to lock your closing periods — or close the books. Once you’ve locked your closing periods, you will be unable to add or make changes, so make sure that you’ve completed all of the necessary steps of year-end accounting before closing your books. Many accounting programs allow you to lock closing periods quite easily just by selecting a date.
If you did find that you made an error, all hope isn’t completely lost. Some software, such as QuickBooks Pro, allows you to set a password that can be used to add, remove, or update transactions.
Start Fresh In The New Year
This all may seem a bit overwhelming, but it’s worth it to have a fresh start for the new year. You’ll be ready for tax time, have new goals in mind for your business, and have a better understanding of your company’s current financial situation.
While some of these steps may be time-consuming (I’m looking at you, inventory counting), knowing what needs to be done and tackling tasks throughout the year will save time and help ease the stress that comes with year-end accounting. Good luck!
The post Simplify Your Small Businessâs Year-End Accounting With These 9 Easy Tips appeared first on Merchant Maverick.
Most people don’t like the idea of taxes in general, not to mention the excruciating minutia of what goes into calculating how much to pay the government and when. And if you do like those things, then you are probably an accountant or a payroll tax expert already. God bless you, you don’t need this article. However, if you are a small business owner who is entering the world of payroll, understanding payroll taxes can feel daunting. It’s true: there’s plenty to learn and making a mistake can result in costly fees. Using payroll software might take the guess-work out of the process and do the calculations for you, but it’s still important to have a rudimentary understanding of payroll taxes, especially if employees have questions about their paychecks.
In this post, we’ll cover what payroll taxes are, who’s responsibility it is to pay them and when, how to calculate them, and more.
What Are Payroll Taxes?
Payroll taxes are the money an employer withholds from an employee’s earnings to pay taxes to the state and federal governments. How much an employer takes out and sends to the government is based on the employee’s salary and wages, and it is the employer’s responsibility to manage these taxes. There’s only one exception: 1099 contractors are in charge of their own taxes! Contractors, freelancers, and small business owners pay a self-employment tax which is the equivalent of employee/employer payroll taxes.
Payroll taxes make up a substantial part of government revenue and are the second-leading money generator for the United States. (And we can often look to payroll in America as indicators of how our economy is growing or receding, too, as payments reflect growing trends in hiring and stagnation.) When an employer runs payroll, the process involves calculating the employee’s net pay. Net pay is the take-home paycheck employee’s receive on payday, and how you calculate that net has to do with how much state and federal taxes you, as the manager of the payroll, take out, collect, and pay to the appropriate agencies. It’s a detail-oriented process that has multiple opportunities for missteps and steep penalties for mistakes.
Bear in mind that when someone says “payroll tax,” they are lumping together all of the various taxes paid out of a person’s paycheck for services, but in the next section I’m going to breakdown where those payroll taxes go.
Types Of Payroll Taxes
When an employer removes taxes from an employee’s paycheck, that money is earmarked for state and federal services. Here’s how payroll taxes breakdown individually:
Federal Income Tax Withholding:Â Federal income tax is based on income level and the rates are progressive, meaning that as you make more income, your rates move, and your income tax increases as you travel up the tax brackets. There are currently seven tax brackets that tax income at: 10%, 12%, 22%, 24%, 32%, 35% and 37% as income increases.
Social Security Tax:Â This tax is also called the Old Age, Survivors, and Disability insurance, and it’s a flat-rate tax of 12.4% of taxable income. Both the employee and the employer are responsible for paying half (6.2%) of the social security tax.
Federal and State Unemployment Taxes: The Federal Unemployment Tax is a mandatory tax paid quarterly versus monthly. State requirements differ widely.
Medicare Tax:Â This tax is also a flat rate of 2.9% with the employer and the employee splitting the cost at 1.45% each.
State Income Tax Withholding:Â There are currently seven states that do not have a state income tax (Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming) but for everyone else, income taxes work similarly to federal income tax withholdings. The tax rates are very specific to each state, so check the withholding tables on the state government website where your business is located.
Local Taxes:Â Local taxes are very specific to city and state. Most states have a state unemployment tax that is accounted for in this local taxes section. These taxes are based on local tax laws and the tax rates vary, so small business owners need to check/verify those taxes through the state’s tax department.
Payroll Tax VS Income Tax
Payroll Taxes
Income Taxes
Payroll taxes include FICA taxes (social security and medicare) and local taxes withheld, and the additional percentages provided by the employer.
VS
Income tax specifically refers to the federal, state, and local income tax rates
So, running taxes for your payroll involves collecting both payroll taxes and federal/state income taxes. When people say “payroll taxes” they are providing an umbrella term for all collected tax, but the term “payroll tax” refers to FICA taxes (social security and medicare) and local taxes withheld from an employee’s paycheck, plus the additional percentages provided by the employer. Income tax specifically refers to the federal, state, and local income tax rates. Even though the two are joined together in one lump, payroll taxes are specifically earmarked for certain programs. Income tax, on the other hand, is delivered to its respective federal or state governments and is used to manage the budget.
Who Pays Payroll Tax?
The burden of managing payroll and sending payroll tax payments is on the company, and the burden for paying those taxes falls on both the employee and the employer. Each state has different regulations and requirements for how state income tax is paid to the government, and the federal government collects payroll taxes quarterly.
Employer Tax Responsibilities
Okay. You are a small business owner and it’s time for payroll. What tax responsibilities do you have?
Social Security: You will pay your half of the 6.2% and you will withhold 6.2% from wages for your employee’s portion.
Medicare:Â You will pay your half of the 1.45% and you will withhold 1.45% from wages for your employee’s portion.
Federal Unemployment Tax:Â This tax is employer-paid and the current rate is 6% on the first $7,000 earned by an employee.
Self-Employment Taxes
If you are self-employed or working under contract, you are the employer and the employee and it’s your responsibility to pay for both sides of the payroll taxes. That means that contractors need to withhold the full 12.4% for social security and 2.9% for Medicare, and withhold their own state and federal income taxes (saving 15-20% of each check to cover these taxes is the recommended practice). Some states also charge additional taxes for small businesses that become the responsibility of a contractor, as well. When contractors file their taxes, they will pay their portion of these taxes then.
When Are Payroll Taxes Due?
Once you have collected the payroll taxes for your small business, they are due on either a monthly or semi-weekly deposit. Semi-weekly deposits are primarily required just for large businesses with a large payroll tax revenue, so it is most probable that you will deposit your withholdings monthly. Payroll taxes are due on the 15th of every month (unless that falls on a weekend, then the next available Monday).
If you are self-employed, you most likely will file estimated quarterly taxes (although some states accept yearly payments if you make under a certain amount). Check your state’s specific rules and tax brackets for the most accurate information.
How To Calculate Payroll Taxes
Calculation of payroll taxes uses all the great basic math skills: multiplication, addition, percentages. Be aware that if you make a mistake or are late processing a payment, the government likes to slap fees around. (I mean, no doubt, fees are a source of revenue for the government, too.) While you can do payroll calculations by hand (and many do, including an adorable 80-year-old woman on Facebook who chastised me for suggesting someone run payroll using anything other than their head, a pencil, some paper, and the numbers), there are many great payroll software options that can do this part for you: Gusto, Square, Paychex, and ADP are all reputable companies that you can use to outsource payroll.
However, maybe you really want to tighten the budget and only have a few employees and you’re not gonna let me convince you to give the computers their chance at this one. Okay. Pencil. Paper. Calculator. Spreadsheet with equations, maybe?
You’ll need to know how many times you are paying/withholding taxes from your employees before you can run payroll, so determine whether you are running payroll, weekly, biweekly, or monthly. Then you will need to decide if you’d like to pull taxes using the wage bracket system (recommended by most tax experts for small businesses) or the percentage method (not recommended for small businesses attempting payroll on their own).
When you onboard employees, you will have them fill out a W-4. You will use that W-4 to note the employee’s withholdings and whether they are filing single/jointly/head of household. This is the data you need to calculate federal income taxes. The following image is from the IRS Publication 15 for the 2019 tax season and gives the step by step numbers for calculating the federal income tax withholdings through either method.
After you withhold the money for federal income taxes and any additional pre-tax deductions (retirement, worker’s compensation, healthcare), then you calculate the FICA (social security and Medicare) taxes. To calculate the social security tax, you will take your employee’s gross pay (the amount your employee receives before payroll taxes are removed for that pay period) and multiply it by .062 — the product is the amount of money to be withheld from the paycheck and matched by the employer.
You would do the same thing for the employee’s portion of Medicare by taking the gross pay for the pay period and multiplying it by .0145%. The product is the amount you’ll withhold and match for Medicare.
All state and local taxes are calculated on a state-by-state basis.
How To Report & Pay Payroll Taxes
When you run payroll, calculating the taxes and discovering your employee’s net pay (aka their take-home pay or the amount they make after payroll taxes are removed) is only the first part of the process. After you’ve run your payroll numbers, you face the important task of getting those taxes into the right hands and accounting for your payroll to the government. As a small business owner, it is your responsibility to:
Withhold all payroll taxes and submit them on time (the 15th of every month, or next available business day) to state and federal agencies.
Report income, withholdings, matching of payroll taxes to the government quarterly.
Keep records of yearly payroll for state and federal reporting agencies.
Send W-2s and 10-99s to employees and contractors listed with the correct amounts of their gross/net pay and tax withholdings.
When you have the monthly deposit to submit, you must submit the funds electronically (barring special circumstances allotted to small businesses only) using one of the following methods: via a third-party (through a software/payroll service like ADP, Gusto, or Paychex); through your bank’s Automated Clearing House (ACH) network; or by the Treasury Department’s free Electronic Federal Tax Payment System online/over the phone.
Some small businesses, especially those with low liability, can opt-in to a yearly payroll payment. This requires filling out a Form 944. Check the government’s website to check for current eligibility requirements.
Your Federal Unemployment Taxes are due to the government quarterly. Form 941 is your guide to reporting income, withholdings, and payroll taxes to the government, and the tax forms are due on the last day of the month after the end of the quarter. For example, quarter one ends March 31 and the report is due by April 30. And at the end of the tax year, you have until January 31 to deliver the necessary tax forms to your employees, former employees, and contractors, so they can file their taxes correctly.
If you are self-employed, you’ll need to gather your 1099-MISCs and file a Schedule C when you file your taxes (due April 15).
For both small business owners and the self-employed, it is imperative to maintain impeccable records of your state and federal payroll taxes, whether by hand in a notebook, in an old spreadsheet document, or by using online software.
Payroll Tax Penalties
Alright, here’s the big scary number: 100%. If you fail to withhold the proper amount from your employees, you the employer are 100% liable and will need to furnish the missing monies from your own pocket in addition to any legal penalties and fees you face. Look, people get real serious when you don’t give them the correct money owed. Also, these funds go toward employee services, so sometimes your employees can’t access these services if the account is behind. Employer error is costly because tax laws say that the onus for accuracy is on you, the business owner. And if you can’t pay those fees? That trickles down into every aspect of your business in a cycle: higher consumer costs, decreased employee wages, a hiring freeze. Not to mention that it erodes the trust between an employer and an employee.
If you don’t pay your payroll taxes on time, every month, you incur a 2% penalty for 1-5 days late; 5% penalty for 6-15 days late; 10% for 16+ days late or within 10 days of first hearing from the IRS. The maximum is 15%.
Also, the government doesn’t care if you outsource these jobs — if a third-party isn’t paying on-time (your payroll service or your bookkeeper), you still hired them and will receive the penalty all the same.
There are other ways you can be penalized, too, like if you miscategorize employees or you make an error on your reporting. There are too many potential errors to explain them all, so it’s important small business owners meet with tax attorneys or other tax experts for a full understanding of the myriad ways things can go off the rails.
Payroll Tax Deductions
But hey…those Statutory Payroll Tax Deductions (all the things we just talked about above: federal and state income tax, social security, Medicare, unemployment taxes) are not the only payroll tax deductions you’ll need to make as you process payroll. In addition to the mandatory deductions, you also have Voluntary Payroll Tax Deductions. These are things like health care, retirement benefits, worker’s compensation, or any other pre-tax deductions. As a small business owner, you might offer some of these programs and benefits but some of the cost can (and does) trickle down to employees.
Final Thoughts
Nothing concludes this post better than this: payroll taxes are complicated. But, they don’t have to be.
If you have a handful of employees, and you want to calculate payroll taxes yourself, then yes you can! You now know the basics of which payroll taxes you are responsible for, how to calculate them, and how and when to pay them. People have been processing payroll manually for longer than they haven’t been.
Or, you can opt for payroll software to help handle the calculation for you. Even if you do have a software program or an online program helping you, it’s great to know what those numbers mean and where that money is going. There are also free online calculators to use in lieu of a software program, or a regular calculator, or an abacus. All in all, these payroll taxes — while they may be an added stressor to the laundry list of small business owner responsibilities — are what pay into great social programs and protections. The most important thing to remember is that rates and guidelines can change yearly depending on inflation and tax laws, so keep up with current literature on the tax brackets from the IRS Forms. Know your state’s laws, file accurately and promptly, pay on time, and report on time. And if you want someone else to do it for you, check out our reviews of some of the leading payroll service vendors out there: Gusto, Square, ADP, Paychex.
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