By Erica Kasper
Content Marketing Manager
It’s summer, so let’s talk about float.
Not the fun floating-down-a-lazy-river kind. For this float, we mean the delay between paying money for something and the payment being received. More specifically, we’re talking about payroll taxes, because at Greenshades, we know payroll.
Many payroll providers, both outsourced and insourced, have a float. This means that, when your company uses one of these providers to process your payroll, you are required to pre-fund an account for payroll taxes. Your money goes into the account well before payment is due, and the payroll company holds those funds for you. When the time comes, the payroll company pays your taxes to the government on your behalf.
Are there any advantages to pre-funded payroll tax accounts? Some companies like them because they think it takes away the hassle of remembering due dates and making payments directly. This can be appealing in a “taking something off the to-do list” sense. But the disadvantages are important, too.
For one thing, pre-funding an account means losing control of that part of your cash flow. It takes those funds out of your hands and places them out of your reach until the taxes come due, which could be weeks later. Of course, you won’t be earning interest on that money during that time. If keeping your money in your hands for as long as possible is important, a pre-funded payroll tax account may not be ideal.
Second, using a payroll provider that requires pre-funded payroll tax accounts means that there are now extra steps and extra time between you and paying your payroll taxes. The funds must be deposited by a certain cutoff point, and the process of paying your payroll taxes now a step for the payroll provider to make the payment. Sometimes, extra steps can be a good thing, but in this case, extra steps may just be more work.
Third, if you’re counting on a payroll provider to hold your funds and pay your payroll taxes on schedule, you’re also counting on them not to have any significant errors, outages, or schedule delays. You’re placing your trust in a third party to ensure that your payroll taxes are paid completely and on time so that you don’t incur penalties. Of course, errors and outages are rare, and most payroll providers are reputable. But it’s still a matter of giving up control over your payments to another company to handle and trusting that it’ll all go smoothly.
You may be wondering: If pre-funding a payroll tax account with my payroll provider isn’t something I want to do, are there other options available to me? The answer is yes. Greenshades, for example, is a cloud-based, insourced payroll provider that has NO float, meaning we do not require pre-funding of payroll tax accounts. We help you run your payroll, and we have alerts in place to tell you when your payroll taxes are due, but we don’t take or hold your money. We know that keeping control over your cash flow is important, so when our alerts notify you of an upcoming payment deadline, you can easily schedule the payment yourself, directly from your funds, without the need for a pre-funded account.
At Greenshades, we think that the best payroll process is one that gives you the control you need over your money and your schedule. We know that being able to see and manage your payroll taxes is a great way to ensure that errors aren’t slipping through. We think that some things shouldn’t be left to anyone but you, so instead of trying to do it all for you, we give you the tools you need to do everything you need to do. We save you time, resources, and money by putting the power of payroll and compliance in your hands.
We’re Greenshades. Get to know more about our no-float payroll tax process and schedule a free demo below!