Smb Plan Payroll

Plan Payroll

When to use

Use this in the days before a payroll run when the owner needs certainty that cash will cover it — and, if it's tight, a prioritized list of collections and levers that would close the gap.

Not for: general 30-day cash outlook (use smb-month-heads-up); running payroll or actually chasing invoices — this produces a plan the owner approves and acts on.

Method

1. Set the payroll target. Payroll date and total due, including employer taxes and any contractor payments.
2. Project cash to that date. Start from today's balance, add expected inflows (AR by realistic pay date), subtract non-payroll obligations due before then.
3. Compute coverage. Compare projected available cash on payroll date vs the amount due; state surplus or gap and the buffer left. Decision point: if the buffer is thin (say under one week of expenses), treat it as "at-risk," not "go."
4. Rank collectible invoices. If tight, sort overdue invoices by (likelihood-to-collect-fast × amount) to show which follow-ups most improve coverage.
5. List other levers. Delay discretionary AP, draw on a line of credit, owner contribution — each with an amount.
6. Give a clear call. Go / at-risk, in plain words. Do not chase invoices, delay payments, or draw credit yourself — payroll and money decisions are the owner's to approve.

Example

Payroll $14,000 due Friday. Today $9,500; expected inflow retainer $4,000 (Thu); rent $2,800 due Wed. Projected available Friday = $10,700 → gap of $3,300, buffer negative. Ranked collections: Invoice #188 $5,000 (30 days over, customer reliable — high collect-fast), #191 $2,200 (slow payer — low). Levers: delay $1,500 supplier AP to next week; $2,000 credit line. Call: at-risk — chasing #188 alone closes the gap.

Pitfalls

• Booking AR on due date instead of a realistic pay date, so coverage looks better than it is.
• Forgetting employer payroll taxes or contractor payments in the amount due.
• Calling "go" on a razor-thin buffer that one late payment would wipe out.
• Acting on collections or credit draws directly — present the plan, let the owner pull the levers.

Output format

• Payroll date / amount due (incl. taxes + contractors).
• Cash projection to date: starting | inflows | outflows | available.
• Coverage verdict: surplus/gap | buffer | go / at-risk.
• Ranked collection targets: invoice | amount | collect-fast likelihood.
• Other levers: option | amount.
• Recommendation (for owner approval).

Reference

Cash-timing checklist (build the projection in this order)

1. Confirm the payroll number is gross-plus. Net wages are only ~70-75% of the real cash out. Add: employer FICA (7.65% of gross), federal + state unemployment, any 401(k) match, workers' comp accrual, and the payroll processor's fee.
2. Age your AR realistically. Book each invoice on its likely pay date, not its due date. Rule of thumb: current invoices land near due date; 1-30 days late slip another ~2 weeks; 60+ days late do not count toward this run's coverage.
3. Subtract everything senior to payroll or due first: rent, loan/card autopays, sales-tax remittance, and any check already mailed.
4. Hold a floor. Never plan to drain the account to zero on payroll day — keep at least one week of operating expenses as buffer.

Coverage verdict thresholds

Payroll-tax deposit reminders

• Deposit schedule is IRS-assigned: most SMBs are monthly depositors (due the 15th of the next month); larger payrolls are semiweekly. Missing the schedule triggers Failure-to-Deposit penalties (2% at 1-5 days late, escalating to 10%+, 15% after IRS notice).
• The $100,000 next-day rule: if accrued payroll-tax liability hits $100k on any day, deposit by the next business day regardless of your normal schedule.
• Form cadence: Form 941 quarterly (Apr 30 / Jul 31 / Oct 31 / Jan 31); Form 940 (FUTA) annually by Jan 31; W-2s to employees and SSA by Jan 31.
• Trust-fund warning: withheld employee taxes are not the business's money. The Trust Fund Recovery Penalty can hold an owner personally liable. Never "borrow" withholding to cover net wages.

Collections-priority scoring

Rank overdue invoices by (likelihood-to-collect-fast × amount), not amount alone:

• High collect-fast: reliable customer, invoice < 45 days over, a quick call or resend usually works.
• Medium: good customer but 45-90 days over, or a disputed line item.
• Low: chronic slow payer, 90+ days, or relationship already strained — do not count these toward this run. A polite "just flagging invoice #X is past due — can you release payment this week?" collects more than a formal dunning letter for a first nudge.

Levers to close a gap (fastest to slowest, cheapest to costliest)

1. Collect the top-ranked overdue invoice (free, days).
2. Delay discretionary AP — non-critical suppliers, with a heads-up (free, days).
3. Offer an early-pay discount to a large customer (2/10 net 30 costs ~36% annualized — use sparingly).
4. Draw on an existing line of credit (interest cost, same-day).
5. Owner capital contribution (no interest, but personal cash).
6. Short-term factoring / MCA — treat as last resort; effective APRs often exceed 40%.

Owner-approval boundary

This skill produces a plan. It never chases invoices, delays a supplier, draws credit, or runs payroll on its own — every lever is the owner's to pull.