Payroll clears when you know the full amount, when it leaves your account, and you keep enough cash above it on that day. Most payroll scares come from timing, not from a lack of money, so a calendar and a cash floor fix most of them.
Know the real amount
The payroll amount isn't the total of net paychecks. It's gross pay plus employer payroll taxes plus any benefits the practice pays. Look at your last two payroll reports and find the total debit from your bank account. That's the number to plan around.
Know when it leaves
Most payroll providers pull the money from your account one to four business days before payday. Taxes may come out on the same day or separately. Check your provider's settings and your bank statement to see exactly when each debit hits.
Then look at when your money comes in. Membership payouts from your payment platform often land a few days after the charge. If members are billed on the 1st and payroll pulls on the 3rd, you may be paying staff before that month's revenue arrives.
Set a cash floor
I'd keep at least one and a half payrolls in checking on the day before each pull. In a made-up example, payroll costs $14,000 every two weeks including employer taxes. The floor is $21,000. If checking is heading below that, you see it days ahead, not the morning of.
The floor sits on top of your other bills. Rent due the same week as payroll needs room too.
Put it on a calendar
Write down every payroll pull date for the next three months, along with your rent, loan payments and big recurring bills. Add your expected membership deposits. Ten minutes of looking at that calendar each month shows you which weeks are tight.
If a week looks short
- Move money from your reserve to checking ahead of the pull.
- Call your payroll provider early. Many can adjust timing if you ask before the run.
- Delay a bill you can delay, not a tax deposit.
Payroll taxes withheld from employees are held in trust for the government. Owners can be personally liable when they aren't paid. If you ever can't cover payroll taxes, call your CPA before the due date.
Keep it from happening again
A short payroll week is usually a sign the reserve is thin. Here's how to build one. It can also be a sign the practice is spending more than it brings in. Check that on your P&L before you add staff. This post covers how to price a hire.
What I'd do this week
- Find the total bank debit from your last two payrolls, taxes included.
- Write down the next six payroll pull dates.
- Compare them with when your membership deposits land.
- Set your floor at one and a half payrolls.
Common questions
Should I have a separate payroll account?
Some owners like it. Move the full payroll amount into it a few days early, and it's always covered. It does add a transfer to remember.
What happens if a payroll pull fails?
Your provider will usually reverse the paychecks or ask you to wire the money, and may charge a fee. Call them immediately.
Can I skip my own paycheck to cover staff?
You can, but that's a short-term fix. If it happens more than once, the numbers need a closer look.
Want to see tight weeks before they come?
At the Fractional CFO level, we add a cash flow forecast to the monthly close, so you can see tight payroll weeks coming. If that's what you need, apply to work with us.