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Taking the Hassle out of Employee Draws

Discussion in 'Lawn Mowing' started by JimLewis, Sep 22, 2007.

  1. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,839

    If you don't have employees or don't allow your employees to take draws then this thread isn't for you.

    But for those of you who do (and assuming you aren't paying under-the-table) then you've probably realized the accounting mess that a simple draw causes. If your doing your accounting properly, it's a PITA to account for each draw properly in your accounting program (e.g. Quickbooks) and then account for it properly AGAIN when you issue the paychecks.

    And if you've ever forgotten to account for it properly and then were later audited by the state or IRS (as I was) then you REALLY know what a PITA it can end up being.

    So finally, after years of issuing draw checks, learning how to account for them properly, etc. I finally just realized there's a much easier way.

    Now I just pay the employee cash and after he cashes his paycheck, he pays me back with cash. It's like a personal loan. No paperwork. No accounting. No forgetting to account for it and having to pay later in an audit. It's simple and works like a charm.

    I guess the only issue some of you might raise is what if the employee doesn't pay you back. Well, I've never had that happen in the last year or so since I've been doing it. But if they cash their check and then dash with your dough, I think maybe you have more problems than just the $100 or $200 you lost. You should have more loyal and trustworthy employees. If they can't be trusted paying you back $100 or so, why are you letting them drive your trucks around?

    Anyway, just thought I'd pass on this tip in case anyone else was having the same issue I used to with draws. If this isn't helpful, just disregard.
  2. lawnMaster5000

    lawnMaster5000 LawnSite Senior Member
    Posts: 589

    I too have considered that approach but have wondered what the law says about that system.

    I don't know why it would not be permitted for you to give a personal loan, and not associate it with the business in any way, but then again the IRS can be very picky about things.
  3. carcrz

    carcrz LawnSite Silver Member
    Posts: 2,085

    I would still have some documentation that shows that they owe you money. What's to prove that you ever loaned him money should something happen?
  4. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,839

    You can do that, if you feel the need. Nobody stopping you. I don't feel the need for many reasons. First, because paydays are always 5 days behind. So by the time they get a paycheck, I still owe them 5 days worth of work. So if they didn't pay me, I'd take it out of their final paycheck. Second, I can trust my guys. Most of them have been working here for years and appreciate me and like their job. I would never screw them and they would never screw me. And the guys who are newer are almost always related to one of the guys who have been here for years. So I may not have a trusted relationship with him, but his father and brother work for me. So if he doesn't pay, it reflects badly on the rest of the family. And they would never let that happen. Third, it just doesn't happen that I don't get paid back. They appreciate the loan and they are quick to pay me back and thank me.
  5. Maybe I'm lucky for I have never done a draw or had an employee ask for one.
  6. carcrz

    carcrz LawnSite Silver Member
    Posts: 2,085

    call yourself very lucky. I have loaned money out on occasion to people that I have known & worked with for over 10 years or more only to have them decide that they don't ever have to pay me back. Then there's no way to prove it so I'm out, but they're gone so what do they care now.
  7. lawnman_scott

    lawnman_scott LawnSite Fanatic
    Posts: 7,547

    I have a line for advance on the pay stub. I have never had a problem.
  8. txgrassguy

    txgrassguy LawnSite Gold Member
    Posts: 3,083

    I too have loaned money to my crew members before. I did run into the same accounting hassle and did what Jim is saying - problem solved.
    I have only had one previous employee try to screw me on the repayment so I held it out of his check.
    When he complained to the State, I produced the signed document and the state dude was amazed I wasn't charging interest on the loan. The state dude goes to the complainer and says knock it off, I did everything correctly.
    Still didn't like the headache and stopped the advances for awhile until all of the guys came up to me and asked for it to be re-instated. Five years later and I haven't been burned so I guess everything is okay now.

    HOOLIE LawnSite Gold Member
    Posts: 3,981

    This is what my old boss used to do, just loan the cash and get it back on payday. And in fact, since most of the guys back then didn't have a bank account, the boss would cash their checks for them and take the cash back himself.

    I think he got burned maybe a couple times over the years, but considering how many of these cash loans he did, it was pretty minor.
  10. lawnspecialties

    lawnspecialties LawnSite Silver Member
    Posts: 2,513

    It's what I've always done.

    If for some reason, one decides to skip out, he gets no check. They always have hours owed every time I loan them money so I consider their time served as collateral.

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