Taking the Friction Out of Pay Advances

Frictionless pay advance solution

Do your employees ever ask for pay advances?

As personally stressful and humiliating as it might be for someone to come in and ask you for an advance, it also creates a lot of work for you, right?

Maybe you’re the supervisor, and to give someone a payroll advance you have to fill out a form and get your manager’s signature. Or maybe you’re worried that if you do it for one employee, then word will get out and others will ask for pay advances too, and the paperwork will never end. Maybe you’re even a little miffed that your workers can’t manage their finances better.

Or perhaps you’re a small business owner simply trying to “do the right thing” for your workers, which includes helping them deal with occasional financial emergencies. But even if you use the simplest accounting software in the world, issuing a pay advance is still a cumbersome, non-routine procedure.

So let’s compare the processes required to provide an employee with a pay advance, both before and after making the PayActiv solution available at your company:

Before PayActiv

Here are the actual instructions provided by one popular accounting tool for small and medium enterprises, instructing you how to issue a payroll advance to an employee (I’m not making this stuff up):

  1. Creating a (non-paycheck) check for an advance.
    1. From the Desktop Banking menu, select Write Check.
    2. Select the bank account from the Bank Account drop-down list.
    3. Select the date for the check.
    4. Select the employee from the Pay to the Order of drop-down list, and click OK in the warning screen.
      Note: The advance check is a regular check and will not affect payroll taxes.
    5. Enter the dollar amount of the advance below the check date.
    6. Select the account from the Expense tab Account drop-down list.
      (Note: The account for this should be the same as the account that will be used to pay back the advance so that the accounting portion of it is correct and is usually an asset account or other current asset account).
      Optional: Select the class from the Expense tab Class drop-down list if you want the check to affect a class.
    7. Check the Print Later box next to the Print
    8. Click Save & Close.
  1. Printing the check.
    1. From the File menu, select Print Forms, and click Checks.
      (Note: If the check does not appear in the Select Checks to Print window, make sure you have the correct bank account selected in the Bank Account drop-down list, and that you checked the Print Later box next to the Print icon.)
    2. Edit the First Check Number if necessary.
    3. Make sure the check has a checkmark in the far left column, and click OK.
    4. Make any necessary printer changes, and click Print.
  1. Setting up a deduction payroll item to pay back the advance.
    1. From the Desktop menu at the top, click Lists >Payroll Item List.
    2. Select the Payroll Item button, and click New.
    3. Select Custom Setup, and click Next.
    4. Select Deduction, and click Next.
    5. Enter the name of the payroll item that will be easily identifiable (such as Advance Payback), and click Next.
    6. Leave the first two fields blank, select the account which will be affected by this payroll item in the Liability account drop-down list
      (Note: The account for this should be the same as the account that was used to give the advance so that the accounting portion of it is correct and is usually an asset account or other current asset account), and click Next.
    7. Make sure None is selected in the Tax Tracking Type window (this payroll item will not affect taxes as it is being deducted from the net pay), and click Next.
    8. Leave the taxes unchecked, and click Next.
    9. Select Neither in the Calculate based on quantity screen, and click Next.
    10. Select Net pay, and click Next.
    11. Click Finish.
      Note: You should only enter a default rate and limit if the rate and limit will apply to everyone using the item. Otherwise, you should enter the rate and limit in the employee’s profile.
  1. Creating a paycheck with the cash advance repayment.
    1. From the Employees menu, select Pay Employees.
    2. Select the employee and click Open Paycheck Details.
    3. In the Preview Paycheck make sure you are paying the employee for the full pay period, in which the cash advance was taken.
    4. Go to the second column on the left, other payroll item. Click under payroll item and use the drop-down arrow to select Cash Advance Repayment.
    5. Enter the dollar amount from the cash advance in the Rate column. Your employee should either have a 0 check, or it should be smaller than normal in the net amount (you can never issue an employee a negative check). You may need to adjust the employee’s FIT and or SIT. If you still have a negative check, you may have to take this out on another check(s).

After PayActiv

Here are the instructions for issuing a payroll advance to an hourly employee after your company has made the PayActiv app available:

  1. Carry on with your normal workday.
    1. Don’t open your accounting program, and don’t access the payroll system.
    2. Don’t write any checks, fill out any forms, or look up any account numbers.
  2. Accept your employees’ gratitude for allowing them to deal with their financial emergencies on their own, like the adults they are.

PayActiv provides a frictionless payroll advance process – so frictionless that you’ll no longer be required to play judge and jury in deciding whether a particular worker’s financial need merits an advance. You won’t even have to know when a worker gets a pay advance, because any worker will be able to get an advance whenever they decide they need one, without having to give up their privacy or dignity.

Importantly, the PayActiv solution isn’t a loan; it just gives workers a frictionless and timely way to access money they’ve already earned. Workers can even use the app to put money aside in a savings program, automatically.

And you know what else is frictionless? Deciding to make the PayActiv app available to begin with.

PayActiv costs your company nothing at all to install or use, and has no effect whatsoever on your cash flow because PayActiv funds each transaction. It requires no integration with your accounting or payroll systems, violates no financial regulations or privacy rules, and is so easy to implement that you can make it available to employees literally within a few days of deciding to do so.

PayActiv is a real-time, frictionless solution for your employees’ between-paycheck financial needs.

Why wouldn’t you offer it to them?

Experience the joy of giving financial self-reliance to your employees.

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Access is more than a paycheck.
It's peace of mind.

Access is more than a paycheck. It's peace of mind.

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