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A few things to consider

8/25/2022 | Harvey Mackler, Banking on Harvey

In business we look at various ways to accelerate cash flow.  There are programs such as prepayments, ACH, more aggressive collection efforts, and offering discounts to name a few.  Well, in these extraordinary times with a recession looming and inflation soaring, what can individuals do?

I have written a number of times about your emergency cash savings.  Never is it more important than now.  It will not accelerate your cash flow, but it is there in times of need.

Similarly, with your other personal assets if you can create liquidity in a short time frame, that is important to keep in mind.  Remember that real estate that you thought was a good idea to buy at the time?  Now try to convert it to liquidity.  Very difficult.

I assume that you have seen commercials on “pay day” loans.  Although I think it can be dangerous financially for a number of reasons, if you see it as temporary and can plan it in your cash flow as temporary, it might be of some benefit.  Not a strong recommendation from me, but an option nonetheless.

There is a new concept making the rounds in certain industries and usually with large employers.  The mnemonic is EWA – Earned Wage Access.  Here is the concept.  Assume that you are paid biweekly.  Each day in the pay period you have earned your wages for that day and successive days.  You are paid at the end of the period, mostly as an administrative convenience to the employer.

Today, with advanced technology, it is possible for the employer to fund the payroll in increments.  Although you might think of it as an advance or loan, you have earned the money.  Thus the name Earned Wage Access.

Some very large retailers have jumped on the bandwagon to promote it as another employee benefit.  There are service providers who work with the employers on the back end.  It has to be free to the employee, as it is their earned wage.  Caveat – the government (both Federal and State) are presently looking into the procedure to “protect” us.

From the employee perspective, again it requires financial discipline.  If you are using the immediate pay for current expenses, such as food and gas, and it removes the risk of running up credit card balances or even worse, overdraft fees (as long as the banks continue to charge them), it is wonderful.  If however, you need this money to cover household expenses that exceed your income on a weekly basis, you are only “robbing Peter to pay Paul.”  Eventually you will have larger financial issues.

For the smaller employer (including GEMPIRE), unless our payroll provider can integrate it into our current payroll software, it may not make sense.  But that does not stop us from advancing some cash in lieu of the formal EWA for special circumstances.  I would not want to be a bank for our employees, however an occasional support mechanism might also go a long way in employee retention.

I am available if you need some guidance.

A 1975 graduate of the Wharton School at the University of Pennsylvania, Harvey enjoyed a 20+ year career in commercial banking, exercising his “golden parachute” in 1996.  In his volunteer life, he is a past chair of the Small Business Banking Unit of the American Bankers Association, Easter Seal Society of New Jersey, the SAAGNY Foundation, PPAF EXPO, and Supplier Committee of PPAI.  He is also a past President of PPAF.  PPAI awarded him the H. Ted Olson Humanitarian Award in 2013.
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