Payroll can be a difficult process to unravel, even on the leanest and most tightly knit teams. Maintaining strict employee privacy, for example, can be more difficult. Underpayments and overpayments are becoming more common and difficult to detect. Accuracy, standardization, backup systems, and other requirements may go unnoticed, resulting in a time-consuming audit.
According to a recent survey of over 1,000 small businesses conducted by payroll services provider On Pay, business owners who run payroll manually spend an average of 18 hours per month paying employees. Despite this, most payroll advice is geared toward larger organizations, so it's useless when looking for ways to improve the efficiency of your lean team. Here's a guide to help small business owners manage their payroll effectively.
Payroll processing is a important business function that involves arriving at the 'net pay' of the employees after adjusting necessary taxes and deductions. It also entails reporting to HMRC and paying employment taxes. These calculations must be completed in sufficient time to adhere to the organization's pay schedule and to comply with applicable regulations.
Payroll processing is a significant part of running a small business with employees. It can be difficult to manage due to numerous factors, such as pay scales, employee classifications, promotions, and terminations. As a result, checkpoints at critical points in payroll processing are critical for as much error prevention as possible. Outsourcing payroll processing services can assure impeccable payroll processing and permit you to focus your time and energy on your core business functions.
The payroll administrator must accomplish the following tasks during payroll processing.
Handling payroll can be challenging for running your small business, and the tax law surrounding payroll makes it even more complex. Following are some suggestions for streamlining your payroll process and keeping your records neat and orderly to save you time each month and during tax season:
Make it this one if you're only willing to do one thing to organize and simplify the payroll process. Ensuring all employees are paid on time is one of the most important aspects of keeping your team happy and your payroll in check. It doesn't matter if you do it weekly, biweekly, or monthly as long as you have a system in place.
Perhaps the most appealing aspect is how simple it is to locate and maintain a payroll calendar. Anyone can use the National Finance Center's pre-made, downloadable calendars. However, remember that your company's pay schedules may not perfectly align with the calendars you find online. Consider creating your own to reflect your business practices best while keeping track of when your next payday is.
Payroll tax automation sounds like something you could do to alleviate the burden of payroll management. But, unfortunately, it's much more substantial than that.
Penalties for late tax payments can be severe. Trying to handle them all manually is a disaster at some point. For example, paying taxes late by just one day will result in a 2% penalty. After 16 days, the penalty quintuples to 10%. Such errors may seem unthinkable, but manually paying taxes greatly increases the risk. The sooner you send those payments to the IRS, the less you'll have to worry about them.
Several major payroll providers and software packages include automated tax payments. However, read the fine print carefully because you're dealing with the IRS. If your software package fails or your payroll provider fails to deliver, the IRS will come after you, not them. So make certain that whatever arrangements you choose are verifiable, guaranteed, and can withstand an audit.
The pay schedules of your employees will differ significantly depending on their classifications, as will the tax implications for your company. As a result, the distinction between an independent contractor and a full-time employee can become hazy, especially in small businesses with limited resources.
There is no simple solution: you must assess and classify each employee thoroughly. Then, you can use the IRS's classification guide to determine whether they are an independent contractor or a full-time employee; make sure to incorporate all of your classifications back into your payroll system so that no important distinctions are missed.
Big businesses have whole payroll teams or can outsource the process; smaller businesses do not. So create whatever payroll process works best for you, but keep a second pair of eyes on data entry at all times. An extra zero now could cause you endless headaches later on.
To prevent this, enter, run, and crunch the numbers twice. Then, incorporate it into your monthly plan review meeting to make it easier and less time-consuming. This ensures you have more eyes on the data and time to review it thoroughly.
Payroll software is probably the first thing that comes to mind when considering a quick way to streamline the payroll process, and for a good reason. Most software systems are simple to use, inexpensive and free up time and energy for your company to focus on what it does.
However, relying too heavily on payroll software can create new problems. For example, simply entering the numbers and letting the software do the rest can leave you confused about your payroll's financial status. They may also make data collection for potential audits more difficult. So, if payroll software works for you, don't let it take advantage of you.
If you invest in payroll software, this is not the place to cut corners. Instead, make sure you budget for this expense on an ongoing basis, that you are familiar with its capabilities, and that you have double-checked to ensure it is compatible with any/all legacy systems your company uses.
This could also be a good time to think outside the box. What other business areas could benefit from a higher-end payroll software package? Can the package you're thinking about handle billing, invoicing, and other financial tasks? It's easy to develop tunnel vision to solve one problem, but take a step back and consider the bigger picture.
This one is self-evident. The rules and regulations governing payroll laws can be complex and frequently differ from state to state. You'll want to ensure your company's payroll system complies with the law from the start, and the American Payroll Association's guide to state payroll laws can help. If you're overwhelmed by all the rules, don't be afraid to consult an expert — it's better to figure it out now than to suffer the consequences later.
Most businesses consider "payroll manager" to be a full-time position. One must sort through all the complexities of a large corporation's pay. The responsibilities for lean teams aren't as demanding, but they're just as we are asking a team member with experience in accounting, human resources, or business finance to help with payroll management. If you provide adequate support, these duties are unlikely to pose a significant challenge with a good software system.
Even if you need to enlist the assistance of more than one employee, having one oversee the entire process can be far more efficient than attempting to patchwork your way through it all.
Keeping payroll records is more than a suggestion: it's a legal requirement. According to Patriot Software, businesses must keep employment tax records for up to four years, payroll records for three years, and wage determination records for two years to comply with IRS guidelines and the FLSA. While software can help with some of this, keeping your physical and digital records is best to reduce the risk of loss.
Business must always ensure that they have sufficient working capital that will help them enable their business be on track. As business could be in trouble if they don't get sufficient credit the time they need it. That's the reason businesses must ensure their is sufficient financial back-up.
Irrespective whether your business handles payroll manually or use payroll software, ensure that you offer training to employees that will need payroll supports. There are multiple ways to implement payroll training within your business:
A) Provide all payroll policy and related documents that are easily accessible.
B) Record all the payroll processes and share it across with your employees.
C) Conduct quizzes and interactive learning to help you make your employee be more aware.
We hope you liked the above payroll tips for your business to maximize growth. Payroll is always a pain, but following the right advice early on can help alleviate the pain later. Small businesses have enough on their plates; keeping payroll simple can keep anything else from being added. We hope you enjoyed the above payroll advice for your company's growth. But on the other hand, are you looking for professional payroll small business services?
Then contact the accounting and bookkeeping experts at Invensis today! Managing complete payroll processing on top of your core business processes can quickly become overwhelming, resulting in payroll issues. Outsourcing payroll management services to Invensis can ensure flawless payroll processing while freeing up your time and energy for core business functions.