One of the most expensive things to maintain for any business —large or small is staff costs. Managing payroll, especially if you have a fairly large, diverse workforce, can become difficult even for a seasoned payroll professional. Payroll can be pretty confusing before you get the hang of it. You have to manage it effectively such that all employees are paid the correct amount and on time.
The confusion, however, comes in when you have to pay them according to the various tax brackets each one falls, roll out the correct commission payments, bonuses, maternity, and sick pay for all your employees.
It is pretty evident that if you handle your business’s payroll or have a manager to do it, their lives become complicated right around payday and eventually as your business grows. Paying your employees incorrectly may put you at the risk of penalties and fines. Not to mention employee morale goes down, and you may have issues with employee retention.
If you’re running a small business, chances are there will be a lot on your plate, and being bothered by menial issues such as payroll can serve as a distraction to you and your business. So, you need to manage payroll effectively.
Payroll – What is it?
Payroll is described as the process business, and companies undergo to compensate every employee that works for them. That may sound like an overly simplified description, but it’s not as easy as handing out cash to the people who work for you.
Some several cogs and wheels make up payroll. You have to calculate, then disburse every employee’s salary. You also need to give them proper financial records, clearly breaking down the salary, the tax imposed, pay for overtime and any bonuses.
So how do you manage this payroll process for your small business efficiently?
1. Automate your Payroll Process
Manual payroll provides room for errors and mistakes like inputting wrong data, failing to input in particular fields, and recording numbers in the wrong places. Additionally, it’s much slower than an automated process and will take up considerable time and money.
If automation proves to be a challenge, outsourcing payroll services is also a route you could take. Outsourcing the whole process, including the sending of financial records, is a great idea since they’re a lot of mail forwarding service for new businesses.
2. Your Payroll has to be Compliant with the IRS
Before filing your payroll documents, you need to be sure they’re in line with the IRS standards. Your employees should be classified correctly, and your business is equipped with an Employer Identification Number or EIN.
If you don’t have an organized payroll system, you risk being fined or penalized by the IRS, so following all the compliance laws is important.
3. Familiarize Yourself with The Deadlines
You have to be aware of the accounting deadlines and returns schedule beforehand. This makes the payroll process much smoother and more accessible. If you’re not ready to file the income taxes and payroll, you should meet the W-2 form deadline instead.
Filing for income taxes can be extended, but in the case of W-2s, not meeting deadlines give room for the IRS to penalize you. Put in place measures that will alert you for essential deadlines or those you consider a priority.
4. Ensure You Categorize Your Employees Correctly
Your business has to categorize its employees correctly, whether they are permanent employees of independent contractors.
Permanent employees need to pay taxes, fall under the minimum wage laws and receive overtime wages. Independent contractors, on the other hand, don’t have any of these and pay their taxes.
5. Ensure Data Entry
Minimal mistakes like incorrect data entry, wrong information, and misspelled words can cost your small business hundreds of dollars annually. It’s very important that you go over all the reports and payroll documents to ensure they are correct and no mistakes are present.
You could also temporarily hire one of your staff members as an administrator of the payroll who will check the entire system and comb it for issues. One of the documents that get filled incorrectly is the W-2 form.
Once your employees fill them out, your administrator goes over them to ensure the information being sent to the IRS is accurate. You should also start documentation and entry early in the tax season to allow ample time for reviewing.
6. Be Up-To-Date with Current Changes
“Knowledge is power” Sir Francis Bacon.
Laws change constantly, and assuming they don’t is a notion based on a fallacy. The government continually passes new regulations that may apply to your whole business, including the Managing Payroll process.
As a small business owner, you have to take it upon yourself to familiarize yourself with these changes, as they may save you both money and time.
Minimal wages and the set tax rates also change annually, and your business should comply with all the employment and labor laws.
To stay ahead, you should check government websites on the regular and news sources that cover payroll-related information. You could also subscribe to blogs and newsletters to get the latest changes or use an attorney well-versed in payroll-related law.
It would be best if you had a clear picture of what needs to be done when it comes to your Managing Payroll that way. You can keep track of all the aspects and execute them accordingly. Using these tips and many others, you’ll discover that Managing Payroll can indeed be an easy task.