Just like a business has many expenses, but not all of them are necessary, processing payroll takes a lot of effort – but it could take less. With the right strategies, your company’s payroll process could be more efficient and accurate than ever before.
From federal laws to self-imposed deadlines, there are a lot of details to consider when it comes to payroll. Even if you have a relatively small workforce, there are still practically innumerable details to keep up with. Some businesses decide to hire a certified accountant to oversee the process, while others use a check printing company like Checkissuing to make sure everything gets done right. Whatever you decide to do, you should be able to find some helpful tips below.
#1: Combine HR records and payroll systems
A tremendous amount of data goes into a single payroll check, and pretty much the only thing that never changes will be the employees’ names. The amount that salaried employees receive won’t vary too often, but hourly employees will probably have a slightly different number of hours worked each pay period. Then there’s the tax rate – that can change if an employee switches tax brackets. It also depends on how much they’ve already earned at the company, and may change after legislative updates. Even their contact information could change, and that’s important to keep track of as well – you don’t want to send a paycheck to their old address.
These (and many more) reasons are why it’s a great idea for HR records and payroll systems to be combined. For example, QuickBooks can store employee data, which is then imported to physical or electronic checks for each payroll.
#2: Go digital
For businesses that started out in the digital age, this may have already happened. That leaves out a huge number of companies, though; many businesses started out with pencil and paper, and are taking a while to change with the times.
This is especially true for smaller businesses. If the workforce is moderately sized, it could be tempting to just stick with what works and continue hand-calculating each payroll. After all, the idea of digitizing so many records and processes is daunting.
What isn’t being taken into account, though, is the cost of continuing without digital assistance. The hours that are being spent calculating payroll are hours that aren’t being spent doing more important things. Plus, this is an open invitation for errors to crop up in employee paychecks. This will likely happen in any case, but it’s practically unavoidable if the most technologically advanced device you’re using is a calculator.
This method also depends on you to know the intricacies of payroll-related legislation. If you’re using outdated tax rates or the incorrect employee classification, you could end up incurring fines from the IRS.
Instead, a program that’s designed for payroll will take care of all of this, and more. It’ll automatically update to include the latest legislation, auto-fill checks after calculating the correct tax rates, and use appropriate tax rates according to each employee classification.
#3: Take advantage of experts
As small businesses grow, the owners realize that they have to delegate various responsibilities to others – and this often involves hiring new people for the job. An accountant may not seem as high-priority as a sales manager, but that opinion might change if the IRS announces an audit due to suspected non-compliance. Even if the mistakes were totally innocent, the IRS doesn’t give second chances.
This being the case, hiring an accountant (either part-time or full-time) should be pretty high on the list for a growing business. They’ll be able to guide the company through not only payroll, but other financial aspects of running a successful business.
So far so good? Here’s what not to do.
Sometimes it’s just as helpful to know which mistakes to avoid in payroll.
#1: Process payroll without double-checking your work
This may seem like unnecessary advice, but some people still need to hear it. No matter how careful you are while entering employee data, a second pass is needed to be extra sure. You should have a zero-tolerance policy for errors in employee paychecks, since this is the most basic way to show your employees that you intend to treat them fairly. If mistakes make regular appearances in the payroll, this could lead to trust issues – and that isn’t something that works out well for anyone. Even if you hardly ever catch mistakes while double-checking your work, it’s still worth the effort to keep those few errors from falling through the cracks.
#2: Vary the payroll schedule
This could be the other side of the same coin. Not only should you be consistent because it’s the best way to run a business, but each state has also established a minimum payroll frequency. If you want to build trust with your employees, the payroll doesn’t just have to be error-free; it also has to be consistent. No matter how loyal the employees are, you can’t expect them to wait around while you get your act together to process payroll. There will always be matters that require urgent attention, but if the payroll deadline is approaching, that should be at the very top of the list. Decide what the schedule will be, let employees know, and then stick to it religiously.
#3: Misclassify employees
Employees get one set of tax forms, tax rates, etc., while independent contractors get another. How can you tell the difference? An employee is hired by you, works according to the hours you set, and gets paid overtime. An independent contractor may be hired by you as a professional with their own business, works according to the hours they make available for you, and is paid whatever rate was negotiated at the start of the job.
Payroll is full of twists and turns, but there are ways to make it slightly less difficult to navigate. With the right strategies – and the right help! – your company’s payroll process can be more straightforward.