There’s a lot more to payroll than just writing a bunch of checks. For example, you have to make sure that the appropriate taxes are being calculated correctly, otherwise both you and your employees could end up dealing with a ton of red tape. In principle, it isn’t that tricky; in practice, though, there are plenty of details to keep up with. Fortunately, there are ways to simplify the process and make your life easier. Let’s explore the details.
#1: Get an expert on board
If you feel like you’re having a hard time handling payroll, you could always get someone else to do it for you. This could take the form of a CPA advising you on how to correctly handle taxes or child-support deductions, or an accountant helping you nail down the process. You could even decide to hire a full-time accountant, or outsource to check printing services like Checkissuing.
The point is that you don’t necessarily have to figure it out on your own. There are plenty of payroll-related resources out there, no matter what kind of help you’re looking for. This should give you more confidence as you process payroll, and it should also reduce the likelihood of errors. You might even learn about a few things you were missing before. If you aren’t quite sure that you’re doing it right, don’t hesitate to consult an expert.
#2: Employ the right software or accounting program
Payroll is one task that you should definitely not use an old-school approach for. Technically you could calculate all the taxes and deductions yourself, but that’s just asking for mistakes to be made. Given how exacting the IRS can be, you’re probably just shooting yourself in the foot if you aren’t using a program that’s built for processing payroll. QuickBooks is one of the most popular options, and with accounting capabilities that extend well beyond payroll, it’s a common choice for businesses of all sizes. The taxes are calculated automatically, plus you can easily add deductions, bonuses, and more to a paycheck. If and when regulations change, these changes will automatically be taken into account by the platform.
Then there are self-service tools that give employees access to things like pay stubs and employment records; they can also view critical forms and update personal details as needed.
#3: Use a solution that tracks attendance and hours worked
If you have employees that are getting paid an hourly rate (which most businesses do), their paychecks will be based on how much they’ve worked. You could enter that information manually, or you could use a solution that automatically imports it to your payroll software. At the very least, you should be able to generate a report that gives you the total hours worked per employee, per payroll period; you shouldn’t have to spend time calculating it from hand-written attendance sheets. Not only is that a lot more complicated than it needs to be, but there’s too much possibility for error as well. Instead, let the software do the work and enjoy the benefits of technology.
While you’re refining the payroll process, here are three pitfalls to avoid.
When processing payroll, it’s important to get it right. However, that can be hard to do if you don’t know which mistakes to look out for.
#1: You didn’t comply with applicable regulations
This is one of the big ones. Payroll software will help a lot in this area, but you can’t depend on it for everything. A lot of inexperienced companies neglect to send out 1099 tax forms, for instance; this is a form that independent contractors need in order to complete their yearly taxes. There are different rules for hourly employees, salaried employees, independent contractors, and foreign independent contractors.
New hires will need to fill out certain forms as soon as they join the company, and you’ll have to submit some of these forms within specified deadlines. If any of your employees are paying child support, that should be deducted from their paychecks at periodic intervals. As you may have noticed by now, there are a lot of details to keep up with. No wonder people hire professionals to take care of payroll!
#2: You rushed through it and didn’t double-check your work
The devil’s in the details, as they say, and that’s definitely true for payroll. Let’s say that you’ve ironed out all the wrinkles and you basically know what you’re doing. You have the process down. In fact, you feel like you can just breeze through it at this point, since it’s essentially just entering information into the right fields of the accounting software.
Except you’d be wrong about that. If you have more than a couple of employees, you’ll need to use all your concentration skills to make sure that you don’t mix up employee details, skip someone, or enter something twice. There are infinite little mistakes you could make while processing payroll; not only should you be careful the first time around, but you should also go back over your work with a fine-toothed comb. Remember that if there are regular mistakes in the payroll, that could damage trust with your employees.
#3: You used the wrong classification for employees or independent contractors
You can’t just agree on someone’s rates and then cut them a check every couple of weeks; there are too many regulations for that to be feasible. One key aspect of payroll is the classification of the person who’s getting paid. Employees (hourly or salaried) have their own tax forms and rates, while independent contractors have theirs as well. Another difference is that employees have their taxes withheld on their paychecks, but contractors get paid the entire amount and have to pay taxes themselves.
Payroll might not have to be as complicated as it seems. There are plenty of ways to make it simpler, from getting the right software to outsourcing the entire process to experts; the main thing is that you find the approach that works best for you and your business.
Interesting Related Article: “The Seven Future Trends to Watch Out for In Payroll in The Upcoming Years“