6 Tips for Easier Payroll Processing

Most small business owners aren’t strangers to the frustrations that usually accompany running payroll. As the leader of your business, you probably want to spend your time making the magic happen—not tied up in monotonous administrative details. But running payroll doesn’t have to be a headache. When you utilize the right payroll tools and follow these six tips, the process can be simple and painless.

 

1. Establish a Payroll Schedule That Works for Your Business

How often you pay your employees has a substantial impact on your operations, cash flow, and employee satisfaction. While different states require different minimum pay periods, the most common U.S. payroll frequencies are weekly, biweekly, semi-monthly, and monthly. When considering how often to run payroll, it’s important to consider the type of employees you employ (salaried vs. hourly), and the time and cost burden running payroll places on your business. Hourly workers generally prefer to be paid more frequently, as their income is dependent on the hours they are able to work in a given pay period. Salaried employees, however, can calculate how much they will receive each paycheck throughout the year, so they are less likely to need more frequent payroll. Whichever cadence you decide on, ensure that it does not place an unnecessary burden on your business, as paying employees can be costly and time consuming.

 

2. Upgrade Your Payroll Software

While payroll may seem like an easy place to cut costs, when you consider the time and energy it takes to figure out the complicated system, not to mention potential IRS fees and fines, the costs quickly outweigh the benefits. Instead of relying on pen and paper, look for online payroll platforms that handle everything from payroll processing, to human resources, tax compliance, time and attendance, PTO management, and even benefits administration. Online payroll software can handle all the complex HR tasks a traditional payroll provider does, but without the prohibitive costs or loss of control of a full-service partner. Professional Employer Organizations can cost up to 6% of your total payroll, which is too large an amount for many small to mid-sized businesses.

 

3. Audit Your Payroll System

While an automated payroll system is extremely beneficial in staying compliant and organized, you cannot completely rely on it to reveal issues. Your system is fast, but make sure to keep an eye on things—double check for misclassified employees, employees who are no longer working at your business, or accidental time tracking errors made by employees. Running manual payroll audits can help you identify miscellaneous issues, saving you time and money in the long run.

 

4. Stay on Top of Tax Requirements

One in every three small business owners gets penalized by the IRS for payroll errors. Make sure you stay out of that statistic by keeping up with payroll tax requirements. As a business owner, you’re responsible for the proper administration, calculation, and payment of payroll taxes every time you run payroll. This involves federal and state income tax, Medicare, Social Security, and unemployment. Certain cities and jurisdictions might also have local income and related taxes, so it’s important to stay informed on tax regulations. Avoid any costly mistakes or delays by understanding compliance laws.

 

5. Pay and File Taxes on Time

You are also responsible for the year-end components of payroll—summarizing, reporting, and filing all the payroll taxes withheld from employees throughout the year. Before you file any documents, ensure your documents are within IRS compliance standards. It’s important to double check your workers are classified properly, and guarantee your business has an employer identification number (EIN). Maintain an organized payroll system to ensure your business is protected from penalties. By paying close attention to tax details each time you run payroll, you can avoid getting hit with hefty fines at year-end.

 

6. Know Which Tax Records to Keep and How Long to Keep Them

So, you did your best to avoid any tax mistakes by staying organized and following tax compliance, but now the IRS is auditing you. What now? The best way to be prepared for an audit is to keep quality records of your payroll and tax filings each year. If you’re able to check your records, present copies, and verify compliance, these issues can often be remedied. It’s recommended to keep all your payroll and tax documents for a minimum of four years—the IRS rule is four years for employment records and three years for taxes. Luckily, if you’re using a cloud-based payroll software, all your records will be securely stored electronically, so you can easily access them.

 

Whether you have two employees or 50, payroll is an integral part of your business operations. Payroll isn’t just about paying your employees anymore—more and more employees are looking for increased human resources guidance in the workplace. Have questions? Learn about the 5 questions our HR advisors always hear.  

 

 

Sources: