What’s the best advice you've ever received about running payroll? There’s no shortage of words of wisdom, and we have a handful of tips we’d like to share with you.
Ways to improve the way your business handles payroll
Let’s take a look at tips and tricks people have gathered about payroll after learning the hard way.
1. Calculate your taxes and pay them on time
You are required to calculate the total pay of each employee, and from there, you must deduct both federal and state taxes from each employee’s paycheck. The same is true of payroll taxes, which
are the federal and state taxes you pay on behalf of your employees. By understanding payroll taxes and ensuring you pay your business’s portion on time, you will keep your business running
smoothly.
2. Fill out your tax forms in their entirety
You must complete and file all tax forms that are relevant to your business. It’s imperative that you ensure the accuracy of the information you report on your tax forms, including the hours, wages, withholdings, taxes and health care benefits for all whom you employ.
3. Set and maintain a timely payroll schedule
Think about a payroll schedule that works for your company, and then set it in place. From there, you must keep up with your payroll process and abide by it on a consistent basis. It might sound like an old-school suggestion to recommend that you create a visual calendar, but you’d be surprised how well this will help you stay on top of all ongoing payroll stages.
For instance, you’ll be more likely to be aware of upcoming federal holidays, many of which might alter your company’s pay schedule. This will allow you to act accordingly to prevent money-related time crunches.
4. Choose a pay period and stick with it
Your business’s pay period is something you can decide on, but once you establish a pay period, it is of utmost importance that you do not diverge from it. Employees rely on their paychecks — and the timeliness of them — to meet their financial obligations, and any irregularities on your part could negatively impact their loyalty to your business. It’s not uncommon for people to quit their jobs in search of a better situation if their current employer does not pay them in a timely fashion.
5. Don’t misclassify any of your workers
It’s important that you accurately classify your workers. The misclassification of workers — such as categorizing a full-time employee as a contract worker or an independent freelancer as a part-time employee — could compromise your credibility in the IRS’ eyes.
It’s essential that you comply with not only the IRS but also the requirements of the state in which you do business. The way you classify your workers will affect their tax contributions and your withholding requirements, so keep this in mind.
6. Make sure you set aside funds to pay taxes on time
One of the worst possible situations you could find yourself in as a business owner is owing taxes but not having the money to pay them. While this set of circumstances is rare, it’s still possible to find yourself in this situation, especially if you fail to make tax payments on time, send payroll reports prior to deadlines or create a payroll register for your business.
The register is especially important because it makes accessing year-end totals and reports easy. If this part of payroll sounds overwhelming, you should consider hiring a payroll provider who can ensure that your business is in compliance with current labor laws and all relevant payroll regulations.
7. Let your employees know what your payroll procedures are
Payroll doesn’t have to be complex, but sometimes, it ends up being that way. However, it’s important to monitor the complexities of your payroll-related policies so that your employees can understand those policies and their implications. So, it’s important that you take the time to train your employees and educate them about the details of your payroll procedures. That way, everyone will be on the same page.
8. Make your payroll information accessible to everyone involved
Have you thought about storing payroll information in a shared online place that all your workers can easily access? It’s even better if you permit those who work for you to download copies via this shared online place, especially if it’s a self-service portal. This should also be somewhere employees can submit time sheets and update personal yet work-related information.
9. Implement reliable payroll software as protocol
With the right software, you can run payroll from just about anywhere. You can also integrate your payroll process with your accounting programs, resulting in quick access to your firm’s financial data.
This approach to payroll will also reduce the risk of accidentally entering duplicate information. Plus, a lot of payroll software also gives you the ability to track bonuses, keep an eye on vacation or sick days, handle benefits, and integrate HR with payroll.
10. Outsource your payroll processes if need be
If you choose to outsource your company’s payroll process, the vendor should cover tax penalties on your behalf. Meanwhile, you’ll always have direct access to your company’s payroll account.
11. Ensure that IRS payroll requirements are met
The IRS has rules that dictate the deposit of payroll taxes on a monthly or semiweekly basis. The deposit is the same value that you deduct from your employees’ paychecks for both state and federal income taxes.
12. Streamline your payroll operations
A major benefit of modern business technology is the ability to streamline operations across departments while simultaneously making it easier to see the bigger picture regarding your business’s overall health. By integrating your payroll-related processes, you can keep all relevant databases updated while also gaining important business insights into your payroll protocol, such as how it all affects the cash flow of your business.
13. Make sure your payroll data is as accurate as possible
If you make calculation-related errors or miss deadlines, your business could face harsh penalties. Tax-related errors can be extremely costly, namely in the form of expensive fines. However, if you double-check your payroll data, you can avoid making expensive errors.
14. Regularly audit the classification status of those who work for you
Checking in on your records and making sure your business details are accurate over time can work wonders. This includes regularly auditing the classifications of your employees, the amount of taxes you’re withholding and the total value of benefits.
The more often you double-check the validity of your records, the more confident you’ll be that everything is as up to date and accurate as possible. This can also make it easier for finance teams to identify — and then rectify — any errors in a prompt manner. Take the time to run reports that will help you notice trends or pinpoint opportunities for improvement.
By regularly auditing your own business records, you can ensure that your employees receive fair and equitable compensation, resulting in the trust of your employees and the transparency of the workplace.
As you can see, payroll processing involves more than a brief glance at employee time sheets and a quick look in search of payroll errors. Instead, payroll means ensuring that all related information is kept up to date, that your workers are paid on time and that you can maintain a watchful eye on your business’s bottom line.