Payroll is an important part of your small business because you have to pay your employees. Failing to do your payroll duties correctly will lead to inaccurate financial reports and wrong paychecks. With the right management, you can make your payroll operations efficient.
You need to decide how often you will be paying your employees. Will you pay them weekly, monthly, or biweekly? You need to look at the minimum payday laws in your state before making this decision. You can pay more but not less often than the law requires.
If you process your payroll in-house, it would be much easier to use software instead of doing it by hand. Your software vendor will offer different packages depending on the size of your business. To save money and time, you should consider outsourcing your payroll duties to companies such as Accuchex.
Such companies will handle your payroll, paychecks, and deal with the benefits and tax obligations of your company. Just make sure that you double-check the work that your provider does.
You need to start tracking how your employees spend their time by installing a time clock or having them fill out timesheets on a weekly basis. A time clock is much easier for employees. Depending on the time clock that you have, the system can do the calculations for you or you can calculate the punches manually.
When doing your payroll, you need to hold back federal payroll taxes such as Medicare and Social Security from the paychecks and pay them to the respective agencies. You also need to take out state income taxes as well as federal income tax. For the purpose of federal income taxes, you need to have your employees sign a W-4 form.
You can monitor the payroll expenses of your company by doing some payroll accounting. With accounting, you will be able to apportion salaries, wages, as well as paycheck deductions to the right financial accounts. You should also conduct reconciliation of accounts to make sure that you have accurate tax reporting and paychecks.
If you offer benefits such as health insurance and retirement plans to your employees, the contributions should also be handled by payroll. Your HR staff can also handle this task. If you provide your employees with paid time off such as vacation, personal days, and sick days, your payroll administrator should be able to track the money being used.
The state and federal governments have recordkeeping laws when it comes to payroll. Although the software that you use for payroll will have the relevant data, you should consider printing payroll reports to increase reliability. After you print them, you should file the hard copies in a safe place. These hard copy reports will give a breakdown of the employee’s gross-to-net wages during different pay periods.
The more employees you have to pay, the more checks you need to track. This is important because checks are prone to misplacement and theft. When you lose track of a paycheck, you should stop payment on it and reissue a different one to the affected employee.
However, you can eliminate the possibility of losing checks by setting up a direct deposit account with the bank. You can then explain the advantages of direct deposit to your employees if you want them to accept it.
Handling your small business payroll is not that hard in the beginning because you have few employees. However, when your employee numbers increase, you should consider outsourcing your payroll duties. This gives you time to handle other business aspects.