How familiar are you with managing payroll? Unless you have experience in accounting, you may not be that familiar with it at all.
Many small business owners take on the task of processing payroll themselves, even if they aren’t necessarily qualified to do it. It’s great that they’re dedicated to multitasking to keep their business going, but they might end up making some grave mistakes if they don’t realize the complexity of the task.
How can this be prevented? To start with, they should know that they don’t have to do everything on their own. For instance, Checkissuing provides check printing services that could greatly simplify the payroll process. Let’s take a closer look at the details.
- 1 #1: Track Employee Attendance Electronically
- 2 #2: Have an Expert Help You
- 3 #3: Use Accounting Software
- 4 Common Mistakes While Processing Payroll
- 5 The Takeaway
#1: Track Employee Attendance Electronically
Assuming your business has employees that are paid by the hour (as opposed to salaried employees), you’ll have to use some method of tracking the hours they work.
Some businesses still have employees manually write down the time they spend on the job, and while it may seem simpler on their end, it’s anything but simple when you’re painstakingly calculating their hours at the end of every payroll period.
That also increases the likelihood of making errors on your employees’ paychecks, which is never a good thing.
Fortunately, there are plenty of ways to have your employees record themselves going on and off the clock electronically.
Whatever program you’re using, you should be able to generate a report that lists the total hours worked during the payroll period for each employee. It’ll save you time, and it’ll significantly decrease the risk of human error.
#2: Have an Expert Help You
You might not want to hire an accountant to take care of your books for you, but that doesn’t mean you can’t take advantage of their expertise.
Payroll involves a lot more than just writing checks, but if you don’t know the ins and outs of payroll-related regulations, you could land yourself in hot water with the IRS.
That’s the main reason why hiring an accountant is a good idea, even if it’s just to train you. You can learn about how to properly deduct taxes, how to handle child support deductions, and even techniques to aid with focus and accuracy.
Another option is to use a check printing service. It takes the burden of payroll off of your shoulders, and it can even be more cost-effective when it frees up time that you can spend more productively.
#3: Use Accounting Software
Unless you’re dedicated to staying 100% old-school, there’s really no reason for you not to invest in a platform (like QuickBooks, for example) that calculates various deductions and taxes for you.
It might seem like an unnecessary expense, but take it from someone who knows – letting the technology do the work for you is a lifesaver. All those minute calculations are just asking to be messed up if you’re doing them manually, and it doesn’t matter how careful you are – it’ll happen sooner or later.
It’s still possible to make errors in payroll if you’re entering employee information into the computer, but the chances of making a mistake are much smaller that way. These programs also tend to have a thorough understanding of current payroll regulations, so you don’t have to worry as much about knowing all the little details yourself.
Common Mistakes While Processing Payroll
While we’re talking about how to improve the payroll process, let’s talk about some things to avoid.
Sometimes in order to do things correctly, you just have to stop doing them incorrectly. Here are some common mistakes that people make while processing payroll.
#1: You’re putting people in the wrong classification (employee vs. independent contractor)
If you’re paying a highschooler to mow the lawn, you can just hand them some cash when they’re done and call it a day. Things work a lot differently if you’re running a business, though; you can’t just agree on a rate and then write them a check.
If you’re paying someone to do work for you, you’ll have to classify them as either an employee or an independent contractor. What difference does this make for payroll? One big difference is that employees get their taxes deducted from their paychecks, while independent contractors get the entire amount, and take care of applicable taxes on their end.
This is probably one of the top mistakes that people make when processing payroll – they just don’t know all the hoops they need to jump through. This usually isn’t intentional, but that won’t make any difference to the IRS.
Even if you’re using payroll software, you can’t rely on it to walk you through each step of payroll. For example, many companies don’t send out 1099 forms to independent contractors, even though the forms are required by law.
Then there are all the forms that employees have to complete when they’re hired; some of these forms have to be submitted by a certain deadline.
If you have employees that pay child support, they could get in trouble if you don’t take care of that while processing payroll. There are all kinds of details to pay attention to, and a lot of businesses simply don’t know that they’re missing some of them.
#3: You’re rushing the process and making mistakes as a result
It might seem like making a few minor errors on employee paychecks isn’t that big a deal. After all, these things are always fixable, right? Well, these are paychecks we’re talking about; that’s a pretty big deal for a lot of people.
If your employees can’t trust you to pay them correctly, that’s going to affect the way they trust you in general, which is the opposite of what you want. Be careful and focused when you’re processing payroll, and always double-check your own work.
Payroll can be complicated, but you can still make it easier for yourself. Just figure out the kind of help you need, and develop an approach to payroll that suits your business best.