According to The Workforce Institute research, an estimated 82 million Americans – more than half of the U.S. workforce – have experienced a problem with their paycheck during their career. Often, it can happen because employers lack the necessary skills or enough knowledge in payroll management. Late or inaccurate salary payments can result in falling under the IRS penalties for failing to pay payroll taxes accurately. Moreover, it negatively affects the reputation of a business and increases employee turnover.
So for every business owner, it is critical to understand the basics of payroll and know how to manage it efficiently. In this article, I want to give some useful tips to enhancing payroll management for small businesses. (I will also share a super bonus, so don’t give up reading).
What do we mean by payroll?
By definition, payroll is the business process of paying employees, as well as tax agencies and service providers responsible for various employee benefits. A payroll system usually comprises calculating and distributing salaries, following your payroll policy, keeping payroll records, preparing financial reports for employees and stakeholders with a breakdown of payments, taxes, bonuses, overtimes, or holiday pays, etc. Errors, whether they occur during calculations or in payroll records, can lead to wrong net pay issued to employees or failed amounts of taxes paid to the government. Both options are totally undesirable and costly for a business. Moreover, in accounting, payroll goes into your business expenses, so proper management of payroll directly affects the accuracy of your accounting.
Five actionable tips to enhance payroll management
Though payroll management looks like a pretty daunting task, you cannot skip it. And geared with appropriate tools and a good piece of knowledge, you can drastically facilitate handling payroll.
Capitalize on technology
Many business owners often manage all the aspects of their business themselves. Whichever reason lies behind it – the intent to have better control over business processes or the lack of resources – payroll management can be a pretty time-consuming task, especially if it involves manual data entry work. Moreover, the right payroll calculations, deductions, taxes, etc. can require a significant investment of effort if you are not specializing in payroll. And here is where technology can be of tremendous help. I would even say that it would be something sinful not to use.
Various types of payroll software can handle all of a business’s payroll processing and related tax filings and payments. There are plenty of options available on the market, so you can choose the one that can perfectly fit the bill for you, depending on your needs. I want to show how you can leverage it using an example of Gusto, as it’s one of the top-rated apps for small businesses.
With Gusto, you can:
- automatically sync worked hours;
- calculate salary payments;
- amend fields for additional hours and earnings, sickness and annual leave;
- automatically calculate and file all relevant taxes for its customers automatically
- keep track of changing tax laws and update the calculations accordingly
Gusto also has a multitude of easy to use HR and compliance features, has over 3,500 health insurance plans, time tracking tools. Users also can set and customize public holidays and company holidays that can be integrated with: Google, Outlook, and iCal.
A pro tip: Synchronize payroll and accounting
I have already mentioned above that payroll needs to be reflected in your accounting, so the ability to quickly and accurately bring payroll data into accounting can be invaluable. Though accounting systems, such as QuickBooks or Xero, for example, often allow for doing payroll, they can lack some needed functionality for efficient payroll management. So many business owners prefer to use separate solutions for more comprehensive payroll. Gusto, of which I have previously written, is one of such solutions. Still, as it is necessary to reflect the payroll in accounting, you need to bring payroll records from Gusto to your books. Transferring this data manually, you are at risk of errors and duplicate data slipping in. And you can leverage the new Gusto and Synder integration to synchronize your employee records with your accounting platforms (Xero/QuickBooks) automatically, drastically improving your business processes. You will only need to connect both platforms to Synder, do the mapping, and get your employees’ data automatically updated across them. Moreover, with Synder, you can get three months of Gusto subscription for absolutely free.
Go with regular training and education
One of the challenges facing payroll specialists and business owners who run payroll themselves is the changing environment. Employment and labor laws change quite often. Moreover, not only the federal government introduces specific payroll requirements, but each state has a unique set of payroll rules, regulations, and procedures.
Ensuring that your business is compliant with the change is critical, as even an inadvertent violation of payroll laws can tangibly hit your company and you as a business owner. Thus, on-going education is essential for successful payroll management. You can inquire about payroll education with the American Payroll Association, for example, or other organizations of the kind. Besides, many payroll and labor courses are available across the country, so you can easily find the one that suits you. And this will be a worth-every-penny investment.
Keep up with state and federal tax requirements
It cannot be emphasized enough how critical it is for businesses to stay abreast of the myriad of IRS and other government agency compliance rules and regulations. The potential cost for companies that fail to meet deadlines or miss filing certain forms altogether can be devastating, especially to smaller businesses.
Make it a mandatory element of your ongoing processes to review and know your State and the Federal payroll tax regulations and changes. By being fully informed and up to date, you and your staff will avoid a significant amount of costly mistakes and delays.
Get help from the experts
Managing your payroll may be stressful if you are not a professional. So if you can delegate this task – do it, as this is an investment that will pay out quickly. Knowing your business, you can decide whether to hire an in-house specialist or to outsource payroll management to an external expert.
Usually, in-house payroll specialists are also responsible for the overall HR, as these tasks intersect. Getting this outside assistance is more suitable if you can’t afford a full-time specialist yet, but need someone to handle the end-of-month payroll calculations. Usually, this option can be more beneficial for small companies with few employees.
Payroll is one of the most expensive aspects of a business. Mistakes in payroll management are costly for both business owners and employees. For a business owner, it’s critical to know the basics of payroll to understand this process and have better control over it, no matter whether you delegate this task or prefer doing it yourself. Properly chosen and implemented software can drastically facilitate your payroll processing, from automating the part of it to making it run on the background requiring no or little action from your side.