Small business owners are experts at accomplishing a lot with very little. Take payroll as an example. Owners typically handle this themselves, yet there’s much to know and do for this one role. And a lot of potential for costly mistakes.
Payroll is both HR and accounting-related, including learning and following the laws, paying employees, and submitting taxes costs time. Often, the Payroll Manager often absorbs all HR and accounting duties, adding up to 40 hours every month.
Additionally, there are risks with accuracy. One transposed number or decimal out of place can have you over- or under-paying the IRS or employees.
Employees and taxes must be paid on time, at different intervals and rates. Slip up on any of these, and you could lose valuable staff and gain the attention of the IRS.
For many small business owners, your workforce must stay as tight as possible. Often, payroll duties fall squarely on your shoulders, eating into the more creative and meaningful aspects of growing your business.
Follow these tips to better manage your payroll and ensure you don’t make costly mistakes.
If nothing else, schedule all payments to employees or Uncle Sam so you don’t have to rely on memory. It’s the best way to keep your employees happy and feeling appreciated while saving you from penalties and fines from the IRS. Search for an online calendar that lines up with your schedule, or create your own.
Where there’s a business need, there’s usually a software or service provider to fulfill it. Consider those that solve more than one problem. They can take much of the burden off you—never miss a payday or tax payment.
Reduce your costs by reducing the time you or your employees spend on payroll functions. Try to choose something compatible with your existing systems.
Cautiously rely on your software to track many of things, from employee hours and vacation time to the taxes owed. However, perform regular checks to ensure it’s functioning and calculating correctly.
Q: What’s better than scheduling tax payments on your calendar?
A: Technology that pays your taxes for you.
Consider that the penalty for paying taxes a day late begins at 2% and balloons to 10% at 16 days late, and you’ll understand how software that takes the burden off your hands (and mind) is a smart investment.
Manually submitting payments puts you at risk of forgetting or making errors. Software packages and payroll providers can do the job for you. Confirm that your chosen software service guarantees its product and supports clients through audits.
The Fair Labor Standards Act (FLSA) sets regulations like wage standards, pay equality, and documentation requirements. Varying local, state, and federal laws can be challenging to remember and juggle, so don’t hesitate to ask an expert for help. Your Charlotte-area CPAs and accounting firms, tax advisors, business attorneys, and your accounting software’s customer success representative are all good experts to contact.
An independent contractor and a full-time employee aren’t treated the same on payday or at tax time. Owners of small and budget-minded organizations must thoroughly research and correctly classify each of their workers using the IRS classification guide. Don’t forget to properly put those classifications into your payroll system.
Documentation is a legal requirement. You and any software you bring on must keep adequate records to comply with the law. For example, employee tax documents are kept for four years and payroll records for three. An organized recording system (manual or digital) will make locating information easier.
It’s easy to make mistakes entering numbers into your payroll system. Transposed numbers, extra numbers, or decimals in the wrong place can cost you money and employees when you get penalized for tax mistakes, overpay employees, or lose good workers because they can’t count on getting paid correctly. Enlist the help of another person to check payroll data because a second, fresh pair of eyes is helpful. Set a goal to review all data again monthly to ensure its correctness.
If you don’t have a dedicated employee to oversee payroll, make it your goal to get one. Someone with HR, business finance, or accounting skills would make a great payroll manager. Train them and encourage their continued education.
Different taxes are paid at different intervals. Some are paid every couple of weeks, others monthly, and others every three months. Money meant for taxes but currently sitting in the bank looks tempting to pull from for typical, yet unpredictable, cash flow dilemmas.
Don’t fall into that trap! Many good-intentioned business owners take money from the stash meant for taxes thinking they’ll have enough time and revenue to pay it back when needed, but things don’t work out. Avoid the temptation by setting up a separate bank account to store tax funds to make the money more “out of sight, out of mind.”
Professional accounting services for businesses can help you handle all the ins and outs of payroll. They’ll minimize risks with the IRS and save you the time and labor costs of doing it yourself or hiring another employee. You’ll regain valuable time and peace of mind knowing that professionals are doing it right and guaranteeing their work. Your accountant can also help you discover ways to improve your cash flow, fund business expenses, apply for loans and grants, and grow. You’ll be less stressed and have more focus and funds to grow your business.
Improve your company’s financial wellness by wisely managing and streamlining payroll tasks. It will ensure accuracy and free up your time for more impactful tasks that will help you grow and expand your business.