Paying your employees on time can be a headache for small business owners looking to do the task themselves. It sounds simple, but when you factor in taxes, fees, and other regulations, it quickly becomes one of the biggest minefields associated with running a business.
There are a number of best practices for payroll management you can follow to keep you and your employees happy. We have provided a few steps that will help small business owners simplify their payroll process.
1. Establish a sound budget
Plan for your company’s future and prepare for unexpected surprises by establishing a sound budget for your business. Analyze your budget regularly to discover areas in which you can improve stewardship and make an even greater impact in your field.
2. Create a Separate Bank Account for Payroll
A separate account for your payroll deposits can help improve transparency to your cash flow. As a small business that’s growing in terms of employees, this small change allows you to work more efficiently with your budget. It will be easier to identify payroll taxes, cost of benefits, Social Security, Medicare, and other payroll deductions so you’re always on top of expenses and ensure that your business stays liquid.
3. Set up a regular payment schedule
Efficient payroll systems include reliable compensation to both hourly and salaried employees. Decide how often you will pay your staff and stick with it to create a simple payroll process. When it comes to compensation, everyone likes to know what will happen and when—and a regular payment schedule creates predictability and stability for your staff.
4. Decide Between Salaried and Hourly Pay
Paying your staff a salary can make your payroll much easier to manage, as they always get paid the same amount. However, it might not make sense for your business model or for the type of work your staff are doing. Paying by the hour is more complex, as you’ll need to keep track of how many hours each staff member has worked and then calculate their pay each period. There are plenty of time sheet solutions out there that can make this easier for you to manage, allowing your staff to clock in and out themselves. Many time sheet solutions can also integrate with your payroll software so everything’s kept up to date.
5. Direct Deposit: Paper Free and You’ll Save Time
Surveys indicate that 80% of American workers are paid via direct deposit. Why should you adopt the direct deposit method? Employers can review payroll reports and confirm the amount being processed is correct, before transferring the money. Time spent preparing the payroll is reduced and saves money by not paying for checks, ink, envelopes, printer maintenance, etc.
Most banks and online accounting programs support direct deposit out of the box. In many cases it’s included as part of the service packages or it’s offered for a nominal fee.
6. Easy to Use Payroll Software
Many business owners make the mistake of assuming payroll software is costly and difficult to use. While many tools have a subscription fee, many payroll software options pay for themselves by enabling professionals like yourself to focus on running your company. Additionally, when you have hourly workers or need to track paid-time-off, payroll software enables you to automate scheduling, accurately check employee time, and have all essential information viewable within a central dashboard.
7. Create a Clear Payroll Policy
When bringing on new employees, have them review and sign a payroll policy form that will be easily accessible. Include how and when employees will be paid, what their compensation is, and whether there are any additional considerations (such as sick days, business expense reimbursement information, or commission rates). Having this on file is helpful to ensure both you and your employees understand the payment plan details.
8. Establish Important Reminders
Small business payroll isn’t what you call forgiving if errors are made. You can’t forget to pay people, or you won’t be in business very long. Keeping track of deadlines can sometimes be overwhelming when payroll is done in-house. Set up reminders for each and every vital deadline and payment. Payroll tax reports need to go to the right jurisdictions. Income tax withholding reports may need to be sent quarterly or annually. Avoid financial penalties by reminding yourself when everything is due.
9. File Taxes Electronically
With payroll and other taxes, you’re obligated to meet deadlines and ensure you’re in compliance with laws on the books. By filing your taxes online, you won’t have to worry about postage costs, lost mail, or long lines at the post office. Most online filing services provide users with near-instant confirmation of your information being received. Some states even require businesses to file their taxes online, another reason your business should switch to paperless payroll workflows.
10. Use Outsourced Payroll Services
If you or your staff who currently handles payroll find yourself overwhelmed, disorganized, or stressed about the payroll process, outsourcing may be your best answer. Growing your company is what’s most important, and payroll needs to be systematic and well organized long before growth speeds up. Outsourced payroll providers come equipped with sophisticated software that automates tiresome payroll processes. Peace of mind comes from knowing your small business payroll is in good hands so you and your staff can focus on growing your business.
Even if you have a bookkeeper, payroll company, or accountant, it’s essential for small business owners to at least have a basic understanding of what’s going on. The best way to stay on top of payroll processes is to develop a trusted team of advisors and perform routine checks to ensure you have the right systems in place. While it might seem daunting at first, it gets easier once you’ve streamlined your payroll workflow.
Limitless Investment and Capital Outsourced Payroll Services in Denver & Detroit
Peace of mind comes from knowing your small business payroll is in good hands so you and your staff can focus on growing your business. Limitless Investment and Capital offers the best options and solutions for small business payroll services in Denver and Detroit.