Approximately 40 percent of all small businesses face hundreds of dollars in penalties each year. In many cases, these penalties could have been avoided if only the businesses had a proper payroll management system in place.
It doesn’t matter what kind of business you run. Payroll compliance is one of the most important aspects of entrepreneurship that you need to master.
If you’re not sure where to begin when it comes to addressing your payroll system, keep reading.
Listed below are eight payroll management tips that will make it easier for you to stay on top of things.
1. Consider Adjusting Your Pay Cycles
If you currently maintain different pay schedules for different employees (weekly paydays for managers, bi-weekly paydays for hourly employees, etc.), you may want to consider adjusting your system so everyone gets paid at the same time.
It might take some time for everyone to adjust to the new schedule. But, you and your employees will soon adjust and your business will benefit.
Sticking to different pay schedules can lead to payroll errors like duplicate checks. It also makes it harder for your payroll department to operate as efficiently as possible.
Just remember that every state has its own minimum pay period. You can always pay more frequently than that, but you should avoid paying less.
2. Consolidate Your Systems
You may also want to consider consolidating payroll systems to simplify the payroll management process.
If you’re currently using multiple programs or systems to track employee hours and other data, it’s easy for information to get lost.
Try to switch over to one system for all your payroll management needs.
In the same way that there might be an adjustment period as you change pay cycles, it might take some time for everyone to get used to the new management system. Over time, though, it’ll get easier and your payroll department will appreciate the simplification.
3. Stay Up-to-Date on Federal and State Tax Requirements
As a business owner, it’s essential for you to stay informed about the latest federal and state tax requirements. Unless you want to deal with penalties, fees, and other serious issues, it’s worth the extra time required to get up-to-speed.
The following are some specific pieces of information you’ll want to make sure you understand regarding your taxes:
- Government deadlines
- Tax filing requirements
- Record keeping requirements
- Reporting requirements
Where do you get all this information? The best approach, in most cases, is to designate one person on your staff to do regular research and make sure that everyone is aware of relevant changes and updates.
State and federal agencies typically put out regular publications and newsletters designed to provide businesses with the information they need. These tools are a great starting point for your designated researcher.
4. Stay Organized
One of the most common payroll mistakes business owners make is failing to stay organized. There’s a lot of information to keep track of — names, social security numbers, time cards, etc. — and it’s easy for things to slip through the cracks if you don’t have a good organization system in place.
Many payroll management systems include tools that can help you stay organized. Make sure you utilize these tools to keep your files and information organized.
If you have a lot of paper files in your office, make sure everyone in your payroll department uses the same filing system. That way, it’s easy to find what you’re looking for.
5. Conduct Regular Audits
No business owner wants to think about an audit. But, conducting your own audits can help you avoid an IRS audit when tax season rolls around.
At regular intervals throughout the year, evaluate your payroll management system and look for issues that could be causing problems or putting your business at risk.
During your audit, you might want to check your time card system to see if there are any glaring errors. You might also want to check to make sure there aren’t any inconsistencies when it comes to classifying employees or adjusting pay rates.
6. Consider Going Paperless
A paperless payroll system isn’t just more eco-friendly. It can also help you reduce costs, maintain security, and manage data more accurately.
A paperless system eliminates the need for time cards or time sheets, along with paper pay stubs and paychecks.
Many employees also prefer this approach to traditional methods. It will take a while to implement the new system, but, after an adjustment period, everyone will likely be glad you did.
7. Implement a Clear Communication System
It’s also important to make sure there’s clear communication between all of your business’s employees and departments.
The more you communicate with your employees, the better. If there are any issues, they can also be solved faster if everyone is aware of the problem.
The following are some specific pieces of information you’ll want to communicate among your employees:
- How your payroll process works
- How different employees are classified
- The reporting responsibilities of each employee
- Your procedure for addressing payroll mistakes
It’s important to have this information in writing and displayed in a prominent location in your office. Make sure every employee in every department has a copy, too.
8. Consider Outsourcing
Finally, you may want to consider outsourcing your payroll process.
If you’re a small business owner and can’t afford to pay one employee to handle all your payroll needs, outsourcing can be a good option.
There are lots of payroll management companies out there that will handle all your needs without putting you out the cost of a full-time employee. They simplify the process so much that nearly half of all U.S. companies (47 percent) currently outsource payroll.
Looking for More Payroll Management Tips?
These tips will get you a long way when it comes to payroll management. But, there’s no shame in needing additional help.
Do you need more specific guidance when it comes to staying on top of your payroll? Or, are you looking for help with other financial matters, like tax preparation or planning?
No matter what kind of financial assistance you need, we can help. Contact us today for a free consultation.
