Running payroll can be a real headache, especially for small business owners who have to wear many hats. But with a few simple tips, you can make the process much easier on yourself. Read on to learn some easy ways to streamline payroll and save yourself time and stress.
What Is Payroll?
Payroll refers to the system for paying employees their wages and salaries, including deductions for taxes and benefits. It involves calculating paychecks, withholding taxes, filing tax forms, and distributing pay. For many companies, payroll is handled every pay period, whether that’s weekly, bi-weekly, or monthly.
Accurately managing payroll requires tracking hours worked, tax rates, benefit deductions, and other data points for each employee. This data is used to determine gross wages, make tax withholdings, calculate net pay, and generate pay stubs for each pay period.
Payroll can be complex, especially when you consider factors like overtime, bonuses, commissions, and PTO. That’s why many small businesses choose to outsource payroll. However, it is possible to handle it in-house if you have the right payroll software and processes.
Some Simple Ways to Make Payroll Easier
Use Payroll Software
Payroll software automates most of the calculation and reporting requirements for payroll. Features like time tracking, tax tables, direct deposit, and integration with accounting software make payroll software well worth the investment for most small businesses. Choose user-friendly software that meets your unique needs.
Being organized makes payroll much smoother. Keep accurate records of time cards, wage rates, employee info, tax forms, and other documentation needed for payroll. Get a filing system so documents are easily accessible. Also, create checklists of tasks and deadlines to stay on track each pay period.
Pay Attention to Due Dates
There are many deadlines for payroll, including depositing payroll taxes and filing quarterly and annual tax forms. Missing deadlines can lead to penalties and interest charges. Mark your calendar with due dates and set reminders to avoid issues. Payroll software with automated notifications can help prevent missed deadlines.
Offer Direct Deposit
Direct deposit allows employees to receive their pay conveniently in their bank account while saving you time on paper checks. Most payroll platforms can split payments across multiple employee accounts too. Just have employees fill out direct deposit forms to get started.
Review Payroll Regularly
It’s a good idea to review your payroll processes regularly to catch any issues early. Look for errors in tax rates, deductions, pay rates, and hours worked. Also ensure proper tax forms are being used and all records are complete. Doing frequent reviews helps avoid bigger problems down the road.
Get Help When Needed
Even using payroll software, some complex situations can arise that are hard to handle in-house. Know when to bring in help, whether it’s your accountant, broker, or an experienced payroll service. The cost will be well worth it to avoid payroll errors.
- Payroll involves calculating wages, withholding taxes, and distributing pay each period
- Software, organization, meeting deadlines, and regular review makes the process smoother
- Offering direct deposit saves time and getting help when needed avoids costly errors
Handling payroll doesn’t have to be painful. With some planning and the right tools, you can streamline the process and avoid those monthly payroll headaches. What tips do you have for making payroll a breeze? Share your thoughts below!
Frequently Asked Questions About Payroll
What are some red flags that indicate my payroll process needs help?
Some red flags include frequently making manual adjustments, missing tax deadlines, employees complaining about errors on their paychecks, and taking several days each pay period to process payroll. If you notice these issues popping up, it’s time to simplify your payroll process.
What payroll mistakes could cost my business money?
Payroll errors like miscalculating tax withholdings, not paying overtime properly, and misclassifying employees as contractors could all cost money later in penalties, back taxes, and lawsuits. It’s important to get payroll right the first time and correct any issues immediately.
Is payroll software worth it for a small business?
Yes, payroll software is worth the investment for most small businesses. The automation saves a huge amount of time and minimizes costly payroll errors by handling calculations, taxes, and reporting seamlessly. Just choose software that suits your business’s size and needs.
Should I outsource payroll or handle it in-house?
Outsourcing to an accountant or payroll provider can make sense if payroll is overly complex or time consuming with your current process. But many small businesses can manage it efficiently themselves with good software and some helpful practices like direct deposit.
How often do I need to process payroll?
Most small businesses process payroll either weekly, bi-weekly, twice a month, or monthly. The frequency often aligns with how frequently employees are paid, such as every other Friday. You’ll also need to consider tax form deadlines when choosing your payroll schedule.
How can I make payroll taxes easier?
Payroll taxes can be simplified by using payroll software that automatically calculates withholdings and deposits owed based on the latest tax rates and form requirements. You can also work with an accountant or tax expert for guidance.
What records do I need to keep for payroll?
Plan to retain records of all paystubs, W-2 and 1099 forms, timecards, payroll tax payments, tax filings, and other wage and tax records for at least 3 years if not longer in case of an IRS audit. Storing records digitally makes this easier.
How do I handle payroll for freelancers or contractors?
Payments to freelancers and contractors are handled differently than employee payroll. You’ll need them to complete a W-9 to obtain their tax ID. At tax time, their compensation is reported on a 1099-NEC rather than a W-2.
What are some ways I can streamline handling payroll?
Strategies like automating payroll calculations, having employees set up direct deposit, scheduling processing time to avoid distractions, creating checklists, and reviewing every payroll for errors can help streamline your payroll workload.