When you run your own business, it’s not enough to just know the ins and outs of your industry or have a great vision for the future of your company—you also need to have an in-depth understanding of all the nitty-gritty details, including payroll. Payroll isn’t something that most small business owners spend much time thinking about, but it can turn into a complex nightmare if you don’t handle it right. While there are no hard and fast rules when it comes to managing payroll, there are plenty of best practices that can help you run payroll smoothly.
1) Timely payment
Payroll is a critical function for any business, but it can also be a major source of stress. If you’re having trouble making timely payments, you’re not alone—small businesses across America face that exact problem. We surveyed several professionals from different fields and asked about their biggest payroll challenge—and about their success in overcoming it. What we found was surprising: over half of respondents said they had trouble coming up with the money for payroll.
Ensuring that all tax obligations are met is no easy task. From state to federal income taxes, workers’ compensation insurance, workers’ comp taxes, unemployment insurance taxes, etc., it can be hard for employers to keep up with everything they need to collect from their employees. As a result, many businesses are prone to making mistakes or accidentally under-collecting money from their staff members. This puts employers at risk of facing hefty fines for unpaid taxes. To avoid being at risk of penalties or even having your business shut down because you didn’t withhold enough tax money from your employees, use a proven payroll software provider that can accurately calculate tax rates based on an employee’s pay structure and/or withhold taxes if necessary.
The costs of running payroll for a small company can quickly add up. If you don’t have a dedicated bookkeeper, you may be having trouble understanding what your expenses are. Having a good handle on these numbers will help you set appropriate budget targets that allow your business to stay profitable. Even if you do have a bookkeeper, making sure everything is recorded correctly from employee start dates through retirement is important because mistakes can happen at any time. That may sound terrifying, but it’s far easier to correct an error if it happens early on rather than waiting until there’s been extensive damage to your cash flow.
Payroll is one of those areas where we’d love for there to be a one-size-fits-all solution, but unfortunately, there isn’t. Each company and employee is different, which means that every payroll system should be too. If you’re planning on outsourcing your payroll function or switching providers at some point in your company’s life cycle (and many SMBs do), it’s important to find a provider that can adjust as needed. More than likely you won’t want – or need – all of your options from day one; having a provider that can grow with you is key.
5) Payroll compliance
Employers are responsible for paying all their employees properly, on time, and accurately. No exceptions. That means withholding income taxes, matching FICA contributions, paying unemployment insurance taxes (if applicable), keeping accurate records of wages paid, hours worked, etc. If you think about it, it’s an amazing amount of responsibility to put on someone running a small company without lots of resources or time. That’s why there are payroll services that can take some or all of these responsibilities off your plate—so you can concentrate on what really matters: your product or service.