Managing payroll is a critical business operation that can make or break your business. For many businesses, doing payroll is one of the most tedious and time-consuming business activities. However, it’s also a necessary one. Payroll is an area in business that is mixed with nuances and distraught. This means you have the potential of making mistakes and getting lost in between. From processing paychecks to bonuses and deductions and keeping up with labor laws, payroll management involves quite a lot.
Further, in the agony of the current global pandemic, more workers now work remotely more than ever before. This has increased what HR needs to address and overwhelming payroll completely. If you are managing a business and operating payroll, we’ve prepared a few tips to help you establish the best payroll efficiency.
Invest in the Right Software
We cannot stress enough the importance of investing in the appropriate software for your business. As technology changes, you need to learn more about how you can easily automate most of your payroll management services. Now more than before, managing payroll is easy to conduct. But, the trick lies in choosing and purchasing the appropriate software suited to your kind of business. You can find many types of software available in the market. Depending on your business needs, you can purchase directly from the shelf or have bespoke software tailored to your business operations. With the right payroll system, you can do away with recurring tasks such as consistently updating timesheets or filling up hours worked. These tools do most of the work for you, so you don’t have to labor on small tasks.
Rank Your Employees Appropriately
If yours is a small business, you need to categorize your employees as either employed or independent contractors. For each employee, you need to pay taxes while still adhering to the minimum wage laws. Additionally, you will also need to sort out overtime wages. But for the contractors, these requirements aren’t a priority as they pay their taxes. You should also understand that determination requirements vary with the state. So, ensure you check with your state’s Department of Labor on the relevant rules to follow when categorizing employees. Improper categorization may lead to owing back wages and taxes, interest, and penalties by the IRS.
Consider a Timekeeping System
For streamlined operations and organization in your payroll system, ensure you have a system to keep track of your employee’s time – this means both in and out. Also, you need to link the timekeeping system to your payroll system. This helps ensure your salary calculations are correct. It’s in your best interest as a business owner to ensure the timekeeping system is working seamlessly. By doing this, you can curb any deviations with records if your employees try to manipulate their time in and time out. With this data, you will have a realistic and accurate record of your employees’ working hours every day.
Have a Payroll Calendar
Having a payroll calendar helps your employees understand when their salaries are paid and when timecards are due. Additionally, it aids your payroll staff with executing and planning payroll activities. Some payroll software has special features to help you create and maintain a payroll calendar. You can also try using a spreadsheet application and set up a calendar by yourself. When creating your payroll calendar, a good rule to stick by is to use colored fonts. This helps to emphasize key information such as deadlines due to a holiday, and a financial statements template could also be very useful. Remember: a good payroll calendar should also display all fiscal year pay dates. This helps in simplifying payment processing and eliminates employee confusion about when they will be paid.
Take Charge of the Errors
Compliance plays a key part in payroll management. Even with sufficient calendars or checklists, sometimes errors are made. If your business is notified by relevant authorities such as the IRS that a violation has occurred, you need to address the issue immediately. As difficult and time-consuming as it sounds like, each day that goes by without rectification puts you in more trouble. This could also potentially cost you penalties and money in interest. Please make it a policy of addressing errors as this will eliminate any significant impact of mistakes. This also applies to errors made with payroll and your approach with your workers.
Track Your Cash Flow
One of the biggest fears in business is not having enough cash to pay employees. If you’re often short of finances during the payroll period, you need to assess your cash flow and identify the root issue. Monitoring your cash flow helps to spot any potential payroll problems like overpaying or over-staffing. If your business is going through a stressful financial period, you can delay vendor payment or collect any outstanding external payments. We recommend taking this approach before you can resort to extreme cash flow management tactics like laying off workers or delaying wages.
Be Open and Transparent
If employees are frustrated by your payroll, this can reduce work productivity. Whether it’s a paycheck that sends home less cash than expected or a miscalculation of an employee’s role, this can lead to misunderstandings and problems in your business. Implement a payroll policy that lays out employee classification. It should also check how salaries are determined, how payroll errors are rectified, and how the payroll process works. You can also include an employee handbook or manual so that it’s standard across your company. Finally, consider creating an online portal where employees can access information about their financial data.
Handling the technical issues of payroll and managing it is no easy work. Since policies and technology keep coming up every day, it’s vital to have the people handling your payroll updated. For this, your payroll team needs to undergo frequent training sessions so they can keep your system updated.
With the tips outlined above, you can now manage your payroll system seamlessly and efficiently. You will have more time to focus on other tasks instead of computing endlessly for the payroll. Handling payroll is a vital part of any business. For small businesses, you need to ensure that your business complies with the relevant IRS standards. With the appropriate policies and strategies, you can manage payroll efficiently.