Four tips for managing payroll for your small business
Find payroll confusing? Here are four tips for successfully managing this important task for your small business.
If you own a small business, then you know how important it is to have good employees. Your employees are your right-hand man and work hard because they want to see success with the business just as much as you do. Which is also why it’s important to pay your employees in an organized and timely manner. Not just because you have to, but because hard work should be rewarded.
However, managing payroll can be confusing. It’s easy for a small business to make mistakes when it comes to managing payroll, but these mistakes can cost big bucks from the IRS. And that is probably money that you don’t have to give up as a small business. So instead, minimize the risk of making mistakes and follow these four tips to managing payroll for your small business.
1) Gather information and set up for payroll
First and foremost, you need to gather the appropriate information from each employee. You will need Form W-4, state income tax withholding forms, and Form I-9. However, if you have any independent contractors hired, you will need to collect a W-9 instead of a W-4 and state income withholding form.
Then, in order to get set up for payroll, you will first need to register for an employer identification number (EIN). The EIN is how your business will be identified for tax reasons. You need an EIN before you can open a bank account or set up payroll.
2) Use a payroll system
Once you have gathered relevant information from all your employees and registered for an EIN, then you can start with payroll. However, it can still be a complicated process, which is why it’s a good idea to use a payroll system. A payroll system will automate the process and minimize the chance of error.
There are a few different options, such as ADP vs. Paychex. Both are payroll systems, but with ADP, you get a ton of added tools, like job postings, discounted legal services, and single invoice billing. If you can get assistance with managing your payroll, your small business will run more smoothly.
3) Decide on a payment schedule
How often will your employees be paid? Will it be weekly, bi-weekly, and monthly? This schedule is important for you to ensure you have enough money to pay them, but also for them so they know they are being paid fairly. Keep this consistent and decide how your employees will be paid as well, such as through direct deposit or check.
4) Keep track of employees’ hours
One of the most stressful parts of managing payroll is having to calculate your employee’s hours. To make this process a little bit easier, use a time-tracking system. This is a simple way to see how often your employees actually worked versus what they were scheduled for, so you know that you are paying them the appropriate amount. You can even build this system right into your payroll or use it as a separate entity. Whatever works best for your small business!
When it comes to payday, you might get overwhelmed with all the things you have to do to manage your payroll. But this process doesn’t have to be complicated. Using tools like a payroll system and a time-tracking tool will make managing and paying your employees a whole lot more manageable.
Your employees are hard workers who deserve to be paid in a timely and efficient manner, so make sure you take some extra time to figure out your payroll. It will be a weight off both your and your employee’s shoulders.