Payroll is one of the most critical aspects of your business. From tracking work hours to withholding taxes and distributing year-end forms, payroll requires attention to detail and compliance with federal and state laws.
Small business owners need to develop standardized processes for handling employee compensation, and a qualified payroll provider can help. Streamline your business with automated systems for processing payroll, time reporting, and tracking deductions.
Automate Your Payroll
Quite a bit goes into running payroll, starting long before employees receive their paychecks. Businesses must get proper paperwork from new hires, process the correct legal forms (like an EIN and I-9), and keep up with changing labor laws and tax regulations.
This information is often complicated, and even a single mistake could result in harsh penalties from the IRS. With automated payroll, you can eliminate the large amounts of data entry that are often one of the largest sources of error and a big reason why these processes take so much time.
Automated payroll systems can also process employee salaries, deductions, and taxes in real time and help you ensure your business is always up to date with tax compliance. You can get the most out of your automation by implementing a solution that works with your current accounting software and other business systems (like an ERP) to provide a seamless experience for your employees and financial managers.
The right system will also provide your team with a centralized location to view your employees’ pay information, timesheets, and other payroll-related information. You can improve employee growth and satisfaction by freeing HR and finance teams to focus on strategic projects.
Automate Your Taxes
The complexities of handling payroll taxes can significantly drain your time and money. Whether taking your payroll or outsourcing it to an accountant or bookkeeper, the process must run smoothly and correctly each pay period. Non-compliance can result in costly fines from the IRS and a host of labor law problems. Payroll software simplifies payroll management and ensures compliance with regulations.
To run payroll properly, you’ll need to collect information from each employee, such as their W-4, which indicates how much federal income tax they want you to withhold from their paychecks. Determining their deductions, allowances, and gross pay would be best. This information will be used to generate their checks, direct deposit forms, and the W-2s they receive at the end of the year, which list their yearly wages and the amount of tax withheld.
It’s a good idea to obtain a federal employer identification number (EIN) and establish a separate bank account for all business transactions before processing payroll. You’ll also need to register your business as an employer with your state and sign up for any applicable state electronic tax payment services. Depending on the complexity of your payroll, you may need to make these deposits semi-weekly or monthly.
Automate Your Timekeeping
Even if your small business has just one employee, it is essential to have a payroll process in place. This will ensure that your employee is paid accurately and on time and that proper deductions are withheld for taxes. Additionally, businesses must keep records of all payroll information for three years. This data can include wage and hour details, timesheets, tax records, and employee W-4 forms. Managing these records manually can be a significant task, especially when there are fluctuations in tax rates or new hires are added to the team.
Manual processes can also be prone to errors, like misentering work hours or forgetting to submit timesheets. These mistakes can lead to IRS penalties and labor law compliance issues. Automating your time tracking can eliminate these errors and save time and money.
When choosing a small business payroll service, select a solution for your company’s size and needs. Consider factors like the number of employees, pay frequency, and whether the product integrates with accounting software. Looking for HR add-ons like performance review guidance, employee onboarding tools, and benefit management features would be best.
Once you’ve found a small business payroll service that meets your criteria, ask for a demo and test-drive the software before signing a contract. NerdWallet’s ratings and reviews consider core features, cost, employee access, HR features, integrations, and customer support to help you make the best choice for your business.
Automate Your Payroll Reporting
A streamlined payroll process means you’re less likely to make common mistakes. Whether you’re new to business or have been running your company for years, a single payroll error can cost you dearly in lost profit and potential penalties from the IRS.
A standardized payroll process helps prevent these errors and ensures employees are paid on time. The IRS issues several billion dollars in payroll penalties every year, so it’s essential to have an intense, reliable small business payroll process in place.
Processing payroll requires time, energy, and attention to detail. You’ll need to obtain an EIN (employer identification number) for your business, collect the necessary legal paperwork (I-9s and W-4s), and determine employee pay rates and deductions. You’ll also need to regularly submit federal, state, and local tax deposits and file annual reports such as W-2s for each employee.
Once you’ve made your journal entries, it’s essential to match them up with the different payroll reports you’ve pulled so that you can see if there are any discrepancies. Choosing software that can post payroll to the general ledger will save you time and reduce the chances of errors, as it eliminates the need for manual data entry. Contact a business accounting expert if you’re still unsure about the best payroll automation solution for your company.