Top 8 Payroll Tips to Run a Small Business Successfully
Payroll management is an integral part of running a business. If you are a small business owner, you may lack the resources for a full-fledged finance team or expensive software applications. But it is more important than ever to stay on top of payroll and its associated tasks like filing your taxes, building a paystub online, and completing your paperwork.
Payroll Tips to Keep Small Businesses on Track
We have compiled a few tips that small businesses should heed to ensure streamlined payroll management. Adhering to these steps will also let you keep track of your taxes and maintain a productive workforce.
- Categorize your employees correctly
The two main categories you need to check are exempt and non-exempt employees. The Fair Labor Standard Act (FLSA) issues this classification. Exempt employees in your workforce are not eligible for minimum wages. They also do not receive overtime. Typically, such employees get their paychecks monthly (or based on another payment schedule) but not by the hour. On the other hand, non-exempt employees need to get overtime pay if they work for you for over 40 hours a week.
Small business owners frequently employ non-exempt employees, which makes this grouping important. If you have mis-categorized an employee, it is best to consult an employment attorney and fix the mistake. They can suggest the right course to rectify the payment issues that arose due to the erroneous classification.
- Develop a payroll calendar
Will you use a bi-weekly or monthly payment schedule? Some businesses opt for a bi-monthly system too. Developing a payment routine in advance helps you ensure that your employees get paid on time. It also makes it easier to account for overtime, hourly payment, etc. Assess the type of your employees, the industry you operate in, and your competitors’ choices to arrive at the optimal schedule.
Utilize the right financial software
It is sensible to use a free paystub maker to assist you with your payroll management throughout the year. The internet is rife with tools and applications to simplify the time-consuming task of payroll management. However, picking one that fits your budget and is tailored to your needs is crucial for business health. A digital tool like StubCheck.com helps you create professional checkstubs and distribute them to your employees while adhering to updated norms by state. It is also utterly straightforward to use, requiring you only to enter the personal and payment information of the employee. Then, you can allow the background calculator to do the grunt work.
Record all payments, overtime, etc.
Keeping track of all the paychecks you issue will come in handy when you need to file your taxes. Small businesses may work with many contractors and freelancers. It makes it crucial to record handwritten checks, voided checks, and overtime hours for employees who get paid by the hour. If you have the budget, you can consider using a timekeeping system for this.
- File your W-2 forms on time
Filing your taxes on time is, undoubtedly, a mandatory part of running a business. A salient component of this task is generating W-2 forms for your employees. While it is possible to get an extension on filing your income taxes, W-2 forms need to be sorted well in time. Not doing so comes with a considerable financial burden, especially for a small business. If a W-2 form is over a month late, you can be penalized up to $50. The fees become enormous if you willfully delay W-2 forms. They can exceed $500 and become a massive drain on your resources.
Appoint a payroll manager
Even for a small business, staying on top of payroll through the year can be arduous. It helps to appoint a dedicated payroll manager to oversee the primary functions. With a financial application or a paystub generator free, they can ensure that tasks like generating paystubs, filing W-2 forms, recording all checks, etc., are completed in time. If any team member has experience in business finance, accounting, HR, etc., you can entrust them with this task.
Establish a budget for payroll
While payroll management is imperative for any organization, big or small, it should not exceed a set budget. It is best to establish a budget at the beginning of the year to cover all the associated expenses. That way, you will be able to operate within your means even if the economy fluctuates, which it most certainly will!
Run a periodic compliance audit
Performing a periodic internal audit is an effective way to iron out any inconsistencies and identify potential problems in your payroll function. Running such an audit helps you examine compliance with tax laws and ferret out possible human errors. It also lowers the likelihood of payroll fraud – an unfortunate reality in many modern businesses.
Error-free payroll processing is vital for a healthy business. Inaccurate payments make employees disgruntled. They also invite penalties and fees that affect the cash flow of your organization. As your business grows, you can consider outsourcing payroll to a third-party provider. You can then minimize the time and effort you have to incur every month. Until then, following the above steps should keep your going smooth and your workforce pleased.