Running payroll always seems to be trickier than it should be. Whether it’s not having accurate data on time, dealing with too many sources for reporting, or not being aware of salary changes, something always seems to come up! We feel your pain, and that’s why we’ve made a short 5 step plan to make payroll easier for you and your business.
1. Have a recurring checklist you follow each pay period
This might seem like overkill for an internal payroll job, but your life will be so much easier if you break up payroll into separate components. This is an example of a payroll checklist for a company that has multiple different locations but only one processing source:
This is just one example, but it is easy to see how there are many cracks for information to slip through if you are not meticulous with your process. Also, having a written checklist allows for someone to fill in for your processor in a pinch, and is highly beneficial for training future employees!
2. Don’t procrastinate
Given the amount of potential problems that can delay payroll, it is highly advisable to start tabulating and prepping for it as soon as all the information for the pay period is available. Work is universally sloppier under time pressure, and attention to detail is key in preventing payroll errors.
There are also unforeseen circumstances that might need time to develop. Bank errors or mistakes in available funding, software or internet issues preventing immediate submission, or network failure that damage your records are all plausible. Studies have shown that 54 percent of employees have experienced paycheck errors. This is extremely damaging, especially for those depending on their paychecks for immediate funding to pay bills.
Thus, in order to keep everyone satisfied, don’t put off the legwork of payroll.
3. Keep accurate records by pay period
Many payroll software options can generate custom reports, but they are often clunky and not useful for practical requests. Especially in a small business setting, you’ll have employees who need proof of employment for housing applications, or people who will ask for a new pay check because theirs was damaged or lost. Basically, don’t count on your first time through to cover all the bases.
Additionally, if you are ever subject to surprise audits, having certain pay periods already compartmentalized looks extremely professional, and will alleviate stress from the situation. For a subject as sensitive as the disbursement of money, it is important to be on top of your game. It can even save you from having to pay fines and penalties- The IRS estimates that 40 percent of small-to-medium businesses pay fines for payroll penalties. Some of these can be avoided with well-kept records in order to verify information or provide evidence of good faith, which will sometimes allow penalties to be waived.
4. Utilize Proper Software and Train Specifically for it
Running payroll is not a new concept, but there are tools that have helped make it easier. As laws evolve and situations dictate more flexibility in payroll processing (such as remote work being more prevalent), it is important to work in a payroll software that will help you keep up with the times.
Make sure that whatever software you are using is calibrated for your business size, pay structure, and has proper support in the event of error. You should be able to automate most of your process, including disbursement of checks and pay stubs, as well as reminders for filing taxes.
Another key component of using this strategy for in-house payroll is having a training manual for your primary payroll processor. This way, they will have no problem navigating any new scenarios or regulations they might encounter, and most importantly, they can pass the knowledge on to their successor.
5. Outsource Your Payroll
The simplest tool available for making your organization better at payroll is also often the most cost effective. When you elect to outsource payroll, it can dramatically reduce structural stress between your HR and Finance teams. It also creates a second line of accountability, as your organization will still be aggregating the information, but will have the careful watch of a professional third party looking for inconsistencies and outliers.
Too often, small businesses are not able to fully quantify their costs in terms of time and resources for running payroll internally. Those questions go away when outsourcing payroll to qualified professionals. It becomes much easier to crunch numbers on how much payroll costs, and you also get the benefit of having a wealth of knowledge from a group whose job is to run payroll over and over.
There is not a one-size-fits-all plan for payroll, but you should do your best to properly evaluate your organization and its needs. Small tweaks to your payroll plan can make life easier for you, your processor, and even your employees.
In general, we recommend going with the most efficient and least stressful option, which is often outsourcing payroll. Paytech is available to consult with your business about any of your payroll needs, and we want to help you make the right choice. Please reach out if you have any questions about our payroll services for small business, and one of our experts will give you their full attention.