Processing payroll for your employees can be challenging for any small business. It only impacts the administrative department of your company. But it can also come with legal and financial implications. Payroll processing can become more complex and time-consuming due to compliance issues, employee regulations, and tax changes.
Any accounting department needs to approach payroll data accurately and timely to avoid overpayments or underpayments. It’s crucial that your team, especially the accounting and human resource departments, knows how to analyze sensitive data properly. Inaccuracy and misclassification can put your entire business at significant risk. Continue reading to learn how you can process payroll in an accurate and timely manner.
1. Ensure Employee Data Is Accurate
No matter how careful your HR is with the employee onboarding process, errors can still creep in. This is even more likely to happen if you’re rushing to hire highly qualified talent or you’re managing the process yourself. Errors may also occur when the new hire fails to complete the correct forms or your department doesn’t have time to countercheck them. These errors can impact the employee’s classification, which can also affect tax deductions and pensions. So before you start the payroll process, always confirm if you have the correct employee data, from the personal details to the tax codes.
2. Create a Payroll Process Checklist
You need to have an organized process if you don’t want to waste time preparing the payroll. You can do that by creating a payroll process checklist. Your checklist should include all the critical steps, and it must be detailed. Having one to follow can reduce errors when running the payments. Some steps to involve in the checklist are collecting attendance and time information, reviewing employee hours, calculating withholding taxes, paying via check or direct deposit, and giving out pay stubs to everyone. Tailor the list based on your own company’s process and policies. Once you’ve completed the checklist, review it from time to time and see what adjustments you’ve made.
3. Outsource Payroll Duties
On average, a company can spend several hours doing payroll tasks. If the work takes too much valuable time, other crucial duties in your business might be getting left out. To ease the work, you can consider outsourcing payroll duties from a qualified company. There are plenty of payroll service firms available that can complete those tasks accurately and timely. You don’t have to spend hours checking employee hours, managing taxes, or getting accurate payroll reports every month.
Keep in mind that you still need to communicate with your payroll service provider now and then. This ensures that there aren’t oversights or mistakes. If your budget permits it, leave the payroll tasks to capable experts. As for you, you can focus more on the other essential parts of your business, like product development or customer service.
4. Streamline Payment Methods
Believe it or not, there are still businesses that use checks. Regardless if you’re a small or big business, it’s best to opt for alternative payment methods. Instead of using bank checks, you can choose to pay your employees via direct deposit, mobile wallets, pay cards, or cash. Reevaluating your payment method is a crucial step in improving a slow, inaccurate payroll process. Switching to methods like mobile wallets or direct deposits enables you to process the payments faster. Plus, you don’t have to spend time and money printing and distributing checks. Don’t forget to look into the state laws that regulate each payment method before switching.
5. Keep Your Records Organized
The last thing you want to have is spending precious time looking for an employee’s document. That’s why organizing your employee and payroll records is necessary. You can go paper or digital, whatever suits your process. Just make sure all files are properly labeled and stored. If you’re using paper storage, invest in enough folders and cabinets for easy sorting. You can invest in an external hard drive or a cloud storage solution if you’re going digital. Ideally, your accounting and HR departments should keep employment tax records for no more than four years and payroll documents for around three years.
Prioritizing accurate and timely payroll isn’t only crucial for avoiding late payments for your employees. It also enables your business to minimize the risk of tax penalties and additional work on your end to address this issue. You’re not only saving time but also lowering processing costs and reducing subsequent downtime. Prioritize your payroll preparation starting now and seek outside assistance if and when necessary.