10 Tips to Manage Payrolls for Small Businesses

Payroll management is one of the most important tasks for every business, regardless of how big or small. However, managing payrolls for small businesses is the more confusing, time-taking and tedious business procedure. Therefore, we have put together 10 tips to manage payrolls for small businesses. These handy tips will help you to convert this monotonous activity into an accurate and hassle-free aspect of your business.

Despite the fact that payroll management is a difficult and time-consuming process but it has a key significance in the business. Even a small error can result in huge troubles, so payroll management requires a lot of time and concentration. As it involves employee wages, hence the problems in the processing may lead to decreased employee morale and tie up the company’s crucial resources.

Here are 10 tips to make payroll management easier and improve to run the process efficiently and successfully.

10 Tips to Manage Payrolls for Small Businesses

Have a Clear Payroll Policy:

First and foremost thing to do is to know all labour laws. Stay up to date and abide by all laws. According to the legislation make a clear payroll policy to ensure a comprehensive payroll generation and calculate total expected remuneration. The process of creating a policy of payrolls for small businesses involve deciding on pay frequency and salary status.

Paying frequency means to set a schedule of when and how often you are going to pay your employees. The most used pay frequencies are weekly, by-weekly or monthly. You must ensure that you are not violating the local minimum payday laws. Choose the schedule that suits your business type the most and stay consistent to pay on decided time.

Salary status of how the salaries are enumerated. This means you have to pick whether you are computing the wages on an hourly rate or a fixed salary. Again this entirely depends on your business needs and employee’s designation.

Set up a Payroll System:

A payroll system, no matter it is manual, outsourced or automated, it will aid you a lot in calculating and managing the employees’ paychecks. As mentioned there are generally three kinds of systems for payroll management.

• Manual: Usually small businesses like to do payroll manually. The main reason is to save on cost but undoubtedly manual payroll is tedious and time-consuming and more prone to errors.
• Outsourced: If you have money then hiring an expert is a wise decision. A competent person with appropriate skills can take care of everything from processing paychecks to tax deposits (payroll taxes, employment taxes etc).
• Software: Automated payroll system is cost-effective as well as time-saving. Most importantly they are accurate and there is no need of double-checking. They have comprehensive features such as information storage, payroll tax calculation etc.

Classify your Employees:

It is necessary to make categories for your employees. Because you will have to pay taxes for your employees but for independent contractors, you don’t need to pay taxes. With employees, you are required to follow the minimum wage law and pay overtime if needed. On the other hand, an independent contractor is responsible for their own tax payments. Every state has its own specific rules, first, check with your local state laws and then follow accordingly.

Transfer payments directly to Bank Accounts:

Use of payment systems to transfer funds directly to your employees’ bank account can save you a lot of time. It is convenient for the employees too to receive payments this way. This method is certainly simpler than going to the bank or issuing cheques.

Choose Paperless Payroll Management:

Going paperless not only saves time but also trees. Therefore, invest in genuine payroll software that suits your business type best. The right software provides help in calculating employee tax deductions and social program payments. Payroll management software also allows you to integrate with time tracking, attendance and other vital metrics software.

Among numerous options most commonly recommended payroll management software is cloud-based. When you subscribe to software as a service it’s usually cheap and accessible from anywhere. Some examples include QBO Payroll and Wagepoint. Choose the one that is best suited to your business needs.

Get a Time-Tracking App or Software:

A time-keeping application is the best way to track your employees’ performance with real-time data of their punctuality and attendance in the workplace. Pick a time-tracking application that easily synchronizes with your payroll software. This way you can calculate the wages easily especially when you are paying on an hourly rate. The application should be easy to use but difficult to manipulate.

Dedicate time to process the Payrolls:

Make sure to have sufficient time in hand each month to generate payrolls and complete the process effectively. This will save you from rushing at the final hours and help you avoid the chances of miscalculations. No one wants to upset the employees so set a cut-off period to provide their salaries on the promised dates.

Decide on your Payroll Budget:

Budgeting is a critical aspect of payroll planning. Make sure to add social security, medicare, and employment taxes in the budget along with taxes and wages to be paid. It is important to plan expenses ahead of time, it will resolve issues in the long run.

Most of the small business owners think that payroll expenses are fixed but it is not the case. Appropriate tracking and budgeting are necessary because there are overtimes, bonuses, commissions and other various variables to consider. All these factors affect the cost of payroll directly. Creating a payroll budget and comparing it to actual every month gives you insight into the possible cutbacks. These cutbacks can be spent on the growth of your business.

Hire a Payroll Manager:

The most reliable and easy way to manage the complication process of payroll is to hire a professional payroll manager. When your small business starts to grow, then it becomes a tedious task to carry out the processes of payroll.

It is a smart choice to invest in a professional capable of handling payroll better and faster than yourself. In case your business budget does not allow you to hire a payroll manager than simply opt for a freelancer. You can hand over the responsibility to one of our trusted employees with relevant education and skills.

Consider Outsourcing:

If you are short of time and team to handle the payroll then the best advice is to outsource the process. As it is not only complicated and time-consuming but if errors happen they also result in far-reaching implications. These may also cause non-compliance with the labour and state law as well as employee disappointments. Therefore, a small business should save themselves from this added trouble by just considering outsourcing.

Communication is Vital:

You must always ask for feedback from your staff and employees regarding the payroll process. The suggestions will help you to take decisions on the steps you can take to improve the process. Communications are always the key to enhance the company processes and increase the effectivity of overall business activities.

Conclusion

Most of the small businesses consider payroll as the worst aspect of the job. However, if you keep the above handy tips in mind then it becomes easier to pay the employees accurately.

We know that managing payroll is not everyone’s cup of tea as it is a confusing and cumbersome topic. Therefore, the most ideal way is to outsource the payroll process.

At centrosome Inc., we provide expert-level services to provide accurate payroll on the promised time. We are based in Ottawa, Canada, and help small businesses with bookkeeping in Canada and the United States.

Let us take the responsibility of your workload and stress and spare yourself for many other portions of your business. We assure you the updated payroll procedures and tax laws. We are here to help you meet the state law compliance requirements efficiently.

To learn more about the services we offer at Centrosome Inc. Please click here, or read what our clients are saying about us, read our about us page here. If you have any questions about how we can help you, contact us.