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Payroll processing can be one of the most frustrating tasks of running a small business. There are so many regulations to follow, especially if you have employees, that it’s easy to make mistakes that can end up costing you thousands of dollars in fines and more money in overtime pay.
Challenges of Payroll Processing
Payroll processing doesn’t have to be this difficult, though, which is why you should implement these simple solutions to help eliminate your payroll problems once and for all.
1) Calculating Salary and Wage Payments
When you run a small business, tracking employee payroll can be tedious and time-consuming. Most small businesses use automated payroll software to automate these processes and make sure workers get paid accurately and on time. Typically, these systems provide employees with an electronic paycheck that they can access online as soon as it’s ready. That way, they’ll always know how much money is available in their bank account—and won’t have to rely on paper checks or guesswork.
2) Managing Cash Flow
A confusing aspect of payroll processing is preparing year-end tax documentation. As a small business owner, you’ll most likely need an extra set of hands—or at least a spreadsheet and calculator—to get everything straightened out and ready to be filed. With some extra planning, your accounting manager will be able to complete your end-of-year reports in half the time with fewer errors than you could do on your own.
3) Preparing Year End Documentation
It’s all fun and games until you have to prepare payroll documentation at year-end. Depending on your business, there might be a myriad of forms you have to fill out – form W-2s, 1099s, and employee withholdings – that can quickly turn into a nightmare. Try using payroll software instead – they’ll take care of everything from Form 941 payments and Form 1099 annual filing requirements so you don’t have any hidden surprises at tax time. Another option is to simply automate as much as possible so it is easier for you or your team to handle.
4) Handling Variable Wages and Bonuses
One of the most basic and important elements in payroll processing is being compliant with labor laws. Before you begin processing payroll, you need to understand your state’s requirements for recordkeeping and taxes, whether or not you have a choice between the union and non-union employees, and what rules apply when firing employees. For example, in most states it is illegal to fire an employee without a good reason; if you terminate someone based on their race or gender, they could potentially sue you for discrimination. Being compliant will help keep your business running smoothly and provide peace of mind that your workers are all protected under the law.
5) Being Compliant
If you work in a small business, you might have your hands full just running your business day-to-day. But when it comes time to process payroll, you’ll need to pay close attention—at a minimum, federal and state tax laws apply. Plus, if you have employees in more than one state, they could be subjected to additional regulations from each location—and that can add up fast. The good news is that processing payroll is complicated only because it’s so important: The success of your business is directly tied to how well payroll gets handled.
Getting up-to-speed on payroll taxes can seem like a daunting task. But it doesn’t have to be so complicated. Remember, you don’t need any special knowledge or degree; what you do need is help getting started and staying on track, particularly if your business is just getting off the ground. With these simple solutions, your payroll service provider should be able to guide you through each aspect of paying employees correctly and filing all necessary forms with ease—and give you peace of mind that everything will get done right. Just keep asking questions until it all makes sense. And remember, always consult an expert if you are ever unsure about how to proceed with something like payroll processing for small businesses.