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Small Businesses: How to Handle Payrolls Like a Boss

Alyssa Williams is a finance expert and a freelance writer from Los Angeles, California.

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A well-planned and organized approach that complies with the IRS is all you need to untangle the complexities of a payroll system.

For a moment, imagine how would a payroll mistake impact an employee whose salary is the only source of income. Such errors could bring the employees' morale down and eventually take a toll on the business productivity.

Payroll Compliance with Laws

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Ensure all the payroll documents comply with the IRS standards(if you are in the US), and your business has an Employer Identification Number(EIN).

Please visit IRS's website for more information on the compliance laws; this would help your business be safe from a penalty by the IRS.

Classify Your Employees

The second step of organizing the payroll system is to classify the employee's documents according to their tax information. Meaning, all your employees need to fill out a W-4 and an I-9. W-4 form will let IRS deduct the right amount of tax from your employees, and I-9 will verify the identity and employment authorization of employees for both the citizens and non-citizens of the United States.

You will have to ask your employees hired on contract and freelancers to fill out 1099s. Know that 1099s have different rules to prepare and submit to the IRS. Please visit IRS's website for more details.

Schedule and Calculate

Decide the Pay schedule or pay frequency by assessing the nature of the work and cash flow of the business. The frequency of the payroll could be weekly, bi-weekly or monthly. The payroll must be on time and consistent to help you maintain a good relationship with the employees. Make sure the salary or hourly rate of the employees abide by the rules of the minimum wage laid down by the government.

Gross Pay

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Calculate the gross pay by multiplying work hours by the employee's hourly rate.

A spreadsheet will help you track the work hours, and a formula applied on a separate column to multiply it by hourly rate will tell you the exact gross pay. If the employee is on a monthly salary, then keep a separate spreadsheet that calculates payroll based on the number of days the individual has worked.

Deduction and Allowances

According to the tax preferences mentioned by the employees on relevant forms, you can calculate the amount that needs to be deducted from their salary.

A W-4 form will tell you the allowances that the employees have opted for, and accordingly, you can calculate the amount that needs to be dedicated to it.

Calculate Net Pay

After determining the deductions and allowances, subtract them from gross pay to calculate net pay. Net pay is the amount you need to deposit in the employees' account.

Make a Payroll Calendar

Keeping your employees informed about payroll dates would answer many questions, eliminate anxiety about the payroll date, and help them plan accordingly. A payroll calendar can also help the human resources staff plan and execute payroll.

Payroll software like QuickBooks automatically creates a payroll calendar and helps you set up a payment schedule; you can also use a spreadsheet for tracking. For employees who prefer checks, sign up for a free account with OnlineCheckWriter integrated with Quickbooks, which will let you print checks on a blank paper.

Mark the Deadlines

Mark the accounting deadlines and returns in the calendar or notes to make the payroll process more manageable and save yourself from last-minute hassle.

A system to notify the deadlines will help you avoid penalties.

Automate the Process

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An intelligent solution is all you need to run a complicated process smoothly. Consider incorporating apt payroll processing software for your business. An automated system can operate and process payrolls significantly less time without errors.

Automated software can help you handle payrolls for a large number of employees with limited payroll staff.

Pay your employees by their preferred method, try to understand their needs, and opt for the method that costs you the least. Checks, direct deposits, and payroll cards are the common forms of payment.

Maintain a Record

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Maintaining a record will help you clear any employee's net pay discrepancies. An organized record of payroll will also help you with audits and taxes. Any mistakes can be easily tracked down and corrected.

Consider a cloud-based system to access the payroll data anytime, and from anywhere you need.

Closing Words

Having a well-organized payroll system will simplify the process and ensure timely payment of the salary. Your employees will trust you more, spread the good word about your organization, and give you a positive outlook.

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