How to Manage Payroll for Your Small Business

This means that it is essential that you have an effective payroll management system in place, and you understand your obligations as an employer. This content is for information purposes only and should not be considered legal, accounting, or tax advice, or a substitute for obtaining such advice specific to your business. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. Intuit Inc. does not have any responsibility for updating or revising any information presented herein.

The application is free and you can access it online, by mail, or by phone. Make sure that learning how to manage payroll is at the top of your list for things to do well. By developing a payroll strategy that supports your culture, you’re guaranteed to stay on top of payroll tasks all the time. Ensure any pay differences between employees performing similar jobs are based on factors other than gender, such as experience, education, or performance. Keeping detailed records of these factors can help you demonstrate your compliance in case of an audit or lawsuit. If one or two payroll processors are having problems processing payroll in a timely manner, consider reallocating their payroll duties.

1. Or if you’d rather, you can work with a payroll company instead of an individual CPA.
2. Payroll software will generally flag some potential inaccuracies automatically, but other mistakes may be subtle and harder to catch.
3. That way, you can build a happy and productive workforce and avoid costly non-compliance penalties that can damage your business.
4. Maintain accurate and organized payroll records, including time cards, pay stubs, tax forms, and documentation of any deductions.
5. Plus, you need to keep up with evolving tax and wage laws to make sure you are compliant with local, state, and federal employment laws.

Document Your Payroll Process

Costs range from $40 per month and up plus additional fees per employee. Many companies will require you to contact them for a quote, as they will tailor their services costing methods and important costing terms for your unique needs. Employees can be paid based on a salary or hourly based on a time sheet. Salaried employees will get the same payment each pay period and generally don’t need to track hours. Review time sheets and compare them to employee schedules, checking for errors.

Step 7: Correct mistakes and pay payroll taxes

Establish any benefits programs that you will offer independent contractor vs employee employees, such as retirement plans or health insurance. You’ll need to account for these deductions when processing payroll and send money to the correct benefits program. The biggest advantage of contracting a PEO is that it can save you time and help you stay compliant.

That way, you are protected against unauthorized access, ensuring compliance and saving you both time and space. While there are specific federal tax deposit deadlines, they are generally influenced by Form 941. This form is an IRS document employers must use to report the income, medicare, and social security taxes they withheld from their staff’s paychecks. Payroll software, like QuickBooks payroll, is designed to accurately calculate the amount you owe each employee and the government. Business owners that choose to do manual payroll should ensure that employees accurately document the time they work.

Step 6: Calculate net pay and run payroll

Payroll software can automatically calculate pay and deductions, create paystubs and generate reports for the IRS. If you pay by the hour, you can get employees to clock in and out of shifts on their phone and set up the app so the data flows into an online timesheet. Start by ensuring employees know how to update their information, whether via an employee portal or paper form. If your software features an employee accounting study guide by accountinginfo com portal, you’ll likely be notified of the change automatically. However, if employees hand you a printed form, you’ll need to manually update the records.

Payroll software also makes it easier to ensure accuracy with each and every paycheck, which is essential for legal and fiscal compliance. Encouraging your employees to opt for direct deposit can also make your payroll process more efficient. With direct deposit, wages are transferred electronically into each employee’s bank account. This eliminates the need for paper checks, making the process faster, more secure, and environmentally friendly.

In other words, the impact that payroll expenses will have on your business’s finances. This is imperative as you need to make sure you have access to enough money to pay your employees in full and on time. This means that it’s vital that you or your payroll manager design an effective payroll management system, and use the right payroll software to manage the entire process. Setting up direct deposit payments that go directly to employees’ bank accounts, instead of sending paper checks, is the first step to improving your payroll processes in 2024. If you want to elevate your workers’ payment experience further, or if you have a global team that includes independent contractors, you may be looking for more flexible solutions. You may opt to use payroll software or service if you are looking to save time or if you’re concerned about the number of regulations that are involved with the payroll management process.

Calculate and Withhold Income Taxes

Messy, incomplete, or missing payroll records are unacceptable to the IRS. Hiring a payroll company or accountant is generally the most expensive method, but professionals can be more flexible with your unique needs and can offer advice. It’s also a good idea to utilize these programs if you need to comply with several regulations, you need to save time on payroll, or you want to speed up the process. This is great for hourly employees because it makes it easier to account for the overtime from the week prior. Traditionally, the role falls on accounts payable or human resources, depending on the business’s size. In some cases, the HR department enters employee information and finance or accounts payable runs the numbers and pays workers.