Nobody enjoys the payroll process, and if you have a startup business you might not be completely clear on how everything works — there’s a lot to think about.
How does payroll work? It’s a question you’ve probably asked yourself before, but that’s why we’re here! If you’re looking for payroll advice, keep reading on to find out our five key tips below.
1. Set Up a System
You’ll need a payroll system. There are three broad options to choose from, and each one will suit different businesses.
Some businesses still operate with a manual system, but this can take up a lot of valuable time, and you’re more likely to see errors too. As a result, there’s plenty of software out there which you can use instead — it’s a lot easier and more accurate than doing it by hand, but is still a fairly inexpensive option.
Alternatively, you can use payroll services, outsourcing the task. It saves you a job, as they’ll take care of everything — you can sit back and get on with other pressing tasks.
2. Pay Frequency and Wage Status
These are two things you’ll need to make a decision on.
When, and how often, do you pay your employees? You’ll need to ensure that you’re complying with regulations, but most businesses will pay weekly, bi-weekly, or monthly. All three are commonplace, but once you decide on one, you should stick with it and be consistent.
Wage status refers to whether you pay an hourly wage or a salary. This is likely to depend on both the needs of your business and the position of the employee.
3. Prepare All Documents
Make sure that all payroll tax documents are ready — it’s likely to be your responsibility.
These generally include income tax, unemployment, social security, and similar, but it can depend on your local area. You’ll also need to round up and report the payroll taxes that are withheld from employees, and paid by the employer over the year.
4. Ensure Accuracy
Through minor data entry mistakes, small business owners can be hundreds of dollars out of pocket each year. Even when using automated software, complete accuracy cannot be guaranteed — even just a misspelled name can pose an issue.
Everything should be reviewed, ideally with an accountant, and you should double-check with employees too before everything’s sent off. This can save you more money than you might think.
5. Be Aware of Write-Offs
When you’ve got the figures for how much you’ve paid out in payroll taxes and wages across the year, you may be able to qualify for various tax deductions.
You’re generally able to write off wages, employer contributors, bonuses, commissions, cash awards, travel expenses, and more, so it’s definitely worth looking at what you’re eligible for.
Our Payroll Advice
These are our five key pieces of payroll advice, and they should help you with the process. There’s a lot more than we could include here, but our tips should offer a valuable starting point for your startup business.
If you’re looking for more business and finance advice, check out our other posts.