Payroll can be one of the most stressful parts of having your own small business, and calculating it correctly often proves to be a real challenge. After all, you’re an expert in entrepreneurship, not in keeping careful track of the various tax and labor laws that apply to each of the people that you employ. However, when it comes to the payroll there are no excuses, and the last thing you want as an owner of a small business is to make a mistake paying the team that works hard to keep your business up and running.
Whether you employ just one single worker or have a larger staff, setting an accurate and reliable payroll system is definitely worth your time and effort, as it can prevent serious issues that you might otherwise face. There are regulations and requirements, forms to fill out, and complicated tax laws. It all might sound quite overwhelming at first, but there’s no need to worry. With the right tools, such as a paystub maker, payroll for your business might end up being less endeavoring than you might initially think. Read the article below and learn how to tackle your payroll so you can put your worries aside and prioritize running your business.
Setting up Payroll
One of the most challenging aspects of a payroll system is understanding all the various rules and regulations that apply. If you’re a small business owner and you’re just starting out or don’t have much experience in this matter, it’s understandable if you feel overwhelmed by the prospect of having to take care of payrolls. Big projects are easier to manage when you break them down into smaller tasks and steps and this rule applies to setting up payroll for your small business as well.
Options for Processing Payroll
A fundamental decision that you’ll have to make in the very beginning is deciding who exactly will handle your payroll and how the work will be done. You’re facing three main options: you can do it yourself using a pen and paper, hire an accountant, or get special software that will make things easier and more efficient.
Doing it Yourself
Doing it yourself probably sounds like the easiest route that you can take and it even seems to be the cheapest. However, when you take into account the hidden costs that might catch up to you, you might want to think twice. It not only requires plenty of time and energy that you’d certainly prefer to put into running your business, but if you’re a novice and don’t have the necessary experience or appropriate knowledge, you might make mistakes that can put you in legal trouble or cause dissatisfaction among your employees. Doing things on your own makes sense only if you run the smallest and simplest business possible or your budget won’t allow you to consider anything else.
Hiring an Accountant
An accountant can provide you with knowledge and experience that you might lack. This solution would work well for organizations that face complicated payroll issues or small business owners who want someone to take care of their payroll so they have one less thing to worry about. However, it’s crucial to keep in mind that the services of a professional accountant might be quite costly.
Payroll software is usually affordable and easy to use - for these reasons, more and more small business owners decide to choose it over other available options. There are many services to choose from and their software quality varies, so it’s important that you shop carefully and keep your budget that you can dedicate to it in mind.
Setting up Necessary Accounts
Payroll for small businesses takes more than just a bank account that you can pay your employees from. Other accounts that you will need to set up your payroll include Employer Identification Number (EIN) and Electronic Federal Tax Payment System account (EFTPS). It’s also in a good sense to check with a financial professional to see whether there are any additional requirements that could apply to your industry or location.
Gathering Employee Information
Once you’ve got your business accounts set up and ready to go, you’ll need some details from each of your contractors and employees. They include:
- Full name and address,
- Social Security number,
- Employee tax withholding information,
- Whether their earnings are subject to garnishment (a process when money is legally withheld from a person’s paycheck and sent to another party, such as when collecting a debt),
- Information on employee benefits which they have chosen that require withholding,
- Direct deposit bank account information.
As a small business owner, you will also have to determine if your employees are exempt or nonexempt from getting paid overtime wages. You can’t decide it yourself because there are strict legal criteria that regulate it.
The next step is choosing your payroll schedule. Because payday is something that each employee looks forward to, you’ll need to choose how often it’s going to happen in your business. There are four most popular options: you can pay them weekly, biweekly, twice a month, or monthly.
To figure out which schedule will work best for your company, first think about your estimated cash flow or consider how your employees would like to be paid. Keep in mind that some states have certain restrictions that apply to pay periods and pay dates, so you should also check with your state labor agency before making any final decisions.
Each person that works for you expects to be fairly compensated for their time and effort. That’s why you need to take payroll seriously so you can keep your promises. By paying your employees on time and making sure that everything’s working as it should be, you’ll show them that you respect their work and care about them.
For small businesses, payroll can take a lot of effort, but once you set up everything and decide on the proper way of managing it, it will become a lot easier and start to feel like a routine. Take things one step at a time, break the big and overwhelming tasks into a few smaller ones and soon you’ll see the effects of your effort.