Managing the payroll correctly is really crucial for small and mid-sized businesses to keep the employees happy and productive. While benefits of self-managing payroll are galore, it’s a time-consuming function for business owners with a lot on their plate.
Monthly payroll processing, calculation of payroll statutory dues, preparation and distribution of employee pay slips and tax reports, PF, ESIC, and other payroll compliance – are just a few payroll activities that you need to manage in order to avoid IRS penalties and ensure employees are paid on time.
A lot of small and mid-sized companies, especially the ones that recently started operations, have no idea how to deal with payroll effectively and are looking for ways to do it better. In this blog, Finsmart will share 7 tips and ideas to take the hassle out of managing payroll in 2022.
Here are useful ideas to manage payroll more effectively:
#1 Stay organized
Getting organized is easy. Staying organized, however, requires discipline, particularly when you are trying to improve your payroll efficiency. Create a payroll calendar for payroll taxes, employees’ salaries, and everything else. You can either use software like Gusto or use a spreadsheet to create a calendar and set up your payment schedule.
This payroll management idea might seem pretty basic to some small and mid-sized business owners but when payroll processing documentation gets sequenced in an orderly fashion, tasks become much easier to execute in a short period of time. You will get reminders for approaching payroll deadlines and can easily focus on other business operations.
#2 Keep up with payroll procedures
Changes in business functions occur often and for several reasons. They can occur due to business relocation, employee relocation, or hiring new employees. Whatever the case, always keep abreast of the latest changes in order to calculate payroll and taxes accurately.
Why? Employers must keep track of inventory to forecast demands and prevent product and production shortages, right? Just like that, it is important to keep tabs on tax obligations and changes in reporting requirements.
This can help you avoid penalties and eventually give you a clear idea of what exactly affects deadlines by the tax bodies. This activity can also help small and mid-sized businesses in calculating and correcting accurate hours, wages, tax holdings, and other benefits.
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#3 Decide on right pay type
This is definitely one of the most important payroll management tips for small and mid-sized businesses based in the USA, UK, and other developed countries. Correct compensation is often a crucial factor for many employees when it comes to long-term employement. When you are hiring a new individual or thinking of starting a new business, you need to select the right pay type. Now, there are three major types of payment methods for employees:
- Hourly pay: As the name suggests, hourly pay is the amount of money you will pay to employees each hour they spend working for your business.
- Salary: Salary is a repetitive payment for employees working in a full-time position. In this payment method, they receive a fixed amount of money each month, depending on days worked.
- Salary non-exempt: This payment method is almost similar to the salary method. Meaning, your employees will get a fixed amount of salary every month but they will also get extra money while working overtime for your business.
Putting employees on salaries is highly recommended for small and mid-sized businesses. Not only are they easier to manage but they also take the stress out of guessing how much your employees should be paid each month. If hourly pay method works for you better, create a sheet for keeping track of time and compensation.
Note: Businesses based in India can’t skip this one since salary is the accepted mode of payment.
#4 Automate payroll process
With a limited HR and payroll managing staff, payroll processing can sometimes become more of a challenge than a business function. It can cost you a lot of time and money when done manually. Not to mention, your business becomes vulnerable to mistakes that can result in inexorable penalties.
This is especially true for those small and mid-sized businesses that have a rapidly growing work staff. How about automating your payroll managing process? Instead of manual data entry and payroll calculations, using an automation technology can help you in:
- Saving time with fewer manual payroll managing processes
- Reducing payroll errors
- Enhancing the accessibility of payroll records
- Keeping sensitive payroll data secure
- Providing employees with self-service operations
Long story short, using automated technology will help SMBs streamline the payroll managing processes and credit accurate employee pay.
#5 Be transparent
Dalai Lama once said, “Lack of transparency results in distrust and a deep sense of insecurity.” He was 100% right! Payroll problems in small and mid-sized businesses often emerge because of the misconception about the payroll managing system. Some popular reasons are inadequate presentation or lack of accessibility of the company’s pay policies to employees.
Almost half of payroll problems in SMBs including underpaid taxes and employee misclassifications can be rectified by introducing a transparent payroll policy. Yes, you read it right!
While creating a transparent payroll policy, answer important questions like:
- How does the payroll process function in the company?
- How salaries for employees are planned?
- What are employee reporting responsibilities?
- What procedures does the organization follow for handling payroll mistakes?
- How exactly are wages, appraisals, and promotions calculated?
After writing and answering important questions, put the payroll managing and processing policy in writing. Provide each employee a copy of it. Also, update the payroll manual accordingly and make timely changes.
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#6 Audit payroll process
Some of our readers might be wondering, “We have recruited experts and are using the right tech. Why should we audit the payroll process?” Okay, we understand that but it is also not unusual to hear occasional complaints about payroll computations, regardless of who performs them.
Getting a complaint or two in an year is okay. However, frequent occurrences clearly suggests the need for regular inspection of the payroll managing process. Auditing is a must for small and mid-sized businesses that are using manual timesheets as they are more likely to be in the line of fire.
While auditing the payroll process, make certain to:
- Verify and reconcile the accounting, payroll, and cash documentation to confirm that monetary values match across all records
- Install a check-in system to automatically note the times an employee logs in and logs out for office work
- Test plugins or add-ons to ensure that payroll software is properly amalgamated with the company’s time and attendance system
Revise your payroll policies for more accuracy and clarity in case your employees face difficulties in complying with current payroll managing and processing policies.
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#7 Turn to payroll managing experts
Not all SMBs are okay with payroll software. While some find it too complex, others can’t deploy it because of a low budget. But that doesn’t mean you are out of cards. Outsourcing to accounting and payroll management experts is still a profitable option.
Outsourced accounting and payroll experts like Finsmart will operate as your in-house accounting team for payroll and tax purposes. Our team of experts manage timekeeping, accounting, payroll, and compliance for businesses across the globe and enable timely financial MIS to the management.
By combining AI-powered tech with human judgement, Finsmart gives businesses quick and easy access to reporting. The same can makes payroll management hassle-free and transparent.
Managing Payroll for Businesses: Final Words
Above are useful tips and tricks for managing payroll for your small or mid-sized business. Always keep in mind that delivering employee paychecks accurately and in a timely manner represents how professional your organization is and will help you attract talented employees and reduce turnover.
Although managing payroll isn’t going to be an easy task, we are certain that after considering the aforementioned tips and with patience, you will be able to streamline and simplify your accounting and payroll management tasks.
Got any queries to ask? Send them to firstname.lastname@example.org and have them answered by our accounting and payroll experts.
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Shalaka Joshi is the founder of Finsmart Accounting and operates in the capacity of Director. A Chartered Accountant passionate about outsourcing and problem-solving, Shalaka has more than 20 years of experience in the field of accounting, payroll and MIS reports.