Small businesses enjoy a certain level of innovativeness and agility that large organizations require help to attain. However, there are still unique challenges affecting small businesses. The main one is accountants payroll processing.
While some accountants payroll management services provide bespoke solutions, many small businesses find their costs out of reach. However, there’s no alternative to managing your company’s payroll process as it’s mandatory for:
- Business profitability
- Employee satisfaction
- Legal compliance
That is why this comprehensive guide on payroll management for small businesses was created to help ensure the sustainability and growth of your business.
Three Accountants Payroll Management Options Available
Before you can learn how to set up and manage your payroll process, it’s vital to note that you do not have to do it yourself. All payroll processing options available for you fall into three primary categories, including:
Use a Payroll Service Provider
Do you need a more reliable and convenient way to manage payroll than doing it yourself? Partner with a reliable payroll service provider. This technique is also affordable than hiring an accountant. It offers all these benefits, especially when integrated with an all-in-one HR information system. This system can:
- Collect and distribute the required benefit and tax forms
- Host tax reporting documentation
- Track time and attendance
- Automate the payroll process, reducing errors
You need extensive training to use the services of a payroll service provider. Also, you need to add this training to your staff’s responsibilities. While it minimizes errors, streamlining your payroll process using a payroll service provider will cost more compared to running it yourself.
Hire a Payroll Accountant
Another popular option for managing payroll is hiring an accountant. This comes second after a payroll service provider. Your accountants can be either in-house or outsourced. A committed expert can take a hands-on approach to operating your payroll process. This ensures compliance and accuracy. Also, they can serve as valuable payroll consultants.
However, this option can be costly. This is especially true when compared to using a payroll service provider. You need to consider the expenses associated with:
- Recruiting
- Onboarding
- Training
Also, a payroll service provider has professionals. These professionals can handle your payroll process accurately and efficiently.
Doing Payroll Yourself
Some small businesses decide to manage payroll themselves. This can be straightforward to manage, especially for small businesses with a manageable workforce. If your workforce is small, this option can be the most affordable. Also, it offers the perfect way to deeply understand the cash flow and finances of your business in the initial stages of expansion.
However, this option comes with a risk of errors. On top of that, it takes considerably more time. You can use Google Sheets or Excel to make your process more efficient. However, doing it yourself still needs collecting all the inputs and ensuring all of your computations are accurate.
You need to remember that your business will not remain the same in the future. As it grows, doing payroll yourself may become less viable. The number of workers you need to manage and the operations will make your payroll process more complex. This is the point where outsourcing your payroll becomes important.
Five Steps to Run Payroll
The option you choose doesn’t matter. You’ll need to go through these five steps to manage your payroll effectively. That means you can outsource these steps to an accountant or a payroll service provider.
- Calculate gross pay and hours: Depending on job duties and income, workers are categorized as non-exempt or exempt. Exempt employees are salaried, and to obtain their gross pay, you simply need to divide their yearly salary by the number of pay periods. The other category includes non-exempt workers. These workers are paid per hour. In order to obtain their gross pay, you need to multiply the number of hours worked by their respective hourly rates.
- Deduct benefits and withhold taxes: The real challenge of running payroll successfully comes into play at this point. Deductions and withholdings are different. Benefits are deducted. Taxes are withheld. You need to deduct things like insurance premiums, health plans, and other contributions. Also, pre-tax deductions are obtained. After that, calculate the total amount of tax. Once you calculate this amount, withhold it from your workers’ paycheck.
- Pay workers: Have you withheld taxes and deducted benefits from gross pay? You are left with an employee’s net pay. This is also known as take-home pay. It is the amount that your workers will take home. Remember that you need to provide your workers with documentation detailing how you calculated their pay rate, hours, withholdings, and deductions.
- Pay and file taxes: You have the responsibility to pay those taxes from your workers’ paychecks. It’s your responsibility to deposit payroll taxes. You can deposit them either weekly or monthly.
- Maintain and retain records: Labor and employment law requires workers to maintain organized and accurate payroll records. A minimum of four years is recommended when it comes keeping these records for tax purposes.
Payroll processing is an important function of your company even if you concentrate on more strategic objectives. It’s your responsibility to pay workers well. They must receive their payments correctly and timely in order to protect your company’s reputation.
