9 Tips for Managing Payroll for Small Businesses

Payroll tracks employee time, calculates their pay, and withholds and makes tax payments. This process requires careful attention to detail to ensure accuracy.

As a small business owner, you may not have the time or resources to dedicate to managing payroll. However, payroll is a critical function of any business and must be managed effectively to ensure compliance with laws and regulations.

Here are nine tips for managing payroll for small businesses:

1. Understand Your Business' Cash Flows

A payroll budget estimates how much it will cost to pay employees in a given period. The budget should include the cost of an employee's base pay and an estimate for taxes, benefits, and other payroll fees. A business should add at least 20 percent to an employee's base pay to account for these additional costs. Creating a payroll budget can help a business manage its finances and ensure that it has enough cash to pay employees on time.

2. Familiarize Yourself with Labor Laws

It's important to know the labor laws that apply to your business on a federal, state, and local level and to stay up-to-date on any changes. Not following the rules can result in serious consequences.

3. Know Your IRS Tax Obligations

Learn about your business's IRS payroll tax obligations and state and local tax requirements. It is important to stay up-to-date on these laws, as they are subject to change, and penalties can be severe.

4. Track All Payroll Tax Deadlines

It is vital to keep track of all payroll tax deadlines and ensure the taxes are filed on time. You may have to pay penalties if the taxes are not filed on time.

5. Determine Payroll Records to Maintain

Keeping accurate and up-to-date payroll records is essential to maintaining compliance with IRS and DOL regulations. You can ensure that your employees are paid correctly and on time by keeping accurate records. Additionally, accurate records will help you to avoid any penalties or fines that may be imposed for non-compliance.

6. Classify Workers Correctly

Employers use Form W-2 to calculate how much money to withhold from an employee's paycheck for federal income taxes. Independent contractors are not subject to withholding, so they file a Form W-9 instead.

7. Use a Payroll Software

Many payroll software solutions available can help small businesses manage payroll more effectively. By automating payroll processes, you can save time and reduce the risk of errors. This will make the process faster, easier, and more accurate. A payroll software solution can simplify many processes, making your life easier.

8. Integrate Payroll Software with Other Business Software

Integrating your payroll solution with other business software can better understand how payroll affects your business. This can be helpful for small business owners who want to see how everything fits together.

9. Double-Check Data Entry

Double-check your data entry when dealing with payroll, even if you're using software designed for it. This helps ensure accuracy in timesheets, payroll calculations, benefit calculations, deductions, time-off requests, IRS forms, and other payroll documentation.

Conclusion

Small businesses have a few options when it comes to managing payroll. They can do it themselves, outsource it, or use payroll software. Each option has its pros and cons. The most important thing is to choose the option that best suits the needs of the business.

Gilmore Financial Services is a family-owned tax service serving the Richmond community for the past ten years. Our team has grown and includes experienced tax preparers, CPAs, EAs, and dedicated support to provide both personal and professional financial services. If you need payroll services in Richmond, Virginia, we’ve got you covered! Get in touch with us today and let us know how we can help!