- January 5, 2022
- Posted by: Trust Bill Atorudibo
- Categories: Finance & Accounting, For Employers, Payroll management
Whether you believe it or not, a lack of a comprehensive payroll management system is still a major cause of bankruptcy in business sectors all over the world. Unfortunately, many employers and businesses engage in payroll self-sabotage, resulting in hassles as they try to figure out why the books aren’t balanced.
Although organizations vary greatly in terms of structure and manner of operation, they all have one task in common that is critical to their survival: managing their financial process. The ease with which a corporation can track and account for all of its financial activities – from capital to revenue – can have a significant impact on profit margins and, more crucially, ensuring that the doors remain open.
Configuring Your Payroll System
Every large corporation began as a tiny firm at some point. Those that go on to be really successful, on the other hand, frequently implement a proper payroll management system early on. Laying the proper payroll foundation for your company ensures that you don’t run into financial snags in the future and offers you complete control over the input and outflow of cash from your company.
But, for the first time, setting up payroll can be extremely overwhelming; from technical words to precise processes, you’ll discover there’s a lot of work to do to guarantee you develop a payroll system that works flawlessly for your organization.
In this post, we’ll provide you with a complete view of all the tasks you’ll need to cross off your payroll checklist, as well as the necessary information to set up an efficient payroll system.
Of course, you can always save time and stress by outsourcing your payroll management needs to our excellent team of financial consultants. If you choose to manage your payroll system on your own, we’ll provide you with all of the knowledge you need to succeed.
What To Consider When Setting Up Your Payroll System
While there is a wide range of payroll software available to assist you at every level of your payroll journey, there are a few crucial aspects to keep in mind during the setup process. Here’s a thorough list of everything you’ll need to get started with payroll for a small business.
- Your company’s legal name & physical address
- All relevant tax ID numbers
- Detailed employee information – if applicable
- Compensation coverage and pay frequency for employees – if applicable
- Previous tax records
- Comprehensive documents on any offered employee benefits
Setting Up Your Accounts – Important Steps
Once you’ve gathered all of the necessary information and made your payroll decisions, it’s time to set up your payroll. Fortunately, you only need to complete the majority of the tasks we’ll detail once.
We’ll go over the three most important steps to running an efficient payroll system for a small business.
1. To Begin your Payroll
You must collect and calculate employee hours and wages. You must know how many hours your employee worked during the pay period. You must also know your employee’s hourly compensation or salary every pay period. You would then compute the employee’s earnings based on this information. Be careful to include any overtime pay and other earnings. After calculating the employee’s gross wages, subtract taxes and other deductions.
2. Double Check Your Balances
The net compensation and withholdings should be the same as or close to previous paychecks. It’s tempting to skip this step, but don’t. After you have completed all of the computations, you should double-check the results.
If you undertake manual paycheck calculations, you should double-check your numbers. If you use payroll software, double-check that you filled in the figures accurately.
3. After you’ve approved Payroll..
You must distribute the wages to your employees. Your payment system will most likely be determined by the size and structure of your business. However, with the correct employee information, which you’ve already acquired, you’ll find the disbursement procedure much easier.
4. Don’t Forget Taxes!
As an employer, you must deduct and remit employment taxes. After you deduct the taxes, you must deposit them on a regular basis.
The main payroll taxes you need to know about include:
- Social Security and Medicare taxes
- Federal, state, and local income taxes
- Federal and state unemployment taxes
Key Payroll Policies
You may have obtained all of the necessary information, but putting the correct benchmarks in place to ensure that your payroll system runs smoothly also requires substantial effort.
We’ll go over the important policies to keep in mind when you set up your first payroll.
1. Mode of Payment
After determining what type of salary you will pay your employee(s) and how frequently, you must decide how you will pay the employee. If you use direct deposit, you will need additional information to complete your paycheck, such as a bank account number and routing number.
2. Payment Plan
You’ll need to set a payment schedule to ensure that wages are disbursed on time. The timetable dictates how frequently you will pay your employee. Monthly, semimonthly, bimonthly, and weekly are all common patterns.
3. Wages and Bonuses
It is also critical to clarify how payments will be computed in order to avoid future issues. You must clearly specify how tips and benefits are collected and paid in addition to an employee’s allotted remuneration.
Payroll is a necessary business function, but not all small businesses want to handle it themselves. Outsourcing your payroll management needs is the way to go if you want to save time and energy so you can focus on growth and marketing!
From time management software programs that can keep track of employee attendance, to payroll software that can accurately calculate wages and extra bonuses, there are numerous ways to effectively set up and run a payroll system for a small business.
Take advantage of a variety of expert HR outsourcing solutions on our website to help you make the most of your time and resources