Payroll for small business is an important function that every business has to deal with. Not only does it help you build your business but trust with your employees. Problem is, over 54% of American employees are normally affected by payroll problems.
This can trigger unnecessary expenses and can hurt your bottom line. As a business, you need every dollar to grow and strengthen your balance sheet.
Want to know which mistakes most small businesses make on the payroll for a small business?
1. Creating the Wrong Payroll Size
One of the payroll mistakes that small business owners make is miscalculating the payroll size. That is, small business owners, end up creating a payroll that is either too small or too big. If they create a large payroll, it becomes expensive.
If it's a small payroll, it becomes difficult to manage.
This error may not present itself early but down the line, the business will experience compliance challenges or delays. To avoid this error, small businesses should gather employee data first.
This helps to determine the payroll size, and type of software to use.
2. Poor Data Entry Practices
Over the years, several small businesses have closed down as a result of poor record keeping. If you don’t want your business to close down either, take the necessary steps to avoid payroll mistakes.
The first thing is to save the following documents:
Proof of past payments
The second step is to implement your own record keeping system. This helps you maintain your payroll. Third, select the best payroll for small business.
3. Inaccuracies in Your Employee Data
One of the most common payroll error laws is inaccuracies in your employee data. It is common to misspell the name of your employee or to miss a single digit in the employees' social security number. What you ought to know is that such mistakes are costly.
Not only can the payroll mistakes derail your entire payroll process but it can result in hefty penalties. To ensure this does not happen, double check your employee data after they fill out their W-2 forms.
Employee’s full name
Social security number
Date of birth
Payroll details such as the hourly rate
Start and termination date
Taking the extra precaution to double check the data will help you avoid costly mistakes. Also, it helps you keep your payroll and employee data organized. Are you in search of the right payroll software for your small business?
PaystubCreator is a web app built by professional accountants and ensures accurate calculations.
4. Not Classifying Your Employees Correctly
Independent contractors are on the rise. As such, small businesses can make a mistake of misclassifying their employees. What you need to know is that you cannot avoid paying taxes by classifying your employees as independents. Yet they are full-time employees.
Doing so will incur serious tax penalties. In fact, 40% of small businesses incur IRS penalties for misclassifying their employees. While the average penalty is $845, the penalties can increase eating into your profit.
5. Not Training Your Employees
Small business owners assume that having payroll software in place is enough. Even though your employees have the knowledge, you should not skimp on training.
Remember, every software comes with its own unique features.
If you neglect training your employees, they will not deliver the level of performance that you desire. By training your employees, it equips them with skills to remain in compliance in the ever-changing payroll field.
Also, it prevents brain drain and your business gets to avoid penalties.
Choosing the Best Payroll for Small Business
There are several factors to consider when choosing payroll for small business. Consider the number of employees, payroll frequencies, payroll types, and pay slip types. Also, consider the possibility of integrating with other software and compliance with legislation.
If you loved our post on the top 5 easy payroll mistakes for small businesses, check out our website for more content.