10 Tips for Streamlining Your Payroll Process

Whether your company is just launching or expanding and adding new employees, maintaining accurate and consistent payroll is a key concern.

Here are some tips to keep the costs down, the productivity up, and the process humming.

1. Keep complete payroll records.

Begin with the basic information from all employees, including their Social Security numbers, the number of deductions, benefits, overtime, bonuses, and any other factors that impact their paychecks.

Create a single file using MS Excel or a payroll software system and keep it up to date. Regularly remind employees to notify you of impending changes in their personal circumstances well in advance of when the changes will take effect.

2. Ask for help when you need it.

If you don’t know if a payroll deduction is valid or accurate, talk to your commercial bank rep. Banks offer free consultation as part of their service packages.

3. Work with an accountant to set up a payroll system.

CPAs, banks, and other number-crunchers can advise you on how to manage your payroll. If you have an accountant, arrange a time to work out a system to streamline your payroll process using software like QuickBooks or Peachtree.

Your commercial bank is also an excellent source for a quick education on managing payroll tasks to avoid overwhelming your days. Your time is better spent growing your business.

4. Know the deadlines.

Corporate taxes are due March 15 of each year. W2s and 1099s must be in the hands of employees and sub-contractors by January 31.

If your business is a corporation of any kind—a C corp, an S corp, an LLC, or some other corporate entity—ask your state tax agency for a list of forms and due dates, including everything from quarterly unemployment payments to taxes due on profits.

5. Get to know the functions of your payroll system.

There’s a lot more to preparing payroll than counting up the hours your employee’s work. Payroll systems can help you track health care insurance contributions, 401K plans, wage garnishments, and other factors. Find a system that’s expandable to guide you through the maze of who gets what, and take the time to learn how to use it effectively. If necessary, consider hiring a tutor or enrolling in an Adult Education course offered in your local community.

Most payroll software is designed for those unfamiliar with the process. It provides guidelines, alerts, warnings, and other alarms that advise you when things don’t add up. Recheck your figures to avoid problems for both your employees and your company.

For example, if you don’t withhold taxes on an unincorporated vendor who earns more than $600 a year from your business, your company is liable for the underpayment. Paying taxes that should be paid by the vendor can really hurt your bottom line.

6. Create a separate payroll account at your commercial bank.

Discuss with your bank the option of creating a separate account for payroll deposits, rather than combining them with your operating cash. Include taxes, costs of benefits, Social Security, Medicare, and other payroll deductions in this separate account.

This is another way your bank can be an invaluable partner. Your representative can provide the facts, figures, rules, and regulations for maintaining company cash on hand to pay your staff and the tax authorities on time.

7. Evolve your payroll system as your company grows.

When your business has a few partners and a small team of employees, payroll is relatively straightforward. But your plan is to grow, expanding your operations and adding more employees.

Chances are, the system you start with won’t provide the necessary functionality as your business grows. At some point, it will be wise to outsource your payroll functions to eliminate the need for staff to prepare checks, make timely deposits to tax accounts, and pay health-care premiums.

However, first discuss with your banker the establishment of a unified system that consolidates all your business accounts and activities into a single, streamlined system. You will still do the books, but your bank can integrate your payroll account with your cash accounts, including insured money markets, CDs, and other cash instruments.

8. Know the rules and play by them.

Consider taxing agencies as partners in your business. The IRS, state, and local taxing agencies are happy to provide information on the requirements they have. Contact these agencies for guidelines.

They’ll help you understand their rules and regulations, and they offer workshops for small-business owners. Attend a workshop or two, take notes, ask questions, and get a name to contact when more questions arise.

9. Fix problems fast (like yesterday).

If you’re notified by the IRS, the state tax commissioner, or a local taxing agency that money is due, don’t delay addressing the issue. Every day that passes costs your business money in interest and penalties.

10. Know what you don’t know.

Unless you’re a CPA or a business major, chances are you don’t even know what you don’t know. Hire a CPA, an accountant, or a payroll pro to get your books in order and your system in place.

Have a consultant clean up the books and create a system that you understand. It’s worth spending a little money to tap the knowledge and experience of a real professional.

Work with the same consultant as your business grows and your payroll expands. Also, keep their telephone number on your speed dial for quick access to answers.

The Key to Success

Managing payroll involves numerous moving parts, including employees, tax agencies, investment managers, and your bank. While this can be a bit confusing at times, it also means you have numerous resources available to help.

The most important thing is not to fall behind. The costs of late payments in business are steep: having your paychecks bounce is nothing worse for morale; missing a payment to creditors hurts your reputation and incurs late fees; and the IRS is unforgiving about missed deadlines.

Utilize all available resources to keep your payroll running smoothly and know when to seek assistance. Reach out when you’re confused. When it comes to payroll, there are no stupid questions.

When in doubt, pick up the phone and call your bank rep for advice.