Owning and running your own small business often requires you to wear many different hats, including accountant, marketing manager, and HR manager. If you find yourself in charge of payroll as well, you might be wondering how to get started with the process and stay organized at the same time. Here are five tips that will help you manage your small business payroll effectively and ensure that no one is shortchanged at the end of the month.
1. Choosing a Platform
The first thing you’ll want to do is decide on a payroll platform. This will be a payroll software or service that takes care of every aspect of your payroll, from calculating how much tax you need to withhold to issuing paychecks. The majority of small businesses use online payroll platforms, so there are plenty of options out there to choose from.
As you look into potential platforms, think about whether or not they offer services that go beyond just paying employees and issuing checks. For example, some platforms also integrate with accounting software and have HR functionality built-in—this could save you money if those functions are something your business will eventually need.
2. Gather Accurate W-9 Forms from Vendors
A W-9 form is simply a form that asks for your vendor’s taxpayer identification number, including an EIN (Employer Identification Number) or Social Security Number. This will be used to report payments on IRS Form 1099. The most critical piece of information on your W-9 is called Taxpayer Identification Number (TIN), also known as an EIN, Employer Identification Number (EIN), or Federal Tax ID.
You will use TIN on all forms related to payroll, including W-2s and 1099s. Any business making payments of $600 or more per year must complete a Form 1099 at year-end.
3. Keep Track of Employee Time
One of your biggest concerns as a small business owner will be keeping track of employees’ time. Most states don’t require you to track employee time, but it can make your job easier if you do. It will also help cut down on wage disputes and overtime pay mistakes if you keep careful records of hours worked—and make sure your employees do, too.
For example, some payroll systems will allow you to set up automated alerts that tell you when an employee has gone over their allotted work hours for a day or week. If you choose not to use a computerized system, at least have some kind of organized spreadsheet that can help remind everyone how many hours are supposed to be worked each week or month.
4. Understand Taxes
One of the biggest issues that small business owners run into is taxes. Having a firm grasp on payroll taxes will help ensure you don’t end up shelling out extra money to your state. And, in general, it’s important to take advantage of all tax deductions to reduce your overall burden.
For example, make sure you are claiming every possible expense, including office supplies and travel costs. The more deductions you can claim, the less cash you have to give up during tax season—so make sure you are being thorough in tracking them. Get help if necessary by consulting with an accountant or other professional familiar with small business taxes.
5. Choose a software having dedicated customer support
It is important to choose payroll software that has dedicated customer support staff. This will ensure that you receive a timely and accurate response to any queries regarding your payroll solution. A product with a stellar reputation can also go a long way in helping new businesses establish their credibility.
Features of good payroll software will vary from business to business, but make sure your package includes functionality such as direct deposit, which allows you to issue paychecks directly from your bank account as opposed to issuing paper checks that must be mailed out. This feature is especially useful for small businesses that rely on small workforces and can save money on printing and postage costs as well as time spent processing those payments manually.
Manage your payroll correctly and you will avoid underpaying or overpaying your employees, which can result in costly fines and penalties. The first step to managing your payroll is taking advantage of automatic deductions, direct deposit, and tax reporting software. These tools make it easy to keep track of each paycheck—making it easier to make sure everyone receives their due. Next, make sure you’re making timely paychecks by keeping an eye on deadlines. Make sure all of your necessary paperwork is filed on time with federal agencies like the IRS.