Operating a small business often involves navigating a critical, yet time-consuming element – payroll, especially if you have employees who expect to receive their paychecks on time. Payroll essentially determines how you and your staff get paid. There are strategies available to improve running payroll, such as using payroll software to eliminate manual processes, that can simplify your overall payroll process.
Here are five helpful tips to enhance efficiency in your payroll system.
Tips To Make Payroll Management More Efficient for Small Business Owners
As a small business owner, you can streamline your payroll system to make it more efficient. You can do so in the following ways:
- Accurately classify your workers as an employee or independent contractors in your payroll system.
- Automate taxes using payroll software or by outsourcing your payroll management.
- Decide whether your pay for employees will be hourly or as a salary.
- Double-check your data entries to avoid payroll errors and misclassification.
- Streamline similar processes with payroll.
1. Use Direct Deposit When Possible
The first tip to make payroll more efficient is to use direct deposit. Direct deposit allows small businesses to send electronic payments from one bank account to another.
Banks use the Automated Clearing House (ACH) network, which lets one financial institution send payments to another. There are several reasons to consider using direct deposit:
- Direct deposits offer more convenience.
- Direct deposits are more secure and take less time to process than checks.
- You won’t need to print checks or pay to mail checks.
2. Establish a Payroll Calendar And Stick To It
The second tip to make processing payroll more efficient is to establish a payroll calendar. This calendar will determine how often your employees will receive payment, and it’s usually one of the first things you’ll figure out as a small business owner.
There are three reasons you should establish a payroll calendar:
- A payroll calendar will help your small business meet labor market expectations.
- Establishing a payroll calendar will also help your small business determine its cash flow.
- Payroll calendars ensure your employees or workers receive payment for the required minimum of times per month.
There are four payment schedules you should base your payroll calendar on. Depending on how you plan your workers to work, one or more payment schedules may work for you:
- Weekly
- Biweekly
- Semimonthly
- Monthly
The first payroll calendar format can occur weekly. This will result in 52 payments to employees on the same day of each week throughout the year.
You may choose a weekly payroll schedule if your small business relies on manual labor, a retail store, or a restaurant. You may also choose a weekly payroll schedule if most of your employees are hourly workers.
The second payroll calendar format you can choose from is biweekly. This will result in employees receiving payment every two weeks. As with the weekly pay period, employees will receive payment on the same day for each payment.
You may choose a biweekly payroll schedule if your small business has both hourly and salaried employees. This option can also work if employees need to take time off throughout the year.
The third payroll calendar format can occur semimonthly. With this payment option, employees will receive payment twice per month or 24 times per year. Employees will receive payment either on the first and 15th of each month or the 15th and the end of the month.
Semimonthly payroll payments can work for employers who would like stable payroll throughout the year. This payroll option also works best for some employees who can use a semimonthly payroll structure to plan their expenses.
The fourth payroll calendar format you can choose from is monthly. This is a rare payment structure, and it may not work for some states requiring workers to receive more than one payment monthly.
A monthly payroll structure works best if you’re the only employee of a business. This option can also work for employees who receive payment as a commission.
3. Provide E-Pay Stubs
Another way to make the payroll process more efficient is to provide e-pay stubs. E-pay stubs list salary and tax information, like paper stubs. It will also list federal and state taxes paid throughout the year and at the time of payment.
Employees and workers can access their e-pay stubs in their employee accounts. As a small business owner, you can create e-pay stubs and enter the data. Another option small business owners have with e-pay stubs is to outsource payroll for similar results.
4. Make the Payroll Process More Efficient by Outsourcing It
Consider outsourcing your payroll. Outsourcing payroll can be beneficial for almost any small business owner.
A payroll expert can help you and your small business with upfront pricing, which can save you both money and time. Outsourcing payroll will also ensure you’ll have all of your payroll needs taken care of no matter how you structure your payroll. This can also ensure you avoid making any costly payroll mistakes.
5. Keep Policies Clear And Simple
The last tip to make payroll more efficient is to keep policies clear and simple. Payroll has intricacies beyond payment for your employees and workers. Businesses may have attendance, benefits, and paid vacation to work through in the middle of paying other employees.
To avoid any issues with your payroll, you’ll want to establish clear guidelines and policies. You can do this by creating a payroll policy document and updating it as needed, so your employees can access it whenever they need to.
Work With Us for Your Payroll Needs
“With tens of thousands of tax jurisdictions and 16,000+ tax rules that impact withholding (and can change year-to-year!), payroll compliance can quickly get very complex for a small business owner. Taxoto has combined the expertise and scale of Gusto as an established payroll and HR provider with the knowledgeable advice only dedicated advisors can provide. Together that creates a powerful solution offering payroll peace of mind,” said Yi Liu, General Manager, Embedded Payroll, Gusto.
The payroll process is one of the most vital needs of any business. For businesses of all sizes, outsourcing payroll can be beneficial. Work with the professionals at Taxoto for help with your small business payroll needs.
Check out this comprehensive guide to learn everything you need to know about payroll taxes.
