Nearly half of the people who responded to a recent survey said they would start looking for a new job after only two payroll errors.
Replacing employees is time-consuming and expensive so it’s important that you manage your small business payroll properly. Let’s look at how to set up your company payroll.
Options for Managing Company Payroll
You have several choices for dealing with your small business payroll:
- Manage it by hand
- Outsource your payroll management
- Use payroll software
1. Managing Payroll by Hand
Doing it by hand is the least expensive way to manage payroll, at least as far as the up-front costs are concerned. You won’t have to pay for software or pay someone to do the work for you. Instead, you’ll do all the calculations to figure out deductions, IRS remittances, and everything else you need to calculate.
This is also the most time-intensive option. Before you choose this option as a way to save money, think about what your time is worth. Is managing your payroll the best way to spend your time? And do you know enough about it to be sure you’re not making any mistakes?
2. Outsourcing Your Payroll
The second option is to outsource your payroll management, either to an accountant or bookkeeper or through a Professional Employer Organization (PEO) service. With a PEO service, the employee works for them and gets sub-contracted to your small business. That way they handle all the payroll work.
Outsourcing your payroll takes the least time on your part but is the most expensive option. It may be worth the cost though, considering the time you save and the fact that these professionals will be much less likely to make errors that can lead to lost employees and IRS fines.
3. Payroll Software
Payroll software is a middle ground between the first two options. You can manage your own payroll this way but the software does most of the heavy lifting for you. It calculates everything based on up-to-date payroll tables and if it’s tied into your accounting software, and it can generate all the necessary documents for the IRS and state tax departments.
You can also use a combination of different software packages to manage the various parts of your small business accounting. You might use a spreadsheet tracking system for most of it along with a service like The Pay Stubs to generate professional pay stubs for your employees’ paychecks.
Keep Good Records
Whatever solution you settle on to manage your company payroll, make sure you keep good records. If your business is ever audited for its payroll remittances, you need to be able to back everything up with documentation. The last thing you want to do is have to go back and reconstruct years of payroll information ahead of a meeting with the auditor.
Don’t stress over how to do payroll; spending some time researching your options before settling on a solution is time well-spent.
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