How to Make the Most of Your Payroll Management
Author : Emily Clarke | Published On : 06 May 2021
When it comes to setting up systems to manage payroll, many small and mid-sized businesses don't have any. Even though payroll is not an impossible task to complete on your own, it's a frustrating chore wrought with confusing paperwork and balancing submission dates. When starting your own business is already a tremendous challenge, trying to manage payroll can feel like another full-time job. So, let's explore how to make the most of your payroll management.
To begin, you'll want to make sure your company is classifying its employees correctly. This is the case when you're a giant Fortune-500 company or even if you're just building computers in your mom's garage with some friends from college. Failing to correctly classify your employees puts your company at risk of hefty fines from the IRS. So before you launch your payroll systems, ensure that none of your W2 employees are categorized as 1099 contractors and vice-versa.
While we've been told that the only way to get something done right is to do it ourselves, the truth is we can't be perfect at everything. When it comes to setting up systems to manage payroll, it's almost always best to consult a third-party professional employer organization, or "PEO." However, you'll want to ensure your company has a positive cash flow before hiring extra help. This same rule applies to allocating funds to payroll itself. While there are no hard-and-fast rules when it comes to payroll, in general, it's recommended that your company does not exceed 30 percent of its total gross revenue.
Once you've ensured a positive cash flow, then it's worth reaching out to a payroll company. Almost every payroll company will help you keep track of dates and deadlines, but the best will offer a 3(16) Fiduciary service. This service is critical because your company has a fiduciary responsibility to track the fees associated with benefits that are often part of standard compensation packages. A payroll company significantly reduces the risk your company is hit with hefty fines by keeping your payroll compliant with the Department of Labor's strict deadlines.
Although it seems like a chore to manage payroll, the age of automation has brought us robust software solutions that streamline these operations, reduce expenses, and altogether make our lives easier. Make the most of your payroll management and explore your options today.