Payroll processing is not the main goal of most entrepreneurs when they start a business. Most likely, you’d rather focus on maintaining your competitiveness and keeping your customers satisfied. Payroll management is an integral part of running any business with employees, and it can present a variety of challenges. It’s important to get this very right: delaying the salaries of employees can damage staff morale, and non-compliance with tax or labour laws can have very serious consequences.
What’s Important to Bookkeepers When Processing Payroll?
Payroll management can be a challenge for small business bookkeepers, especially since they’re usually handling many other accounting tasks as well. It is a time-consuming process to calculate wages, taxes, and other payroll deductions manually, and it requires precision to ensure employees are paid accurately.
To keep the company’s accounts up to date, they will have to enter payroll data multiple times if their payroll tools aren’t integrated with their accounting system. Payroll processing can be simplified and automated by anything that simplifies and automates the process.
10 Common Challenges for Small Businesses and Their Solutions
These are 10 of the most common payroll challenges faced by small businesses, along with their solutions.
- Manual payroll processing. Small businesses may be able to process data manually with spreadsheets or other basic tools. As your business expands and you hire more employees, the complexity and risks increase. Mistakes cannot be avoided, regulations cannot be kept up-to-date, and confidential data cannot be protected. For growing businesses, automating the payroll process through software or payroll services makes sense.
- Staying in the loop with employment law and regulatory changes. A law or regulation that doesn’t change would be nice. Regulations from the federal government, states, and local governments must be adhered to, however. As a result of failing to notice regulatory changes, you could face significant fines and penalties. In addition to staying up-to-date with changing regulations, good payroll providers should also provide staff training regularly.
- Record keeping. It is important to maintain accurate records not only for business purposes but also for compliance reasons. You should use payroll solutions that ensure accurate and compliant storage, even if you have an on-staff payroll specialist who is obsessed with record-keeping.
- Privacy and confidentiality. A new data breach is reported every day. Payroll systems cannot run without highly sensitive data such as bank account and social security numbers, home addresses, and pay rates. As a result, your business is exposed to risk. To protect sensitive pay-related information, companies need clear privacy policies, a secure payroll environment, and strict internal controls.
- Under or overpayments. A person hates being underpaid-or being asked to return money if they’ve been overpaid by mistake. When problems are not caught early, they can complicate year-end accounting as well as require time-consuming corrections the following year. Using automated solutions reduces the chance of human error when entering or calculating data. Erroneous payments should be reported to employees as soon as possible and corrected without causing financial hardship to them.
- Misclassification. Companies of all sizes may have a mix of full-time, part-time, temp, and independent contractor employees. An incorrect classification of an employee, such as incorrectly categorizing them as a contractor, can cause serious problems for both the employer and the employee. In general, employees receive company benefits and unemployment compensation, while contractors do not. You may be penalized if you misclassify; make sure you understand the rules.
- Tax non-compliance. Payroll taxes and the employer’s share of payroll taxes are usually the responsibility of the employer. Another reason to use payroll solutions that automate tax withholding and filing is to reduce the possibility of manual errors.
- Managing changes. It is possible for payroll problems to arise even when employee information is changed a little bit. For example, if you don’t update an employee’s address after they move to a different tax jurisdiction, tax withholding can be calculated incorrectly. In addition to allowing employees to update their information, payroll solutions that include self-service capabilities can reduce payroll staff burdens.
- Data management and reporting. In light of the fact that payroll is often a company’s biggest cost, it’s crucial to know how payroll affects profitability. Payroll management can be difficult if you’re trying to do it manually. In order to cut overtime costs by 80%, how much staff would we need to increase? Making reporting easier can help businesses make better tactical and strategic decisions.
- Technology integration. Lack of integration with other business systems can compromise the benefits of powerful payroll software. A common source of data integrity issues is manual data transfer between multiple systems. For simple, time-insensitive changes, it may be sufficient to transfer data in batches between systems, but for full integration, you generally need applications provided as a suite or connected via application programming interfaces (APIs) that transfer data in real-time.
A small business can’t ignore the fact that financials matter a lot. The importance of payroll cannot be ignored by entrepreneurs and managers, even if large financial transactions are the most important. It’s a regular expense that affects the motivation of your employees. Small businesses, especially, cannot afford to mess it up.
The cost of payroll processing mistakes may be too high for any business, so you need great software to manage it.
Software that isn’t just any software, because you don’t want a confusing maze of HRMS solutions. Therefore, Multi Recruit can certainly save you from both of these problems because it has features that make it the best HRMS payroll software.