As a Small Business Owner, your job description includes ensuring that the people who work for your business get paid as and when due. You must also ensure that the business only pays for work done or service rendered, that the business tracks the hours and days of work or service recorded by the people it has engaged to do so. This is where the payroll system of the business comes into service.
Payroll is an essential function of any business. A Small Business Owner must understand the need for a payroll system, how it works, the one that is best for the business, its cost, and how to set it up.
A business with a few or a growing number of employees will have great difficulty in manually tracking their work hours, work days and earnings. It will get more challenging as the business runs its monthly cycles while striving to comply with the relevant Federal and State laws, and making the mandatory deductions from the earnings of its employees. After paying its employees each month, the business must also track the year-to-date spending on payments as staff salaries. A business will be overwhelmed and distracted if it tries to perform these administrative tasks manually. It is therefore important to automate them.
A functional payroll system should automate the requirements of accurately running the payroll of the business. It should automatically calculate how much each employee should be paid on every pay day, according to the number of hours or days of work. It should track and pay them correctly. A big advantage of using a payroll system is that taxes are automatically deducted from the pay cheques of employees. With an automated payroll system, the Small Business Owner will be saved the worry of paying payroll taxes or misreporting the wages of an employee, which will bring the additional benefit of freeing the attention and time to focus on running the business.
To find the right payroll solution, the business must assess its revenue, and understand the system that will best serve its purpose. Here, the Small Business Owner could choose between doing its payroll work in-house or outsourcing it to a third party. Where the business is small or in its start-up stage, the latter option is advised as it frees the business to focus on its core activity. In this case, the business can engage a Payroll Service Provider, and make payments on a monthly or per-payroll basis. A monthly pay structure will entail a base monthly fee, plus a fee per employee while a flat monthly fee will allow unlimited payroll runs at no extra cost.
In choosing a payroll system, the Small Business Owner will start by assessing the needs of the business. He or she will be looking for features like multiple payment options, which will allow the business to pay its employees through direct deposits into their bank accounts or issuance of cheques to individuals or any such instruments that are convenient to both parties. The system should also be able to handle statutory deductions, employee compensations and produce detailed payroll reports. It also helps for the payroll software to integrate with the human resources software. Once the business decides the payroll system that it needs, it is time to look for service providers who can fit the purpose. In picking a service provider, the Small Business Owner must consider the best one for budget, without foregoing set requirements or falling into the temptation to settle for a less expensive option that doesn’t meet the needs of the business.
For a minimum, the payroll system should function in a human resource and finance capacity. It should interface with finance because payroll is a key overhead cost of the business. It should also perform a human resource function because it involves tracking hours and days worked by employees, and bears information on benefits.
Setting up a payroll system for a small business is fairly simple. Once the Small Business Owner understands the payroll system that is best for the business and its staff, he or she will proceed to choose a service provider to work with. They will agree on a service plan, following which the business and the service provider will on-board the employees by getting them to provide their personal, employment and tax information. Thenceforth, the payroll software will function in an intuitive and efficient way, by automatically calculating and providing for all emoluments and deductibles related to each employee’s wages.
In summary, an automated payroll system is a necessity for a business that plans to grow. It is not optional. While the payroll process could be daunting for a small business, the use of a payroll software and a payroll service provider offers a seamless solution that automatically calculates deductions, and gross and net pay. More importantly, it will keep the necessary paperwork in one place that is easily accessible to the owner and managers of the business.
Do you need help in setting up the payroll system for your business? Let’s explore your options at https://smefinance.org/thesmelab.
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