What is payroll processing?
Payroll processing refers to compensating employees for the work they do. It means arriving at the net pay after making necessary adjustments related to taxes and other deductions. These steps can be done manually but making it automated will make it more accurate and will also help you comply with the payroll regulations. It is not just about salary calculations. It involves a lot more.
How to manually process a payroll?
If you choose to manually process your payroll if the business is small as you only need to keep a precise record of the number of hours an employee has worked, the wages paid, the classification of workers and other details. You must also make sure the calculations are just right so that the taxes and the paperwork can be filed with the government authorities on time. The more the employees become, the harder the payroll process. Any mistakes made can result in serious tax penalties.
Did you know, payroll can have an impact on the cash flow?
Payroll is considered a business expense even if the payroll is not done by a third party because the wages you pay your employees and the share of payroll taxes cut your profit margin. If the business slows down then you might end up delaying the payments or seeking for other resources to divert money.
The best way to reduce the impact on your cash flow is to pay the workers either via direct deposits or digital pay options. It is better to avoid paper checks. Direct deposit is considered a better option as the company only needs to have sufficient funds to cover the cost of payroll on certain days in a month. This will help in better managing the finances.
Streamline your payroll process
- Fix the pay period
Paying different groups of workers at different times makes the payroll process complicated. Instead having a fixed pay period that goes along with the state laws is the best practice.
- Having a payroll software
Avoid manual data entry, save time and eliminate duplications using the automated features that come along with the payroll softwares. Payroll softwares can be integrated with accounting ledgers and the time clocks such as biometrics as well. This will help in making the payroll calculations more accurate.
- Keep an eye on the regulations
Laws related to payroll and employment keep changing quite often. Keeping yourself updated will help you stay away from expensive penalties.
Choose your payroll service provider. One best way to improve your payroll process is to have a service provider who can handle your company’s payroll. This will ensure that your employees are paid on time and the taxes are worked on correctly.
Payroll doesn’t have to be hard, chat with our experts!