Do you own a business? If you do, and you are reading this, chances are you want to learn more about managing your payroll. If you have employees, you are going to have payroll, and you must deliver. Nothing makes a staff of hardworking people angrier than late checks – or worse, bounced checks. To avoid these problems altogether, we suggest you hire a payroll company to manage this for you. But if you decide you still want to be the one to cut the checks, then this guide is for you.
What Is Payroll?
Payroll is a process by which you calculate the wages and the taxes of an employee and pay them on the scheduled pay date. There are different ways by which you can prepare payroll. You can hire an accountant, do it yourself or hire a specialized payroll company to manage it for you. We suggest the latter. Outsourcing these responsibilities to a qualified vendor will free up your time and resources for growing your business.
Collect All the Documents
To keep track of employee wages, every employee who is working for you must fill out a W-4 form as required by the IRS. Have them fill this out, make a digital copy and file the paper in the employee’s folder.
Employee Identification Number
The IRS uses an employee identification number (EIN) to identify a business entity. It’s like a Social Security number for businesses. Make sure that your EIN is registered and ready before preparing payrolls. If you don’t have an EIN, you can apply for one online. If you have filed an LLC, you should have been assigned an EIN at that time.
Schedule Your Payroll
To do this right, you need to get everything on a schedule. Pay periods need to have a due date, end-of-year accounting, quarterly taxes and any other dates that are relevant to the financial operations of your business. This is a critical step to complete after getting your EIN. Creating consistency by scheduling will ensure you meet your financial deadlines and properly manage your cash flow.
Know Your Tax Laws
While paying your employees, keep track of everything. You need to know the state and federal tax laws so the proper dollar amounts can be withheld from employee checks. You can use numerous accounting applications to do this. Your federal, local and state taxes need to be submitted each payroll. Make sure you send these regularly. Consult with an accountant about other relevant tax laws before running your first payroll. If you use a payroll company, they should know the local laws and can help you navigate that paperwork.
Making payroll is crucial to the success of your business. Payroll errors, miscalculation of finances or late payment can cause turmoil among employees. Avoid this at all costs. Hiring a payroll company to manage this for you is a solution, and most payroll companies have add-on services like HR, labor management, onboarding assistance and more. Find a solution that works for you and stays consistent with your accounting and payroll efforts. Your staff will appreciate your efficiency, as will your accountant.