Learn the “ins and outs” of doing payroll for small businesses, and how you can make it an easier, more accurate process.
Payroll is much more than just signing a check or making a direct deposit. Your employees’ paychecks are their lifeblood! As a small business owner, it’s important to understand all of the components of payroll. It’s not only about compensating your employees for their hard work, you must also withhold taxes, calculate deductions, and pay out benefits.
Doing payroll incorrectly can have serious consequences for your business, as payroll is often subject to scrutiny by federal and state agencies.
In theory, you can do payroll and track employee working hours manually, but given how complicated taxes and withholdings can be, and the many opportunities for error, it’s better to invest in payroll software for small business to make sure it’s done right.
Here is a detailed breakdown of everything you need to help you run your payroll smoothly every month.
If you employ hourly employees, the first thing you will need to do is accurately record how much your employees work. Time tracking is mandatory for hourly employees, for several reasons:
- Benefits tracking, if hourly employees work more than 30 hours per week
- Overtime compensation, if your business offers it
- Job costing in accounting, and for accurate customer invoicing
- Tracking hours can make it easier for you to allocate costs to different projects that your salaried employees work on
While there is no lack of time-tracking tools on the market, the best payroll software comes with a built-in time-tracking tool. Having the time-tracking feature built into your payroll software will make it much easier for you to ensure your payroll is accurate.
If you’re using FINSYNC, a time-tracking tool is integrated with your project tracking and payroll software. Because FINSYNC is gig economy friendly, you can have both employees and independent contractors track their time in the same tool. Accurate time-tracking will provide the most accurate profitability calculations for your projects.
The FINSYNC platform also includes an expense reimbursement tool that all your employees can use. For example, if you hire Janna, a web developer, to build a landing page, and she purchases some stock photos for the project, all she has to do is upload the receipt in FINSYNC, and she will be reimbursed by direct deposit.
Calculating Benefits and Withholdings Correctly
The second and, as we stated earlier, most important aspect of payroll is the withholdings and benefit payments that you need to account for as the business owner.
Taxes are at the top of this list:
- Federal income tax
- State income tax
- State unemployment tax
- Federal unemployment tax
- Social Security
- Court-ordered withholdings, such as garnishments or child support
- Other withholdings, such as repayment for payroll advances, union dues or pretax contributions to healthcare savings accounts
It’s vital to make the right calculations when it comes to withholdings, or your business could be penalized. With the help of FINSYNC, you can calculate all the necessary taxes and fees automatically, and pay it to the right agencies accordingly.
For taxes that are paid quarterly or annually, the correct amount will be placed in an escrow account for later payment.
Additionally, you will probably have some or all of these employer-paid benefits:
- Paid vacation, holiday, sick days
- Time-off related to family illness
- Workers’ insurance (health, dental, vision, life, and/or disability)
- Contributions to retirement plans (401(k))
- Profit-sharing and bonuses
These benefits will have to be paid together with salaries, generally on a monthly or bi-weekly schedule. With FINSYNC, you can set your own payment schedule, and pay your employees weekly, bi-weekly, monthly, or bi-monthly.
Once paychecks are deposited and all taxes and withholdings are calculated correctly. Then, you have one last step to do: put the payroll information into the general ledger. If you’re working with an accountant, you will send over the payroll sheet to them, and they’ll take care of the rest. However, if you’re using FINSYNC, everything is automatically put into the general ledger. No need for manual work.
Full Financial Control with FINSYNC
One of the big benefits of using FINSYNC is the complete overview of all of your payroll expenses: salaried employees, hourly workers, and contractors. This provides better financial insight into how payroll costs are affecting your bottom line. Also what you can do to correct any bad projections.
You will also have a better chance of spotting irregularities in payroll. For example, is someone logging fictitious hours, or are an employee’s overtime hours not being submitted correctly?
Another helpful aspect of FINSYNC is customer support. You get a dedicated support representative that works with your business when you need help.
Whether you need help setting up a new payment method or updating the marital status and tax information of an employee, your dedicated FINSYNC representative can walk you through the steps. Having a dedicated rep saves you time and frustration. That way you won’t have to re-explain the particular situation of your business every time you need help.
Ready to tackle payroll management with less headache? See how FINSYNC can help you stay on top of your payroll responsibilities with a free trial.