It’s no secret that most small businesses struggle managing both their business and their payroll. This task can be daunting if you are not prepared with all of the correct forms, information, and calculations. Most business owners avoid managing their payroll because of the large expense it will cause them. There are many repercussions for business owners that neglect or fail to understand how to properly pay their employees.
Over the years, we have seen some extreme cases of business owners that have been scared or confused with their payroll. Here are some common mistakes that you can be sure to avoid in your business practices.
1. Not Completing The Correct Forms For Each Employee
As your business grows and takes on new employees, it is crucial that you complete the pre-counseling forms. This will ensure that your new employees’ are properly compensated for their hard work. Payroll mistakes are typically always made in the beginning of enrollment. By completing all of the correct forms in the beginning of enrollment, you will be rest assured that your staff is set for good.
2. Managing Payroll By Hand
Most business owners skip out on using payroll services because of the additional costs it brings. By doing payroll on your own, you are more susceptible to mistakes. By using a simple payroll software, you will take the possibility of error away so that your business will be covered. Don’t leave payroll up to chance.
3. Estimating Net Pay
This is one of the biggest mistakes that we see in our new clients. Paying your employee’s net pay rather than the actual calculation can result in having to adjust your employee’s paychecks in the future. Not only does this add more work for you, but also can make your staff very unhappy.
If you do not have the time to dedicate to calculate the exact figure each month, your business should consider taking on help from a payroll company.
4. Poor Management Of Cash Flow
If your business is constantly waiting for invoices to be paid, this can be very detrimental to your payroll. There is a simple solution. Payroll factoring can help you get the funds from your unpaid invoices so that your business will not be late for payroll. You will get a large advance on your unpaid invoice with no repercussions to your credit, because the factoring company purchases that invoice.
This simple solution can help you better manage your time and resources to get your employees their deserved pay, on time.
Also, some business owners make the mistake of not transferring payroll money through the IRS. When you neglect to do this, both you and your business will suffer from harsh payroll tax penalties, as this act was seen as a business purchase rather than compensating employees for labor.
We hope that these 4 common mistakes have opened your eyes to the dangers of not properly managing payroll. No matter the size of your business, you should always be sure to involve help if you are struggling to manage your payroll on your own. There are many outlets that can help you do this quickly and safely.