How To Do Payroll Yourself For Small Businesses
For many small business owners today, the challenge of being an entrepreneur comes with wearing many hats. For many, being a business owner means being the CEO, marketing manager, HR manager, bookkeeper, sales director, and customer service manager in one package.
What many rarely realize, though, is how much time goes into the human resource function of entrepreneurship. Payroll management alone takes up to 4 hours and 52 minutes of a small business owner’s day. As a result, doing payroll can be quite a challenge for business owners. It doesn’t only take up time. It can also be a source of headaches when staff gets over or underpaid because of unfair practices.
This article talks about essential practices and tips for business owners who are at the brink of losing their minds over payroll issues and tasks.
Payroll for Small Business Owners
For any business owner who asks, “what can I do with an accounting degree?” there’s always a sense of gratefulness by the time payroll comes around. Unfortunately, not all business owners are accountants or bookkeepers by trade. Some business owners struggle with finances.
But there’s no denying that payroll is an integral part of the business. It only takes two payroll issues for 49% of employees to start looking for another job. Staff turnover is not the only concern. There are also millions of dollars annually that go down the drain due to wrong salary computations. So how can a business owner deal with payroll for their small businesses efficiently? Here are some tips and a step-by-step guide.
Tips for Small Business Owners to Automate Payroll
The first thing that a business owner should know about payroll is that they can now automate it with technology. Gone are the days that entrepreneurs needed to do all payroll with paper and pen. Instead, some tools can help save time and energy spent on payroll so business owners can reinvest them in other activities. Here are some tips to start with.
Automate with cloud-based tools
A large majority of the best small business payroll software today is cloud-based. Cloud technology makes software available anytime, anywhere by crafting it online. That means that entrepreneurs can access them through any device without having to depend on software.
Cloud-based solutions are now some of the best options today. It gives business owners flexibility and allows their staff to access them too. Here are some of the cloud solutions you should have:
- Time-tracking software — To measure clocked hours and develop aggregated reports.
- Bookkeeping software — To keep track of workforce expenses
- Payout software — To schedule out payouts and send money to staff without having to visit a bank or financial center physically
Invest in technology
41% of small business owners cite software price as one of the greatest challenges for technology adoption. But what many of them don’t realize is the trade-off that comes with not investing in technology. When we don’t spend on softwares and tools, we will either have to do it ourselves or hire someone to do it for us. These two options will cost us more in the long run.
Entrepreneurs must start to realize the opportunity costs that come along with not using software to streamline their operations. This reality bites even harder on the human resource aspect of a business. The best small business payroll software will give you the freedom to grow your business.
Build a payroll policy and process
One other common mistake that business owners make is to commit their policies to memory. Unfortunately, our memories can fail us many times. Moreover, remembering policies can take up a lot of our energy too. What entrepreneurs should do instead is document their payroll policies.
When documenting your policies and processes, save them on a digital platform that your staff can access and reference back to at any time. For the most part, an editing-locked Google Document can do. Still, others might turn to some payroll software with a knowledge hub for staff to access when they have questions about policies like paid leaves, deductions, payroll schedules, etc.
Steps to Setting Up Payroll for Small Businesses
So you’re ready to start paying your staff. First, let’s talk about the steps you need to undertake when creating a payroll process for your business. If you currently have a system in place, check the steps and see which ones you might have missed.
Step 1. Work on the legalities
Skipping out on payroll legalities can present considerable problems in the future. So ensure that everything is in place for employee registrations, payroll tax, payslips and so on. Some payroll softwares can help with all these by computing for taxes, automating payslip creation, and creating employee identification trackers and directories. Legalities can differ depending on where your business operates. Talk to a local lawyer or accountant to help you get started on the necessary paperwork to hire staff.
Step 2. Create a payroll schedule
The best payroll programs for small businesses begin with determining when your staff will get paid. The next step would be to indicate whether staff will get paid weekly, fortnightly, or monthly. Next, determine what day of the month you will pay staff and stick with the schedule.
Entrepreneurs should also be clear about payroll schedules when paydays fall on a weekend or holiday. For example, will you be paying staff on the most immediate business day or the following working day after the break?
Step 3. Build an employee and contractor database
The next thing an entrepreneur must do is have one centralized employee and contractor database with all their information. Include their full names, tax details, bank details, contact information, incentives they qualify for, and so on.
It’s best to keep freelance and internal staff in separate databases to avoid any confusion. You can also ask freelance or contractual staff to use invoicing software so that professional fees stay documented. Finally, store all your employee and contractor details in a secure online database to avoid privacy issues.
Step 4. Set up a time tracker
One of the common accounting mistakes business owners make is to skip time tracking systems. However, there are many tracking softwares available that can automatically track staff hours and create reports at the end of every payroll schedule. This step alone can save several hours for a business owner by eliminating the need to compute person-hours manually.
Step 5. Decide on disbursement modes
Another crucial part of a payroll system is deciding how employees will receive their salaries and incentives. Entrepreneurs can use payroll software programs that can disburse salaries through an online payout system or talk to a bank that can provide staff payroll accounts. The latter can be a more tedious process, so a better alternative would be to look for a disbursement program that can deposit to any bank or an e-wallet account for staff who don’t have bank accounts. Entrepreneurs can also look into money-sending services like Paypal, Payoneer, Wise, or Remitly.
Step 6. Execute
The final and most crucial part of the payroll management process is following through on the plan. Effectively running payroll operations ensures that staff remain satisfied at work and keeps them motivated to give their best without worrying about getting paid or not.
51% of businesses hope to use artificial intelligence to save on business costs. There are many AI-based and cheap payroll tools for small businesses that can help them save considerable time and resources. As the world moves into a future of computer learning, leveraging these smart tools can give business owners more time and financial freedom to grow their businesses.