As a business owner it is so important for you to know how to do payroll efficiently. Making payroll mistakes can cause big headaches for both you and your employees.
You will save a lot of money by processing payroll yourself instead of paying a payroll processing company to do so.
The first step in creating an efficient payroll system is keeping good records. First, you will need to gather all employee time sheets, whether it is an actual time card or downloading reports from your employee time tracking software.
Once you have reviewed your employee time reports for errors you will be ready to begin processing payroll. You can process your payroll manually or with one of the many helpful software programs available to small business owners.
Both QuickBooks and Peachtree have simple programs that will walk you through how to do payroll quickly.
QuickBooks does a lot of the work for you and will make sure the right withholdings are taken for each employee.
When you use payroll software the appropriate deductions and taxes are calculated automatically based on your initial settings.
A software program that automatically processes payroll can help reduce instances of errors. Payroll errors can result in costly penalty fees from the IRS.
If you choose to process payroll manually it is a good idea to develop a spreadsheet to help keep you organized. You will then need to determine what each employee's gross pay will be.
Salaried employees will be easier because they receive the same amount each week, while hourly employees will need to be calculated based on the amount of time they work.
Once you have found the gross pay for an employee you will need to calculate the correct amount of taxes withholdings and deduction, the result will be the employee's net pay.
Medicare, Social Security and both state and federal income taxes are the most common withholdings. Payroll deductions can be made for 401k plans and health insurance.
Learning how to do payroll correctly is important for every business owner. Keeping excellent records and staying current with tax rules and regulations while help you avoid penalties and over or under paying employees.
Once you have learned to process payroll, it could become a task that you can teach and delegate to an assistant and then review. Accurate payroll processing is a skill every small business owner needs to have in order to be successful!
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