Learning to manage a payroll is never the favorite thing to do for any business owner. But it is a necessary evil if they want their company to survive.
When a business starts up, with only a few employees, it may make sense to handle payroll internally. But as the business grows and the business owner has more and more on their plate, managing payroll could take their attention away from other important tasks. Then it may make sense to hire out payroll management to a third-party accounting firm with proven expertise in the area, such as Shockley Bookkeeping and Tax Services – Oklahoma’s small business accounting firm of choice.
Without this help, here are some risks businesses run:
When you set a payroll budget, you not only need to set pay grades for each position but you must ensure you properly classify your employees. There are three main classifications: salaried workers, hourly employees and independent contractors.
An hourly employee misclassified as an independent contractor can result in missed overtime or pay that is less than minimum wage – mistakes that could wind up being expensive for you. You could find yourself owing the IRA back taxes, including unemployment taxes.
Withholding the Wrong Amount of Taxes
Taxes are one of the most complicated things about handling payroll. Often businesses are responsible for withholding taxes on behalf of employees. Some taxes are mandatory, some are voluntary, and there are lots of chances to make costly mistakes.
You need to keep straight both how much you must pay in taxes and what amount you must withhold from employee paychecks. While misclassifying employees (see above) is one common way for small businesses to miscalculate their withholding amounts, there are other common mistakes. These include failing to withhold federal and state taxes, making incorrect deductions from salaries, incorrectly calculating pre-tax and post-tax deductions, failing to exclude taxable fringe benefits such as gifts and bonuses, and the list goes on.
From recording employee hours from time cards to inputting information such as Social Security numbers, there are plenty of opportunities to input wrong information that will cause payroll chaos. A professional firm handling payroll has the experience in inputting and double-checking information to ensure mistakes are kept to a minimum.
Problems Calculating Overtime
Many businesses calculate overtime every two weeks but this needs to be done weekly. Any worker who labors more than 40 hours a week must receive a rate not less than 1.5 times their regular pay.
The Depart of Labor recently made changes to the overtime rule, which could affect your employee overtime, making some previously exempt workers non-exempt. Keeping on top of these kinds of changing rules is difficult if payroll and accounting are not your full focus.
Doing your own payroll can take a lot of your valuable time in a workday. Hiring out your bookkeeping to Shockley Books, can be cheaper than you think and will give you peace of mind, knowing that your payroll will be taken care of accurately, with no miscalculations as far as taxes, insurance and other deductions.
Contact Shockley Books for a free quote and consultation – we will keep your books straight.