Your team is enthusiastic, your organization structure is solid, and your future looks bright — on the whole, the fundamental model of your small business is performing as it should. There’s one significant problem, though: you’re having some issues handling the payroll.
There’s no need to be overly concerned, as it’s something that almost every small business encounters problems with sooner or later — but you do need to take action to address those issues. A misfiring payroll system is a recipe for disgruntled employees and, as a result, a remarkable amount of business disruption.
If you’re going to keep your payroll system in good condition, there are 5 challenges in particular that you need to acknowledge. Let’s run through them, and set out viable resolutions:
Logging roles correctly
The more your business grows, the more roles you’ll need to fill, and the more complex the tiers will become. You need to keep track of all the internal moves and changes in pay grade, because the calculations won’t magically update themselves just because you’ve given someone a new title and promised them a 20% bump. If that raise doesn’t come through in a prompt fashion, they’ll feel duped, causing a huge rift to form between you.
The solution? Commit to regularly auditing your entire payroll system (CPA Hall Talk has a great guide to this) to ensure that everyone is logged exactly as they should be. Formally schedule it so it can’t easily be forgotten.
Tracking hours worked
If you pay workers by their hours worked (instead of a flat monthly rate), then you’ll need to know exactly how much time they’ve spent working to pay them accordingly. When your time is limited, and you might well be using remote workers who are relatively difficult to oversee, you can easily have difficulty checking up on progress.
The solution? Mandate the use of some kind of time-tracking system for all types of employees, and feed the results directly into your payroll system. You must also pay close attention to what’s achieved with tracked time, to confirm that employees don’t log time not spent working.
Ensuring timely payments
Above everything else, a payroll system needs to operate in a timely fashion, because being paid promptly isn’t just a preference for many employees — it’s a necessity. People who live paycheck to paycheck (and there are many reasons for this that don’t involve employer negligence) can encounter major problems following even minor delays, and when your employees encounter such issues, it seriously damages your business.
The solution? Stop treating payroll as a manual process to be handled when needed. Consolidate the scheduling and data using a single system (Quickbooks and Wave are both solid options, though the latter is more small-business friendly due to its pricing), but continue to run manual checks to make sure.
Keeping records updated
Data entry might seem trivial, but it’s hugely important to get it right, because mistakes are easy to make and can disrupt systems in a big way. Consider the importance of a simple tax ID, or an employee’s bank account number: one misplaced zero in a payroll system that technically works as it should can result in missed payments and a lot of strife.
The solution? After adding a new employee, or changing any other significant element of the payroll details, issue a trivial payment to confirm functionality. Additionally, have employees accept responsibility for keeping their own details in line.
Dealing with tax requirements
Missing payments isn’t the only danger here, because falling foul of payroll tax is a disaster at the corporate level. Despite this, many small businesses avoid thinking about tax as much as possible, only making it a priority when tax season rolls around — at which point it’s very tricky to get everything in line.
The solution? Instead of leaving tax calculations until the last minute, get your tax figures sorted out as the year progresses, lining up all the data ready for submission. That approach will cause minimal disruption and avoid risking fines (or worse).
Small business payroll typically lacks the polish found in its enterprise-level equivalent. That can cause some issues in a small business with enough employees and a large operation to have a lot on the line should something go wrong. Be aware of these common challenges and get ahead of them to minimize risk.
About the Author
Rodney Laws is an ecommerce expert with over a decade of experience in building online businesses. Check out his reviews on EcommercePlatforms.io and you’ll find practical tips that you can use to build the best online store for your business. Connect with him on Twitter @EcomPlatformsio.