Payroll Processing & Reporting
Whether you’re a small business owner or an executive manager, it seems like there are never enough hours in the day, and you’re expected to be an expert in everything from maintenance to accounting. You know there has to be an easier way.
Each week or every other week, it’s essential that you pay your employees and your staff. Before owning your own business, you never realized that there was so much paperwork and effort involved in processing payroll. Learn more about processing and reporting payroll for your small business.
What Is Involved With Payroll Processing?
Payroll processing is defined as compensating your small business’s employees for the work that they’ve done during the pay period. If you pay yourself through with a payroll check, this process includes your pay as well.
The things involved with payroll processing include:
- Determining the total of earnings for each of the business’s employees
- Defining the payroll deductions required for each employee
- Filing the payroll taxes with the Internal Revenue Service (IRS)
- Distributing earnings to each employee through direct deposit or a payroll check
You’d think that with only four steps that payroll processing would be an easy task on your to-do list, but it isn’t. Look closely at what’s involved with each of these payroll processing steps.
For each pay period, you need to determine the total earning of each employee. Some companies use old-fashioned time cards while others use online services for employees to record their hours. In most cases, the total earnings of each employee varies from one pay period to the next.
Before you can start printing checks or setting up direct deposits, you need to take payroll deductions. These can include taxes, health insurance, retirement contributions, and more. Each employee will have their own deductions based on their elections and employment status.
The IRS requires you to file payroll forms and deposit the funds periodically, either monthly or weekly. Employers need to keep impeccable records to ensure that the correct amount is withheld and deposited when due.
Finally, you need to arrange for each employee to get the amount that they earned. Most companies use direct deposit, but some continue to issue paper checks. No matter the method your company uses, you must disperse these funds on the assigned pay day.
What Makes It Complicated?
This would be much easier if each of your employees paid the same percentage in taxes, but they don’t. Each employee fills out paperwork when they’re hired about their tax status, and you use it as a guide to deduct taxes.
However, each person has a varying number of dependents and deductions that they can take, which makes their tax rate lower or higher than someone else’s tax burden. Also, an employee making $10,000 a year pays a lower tax rate than one earning $50,000.
To make matters even more complicated, there’s no room for mistakes in the calculations. If you don’t withhold and deposit enough in taxes, you alienate employees who you have to go back and get the correct amount from them. Also, the IRS and other tax authorities will fine you for the incorrect calculations.
Why Is Payroll Reporting Important?
Payroll reporting and reports are an essential part of any business, especially small businesses. Each pay period, you use the payroll reports to determine the wages earned by each employee along with the taxes they owe and deductions for benefits.
Each time your employee receives a paycheck stub, it provides them with critical information too. It shows how much they earned and where their deductions went. They can use this information to rent homes or buy a new car.
As the business owner and manager, you use payroll reporting and reports for a variety of reasons, and the first and most important is always reporting taxes on the federal, state, and local levels. You can also use the reports during business audits and preparing workman’s comp claims if someone is hurt at work.
Payroll reports provide invaluable information about your business and your individual employees. These reports highlight where your payroll expenses are highest and lowest throughout your business, such as teams and departments. You can use this information to compare the expenses to the revenue generated to make important financial decisions about your company.
Other benefits of payroll reporting include tracking your company’s employee turnover rates and maintaining a positive cash flow for your business. You can use your payroll reporting to determine how much cash you need available to meet payroll each period.
Why Do Small Businesses Need Help With Payroll Processing and Reporting?
You don’t have to tackle payroll processing and reporting for your small business by yourself. There are some reasons why you should hire a professional accountant to take care of your payroll duties. Here are some things to consider:
- Your time is worth a lot: if you’re like other small business owners, you probably devote a lot of time and energy each pay period to gathering documents and determining the amount each of your employee’s earned. You also spend a lot of time preparing the tax reports and ensuring that you deposit the correct amount of taxes each quarter.
- Compliance with tax laws: Not only is your company responsible for withholding taxes from employees’ pay, you’re responsible for keeping up with the ever-changing tax laws. When you hire someone else to take care of your payroll processing and reporting, they make sure that your company is always compliant with the current tax laws.
Help with payroll processing and reporting is always a good idea for a small business.