Running payroll manually can take days. For small businesses, time can actually be money, so this significant commitment to payroll processing can cost you so much more than annoying hours calculating the pay and taxes for each of your employees. Even with a payroll provider, a business owner is likely to dedicate hours to payroll processing each week (a survey from QuickBooks Online estimated a minimum of 5 hours per pay period).
We want to help you simplify your payroll process so you can turn your focus to more pressing matters. We’re sharing 6 ways you can streamline your payroll management for more time and less error.
1. Set up direct deposit
The number one recommendation for simplifying your payroll management is to make the switch to direct deposit. It will require some documentation of bank accounts from your employees for the ACH transfer, but your employees will be happy to oblige as it means faster, easier access to their earnings.
Direct deposit may include a fee through your payroll processing program, but can also save you money on printing and mailing costs of paper checks. Setting up direct deposit for your payroll will eliminate the hours of cutting checks and make the biggest impact on your payroll processing.
2. File payroll taxes electronically
Much like direct deposit, e-filing taxes allows you to skip the hours and expenses of printing and mailing. Instead of printing forms, filling them out, stuffing and addressing envelopes, and sending them each pay period, you can set up e-filing which will automatically withhold and file payroll taxes on behalf of you (the employer) and your employees. Enter the payroll data, including all payroll deductions and the tax accounts to pay—then sit back and relax. Your taxes will be automatically withheld and paid on your behalf to federal and/or state accounts.
3. Get to know your payroll provider
Modern payroll software providers are pulling out all the stops. We’re willing to bet that your payroll service has features you haven’t fully leveraged yet. Perhaps you’re intimidated by the software, or you feel that it will take too much time to take a deep dive into every nook and cranny of the payroll system. We think it’s worth it.
If your payroll software has a tutorial or “Getting Started” onboarding video, start there. Take the tour of payroll features and find the knowledge base for the software (usually located on their website). Learning the ins and outs of your payroll solution will take some time upfront, but it will help simplify your payroll processing in the future.
4. Set reminders for important payroll dates
Even if you set up e-filing of your taxes, you’ll still be responsible for reporting the taxes you’re withholding and paying. Depending on your size and location, you may be required to report payroll taxes each pay period or monthly. Quarterly and annually you’ll be responsible for business tax filing and reporting.
Set reminders for the important tax dates regarding payroll taxes, estimated quarterly taxes, and when you need to initiate payroll for each pay period. You might also consider if a different pay period structure could work better for your current cash flow and payroll processing.
5. Switch to employee time entry
Rather than manually entering work hours for your employees, it’s well worth the investment to switch to employee-lead time tracking. Employees can log their hours with a cloud-based time clock, which is preferable in our mobile and remote work world.
While you will have to double-check and deal with employee errors, it’s much more accurate than having a single finance team member manually entering in hours for each individual employee. Check with your existing payroll processor for time clock functions and integrations. Most payroll processors or Human Resource software solutions provide a time tracking functionality for this purpose, but you can also find third-party time-tracking that can integrate with your existing payroll system.
6. Regularly update W-4s
You should have each employee fill out an Employee Withholding Certificate (Form W-4) when hired. For many (if not most) of your employees, that original information is sufficient for the duration of their employment. However, there are periodic changes in the lives of your employees which will necessitate updates to their payroll deductions. Rather than servicing the urgency of a time-sensitive change to payroll withholding or other adjustments, we recommend regular review of employee W-4.
Once a year, take the time to review the purpose of a W-4 and each of the data points it requires with your employees. Allow them the opportunity to update their withholdings as things like children, changing benefits, and goals for retirement may have changed their situation. Batching the changes in your payroll system and keeping things current will simplify the repetitive task of running payroll for each pay period.
Save time, save money
Don’t let the finances of your business keep you from running your business. We hope these tips will help you process payroll faster and provide greater visibility into your business finances.
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