Small businesses make up more than 42.9% of the United States’ private-sector payroll. By 2019, there were more than 30.2 million such small businesses. Managing the day-to-day affairs of an SME can be a daunting task.
Payroll management is among the stressful processes business owners grapple with. As such, most small businesses opt to outsource payroll services given the delicate nature of this function.
Are you a new small business owner? Understanding how to do your own payroll can help you cut on costs, while also avoiding mistakes in the management of your employees.
This step-by-step guide is all you need to ensure that you manage your own payroll without having to outsource this critical function.
Why Is Payroll Management Critical?
Your employees need to know they can trust you to pay them on time without delays. As your business expands, you’ll have to grapple with more employees and higher salaries. If you aren’t careful, you might end up incurring hefty financial losses due to mistakes in your payroll.
A sound payroll management system can help you build reliability consistency and effectiveness.
Are you keen on ensuring that you manage your employees’ salary and remuneration with utmost consistency? You can learn how to do your own payroll and save on costs while staying on top of things.
How to Do Your Own Payroll
Managing your payroll is not always easy. You may end up making costly mistakes if you don’t take your time to learn the ropes. These are some of the steps that can help you manage your payroll on your own without outsourcing.
Have Your EIN Ready
Before you can start preparing your payroll, you need to apply for an EIN. The Employer Identification Number is a unique code that each employer must have when reporting any information about employees.
State and Federal agencies require the use of Employer Identification Numbers when an employer declares total income or when filing taxes on behalf of employees. As such, the first step when preparing your business’ payroll is to apply for your EIN.
Consult Your State or Local Government
Information is a critical tool as you prepare your company’s payroll. You can visit your respective state or local government’s website to find out more about any additional EIN requirements. For instance, in States such as New York, you may need a separate EIN for tax-related purposes.
Set up a Separate Payroll Bank Account
Well, most businesses already have an active business account. But when preparing to manage your payroll, it’s prudent to have a second account for payment and payroll tax purposes. You can use this account to channel all your salary and remuneration processes.
A second account also makes it easy for you to remit payroll taxes. It’s best to have a second account to ensure that you maintain separate records related to your payroll.
Obtain Required Tax Forms
The standard practice when paying your employees involves a few critical procedures. One such process is the filing of three basic forms. The three include the I-9, W-4 and the W-9 forms. It’s mandatory to fill both the W-4 and the I-9 forms on the first day of employment.
Before commencing the process of preparing your payroll, you need these two forms from all your employees. The W-9 is often required for employees who are on a contract basis. Ensure that you have these forms before proceeding with the payroll preparation process.
Determine Your Pay Period
You ought to determine your pay periods in advance to ensure ease in the process of managing your firm’s payroll. Most States have an underlying pay schedule which you may need to adhere to as an employer. In most cases, these schedules are either weekly or bi-weekly.
You may need to consult your local or state Departments of Labor on the matter of scheduling. You may present your proposal on the payment schedule that works for you for consideration. Depending on the level of compliance to the regulations, it’s likely that you’ll get the approval.
Consider the Various Types of Payrolls
Everything you have done in the first five steps relate to the preparation process. At this point, you need to determine the type of payroll that works for you. There are ordinarily three types of payroll options you can consider.
a. Outsourced Payroll Services
Some businesses don’t want to have to deal with the complexities of payroll management. Such companies opt to outsource the payroll service from companies who specialize in payroll management. You may not have as much control when your payroll management process is under a third party.
While you have the luxury of worry-free compliance when dealing with outsourced payroll service providers, you may end up spending a lot in the long run. This is not a good option for a new business.
b. In-House Payroll Services
Most big entities have an internal department that is dedicated to the management and reporting on payroll matters. The department manages all the issues related to federal, state and local taxes. While this is an effective way of dealing with payroll, new businesses may not always have the luxury of having a dedicated payroll department.
If your small business cannot afford both outsourced and dedicated in-house options, don’t flinch. You can still consider the third option.
c. Payroll Software
You have the option of using highly effective payroll software that can help you manage your company’s payroll. This option is highly reliable since it helps you accomplish all your payroll needs without wasting time or incurring additional costs.
How to Do Your Own Payroll with a Payroll Software
Most small businesses find payroll software a rewarding option. This option helps you customize your payroll processes in line with your unique needs. You’ll also get to enjoy critical benefits through easy scaling, which allows you to add more employees gradually.
Have you been wondering how to do your own payroll? You can utilize the paystub generator and harness the power of integration with other accounting and bookkeeping software. With payroll software, everything about payroll management is easy peasy.
With Technology, You No Longer Have to Worry About Payroll Management
Most business owners dread the payroll management process due to the assumed complexities. However, given the importance of having a reliable salary, remuneration and taxing framework, your goose is cooked.
Developing a stable payroll management structure requires adequate preparation and planning. However, once the basics are in place, everything else is easy.
Are you wondering how to do your own payroll? With payroll management software such as paystub generator, your payroll management needs are no longer a concern.
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