If your are running a small business, payroll is a complex but necessary task. Check out these payroll solutions to make the task more manageable.
Payroll is a significant cost for any small business, with most companies in most industries spending 10-30% of their revenue on employee salaries.
Hiring good people and compensating them properly is essential to your business’s success.
That said, to maximize profit, employers should seek to optimize what they spend on labor. The only way to do this is to keep track of your expenses and calculate your gross labor margin.
This is why it is important for small businesses to implement smart payroll solutions. With these solutions, you can manage payroll more effectively and spend more time working on building your business.
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For several reasons, it is crucial that everything related to employee compensation is properly documented. If your company is ever sued or audited, you will need to show evidence of how payroll expenses were spent. The same is true if you need to go through your company’s financials to find opportunities to cut expenses.
The simplest way to document payroll is to make pay stubs for your employees. Even if you are a small, home-based business and all of your employees are friends or family members, it is still important to use pay stubs. This will make it much easier to track your business’s progress.
Track What You Pay the Government
As an employer, you don’t just pay your employees. You also pay the government in the form of payroll taxes. It is important that your payroll records reflect these payments.
Make sure to record all transactions. These include gross wages, FICA tax, state income tax, and other withholdings like retirement contributions or matches.
Plan for the Future
It’s important to not only pay your employees what they have already earned but to also plan ahead for future paychecks. Keeping a ledger that anticipates upcoming payments will help you ensure your business is making enough money to pay its staff.
If your projections start showing that you will be unable to make these payments, you will know that you need to make adjustments. Hopefully, planning ahead can help you avoid hiring employees before you realize you cannot afford them.
Payroll Management Options
There are a few options available to your business for managing your payroll. One is to do your payroll in-house. With this option, you will want to hire someone with accounting experience.
You can also outsource your payroll to an outside accountant. Or, for a midway option, you can do the payroll in-house, but use payroll software. This will automate much of the process, and thereby minimize error.
Put Payroll Solutions to Work Today
Overpaying your employees can easily sink your business into debt. But with these payroll solutions in place, you will be able to optimize your business’s labor costs and maximize your profits.
Of course, payroll is not the only financial concern for small businesses. Read up on asset protection to learn how to safeguard your funds.