If you have one or more employees, payroll is an essential component of your business operations. Mistakes in payroll can be expensive and inconvenient for your company, so it is important to ensure accuracy at all times. Here are some of the most common payroll mistakes businesses make and how you can avoid them.
1. Failing to withhold the proper amount.
As an employer, you are responsible for withholding the proper amount of state and federal taxes from your employees' checks and submitting these funds to the appropriate taxing authority. if you fail to withhold the proper amount or turn it in on time, you may face expensive penalties and other consequences. One of the most common withholding errors involves misclassifying employees as independent contractors and failing to withhold any taxes. However, you may also make withholding errors because of inaccurate calculations, incorrect deductions or accidental exclusion of taxable benefits.
2. Keeping inadequate records.
Inaccurate or incomplete records lead to a wide variety of payroll problems, from inaccurate calculations of employees' wages to late checks and overdue tax payments. For this reason, keeping detailed, accurate records is essential. Careful data entry and data management will help you to avoid mistakes related to problems with payroll records. Whether you entrust this task to your on-site staff or to a third-party provider, accuracy should always be a priority.
3. Calculating wages inaccurately.
Problems with wage calculation lead to overpayment or underpayment of employees. If you overpay your employees, your company loses money that may be difficult or even impossible to recover. If you underpay your employees, you will deal with angry personnel and mountains of paperwork. Make sure your wages are calculated properly by ensuring that every individual is classified accurately as either an employee or independent contractor, streamlining data entry processes and using high quality software for all calculations.
4. Not relying on the right professionals.
Some businesses try to handle all of their payroll needs without any help. Unfortunately, if you don't have staff members who are capable of handling these tasks accurately, this choice can lead to countless payroll problems. Likewise, if you decide to outsource your payroll needs but you choose a provider that isn't reliable, you may find yourself facing fines, unhappy employees and even legal action. To avoid this common payroll mistake, make sure your company's payroll is in the hands of staff members or third-party providers who understand all of the relevant laws and can calculate payroll and taxes accurately during every pay period.
Inaccurate payroll can dramatically affect the success of your business. If you need help with payroll, or for other small business needs, please contact Padgett Business Services today.
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All content posted on this website or distributed by SmallBizPros, Inc. DBA PADGETT BUSINESS SERVICES is intended for informational purposes only. To determine whether these concepts are appropriate for your business, you should seek advice from a PADGETT BUSINESS SERVICES® representative or an independent advisor before implementation.