You’ve started up your first small business, congratulations! You’ve got a lot of work ahead of you, but you’re on the road to success. Getting a good start on this leg of your professional journey will help, and one of the keys to a good start is having a solid administrative system for your business. Part of this system is payroll. For a small-business owner, payroll can be complicated, especially for those with little experience with budgeting, accounting, and finances. Even with experience, it can be tough to balance your administrative duties with serving your customers/clients. Here’s some advice to help you get started.
#1: Know the Process
Let’s start with the basics of payroll setup. If you intend to handle your payroll personally, you’ll need to perform the following steps:
- Obtain an employer identification number (EIN) from the IRS.
- Obtain a business ID from your state and/or local government.
- Collect all the necessary documentation from your staff. This includes Form I-9, Form W-4, and state withholding allowance certificates.
- Choose your preferred pay period. Businesses issue pay on a weekly, bi-weekly, semi-monthly, or monthly basis. Consider how often you want to distribute pay to your employees and what schedule works best for everyone.
- Obtain workers’ compensation insurance.
- Offer additional benefits to your employees. This can range from paid time off (PTO) to the use of company cars to reimbursing travel expenses.
- Open a payroll bank account.
Once you have everything set up, you’ll be prepared to conduct payroll regularly. For each pay period, you’ll need to perform the following process:
- Determine each employee’s hours worked and gross pay.
- Process each employee’s payroll deductions.
- Calculate the net pay for each employee.
- Distribute pay by your preferred method.
#2: Consider Delegating
Payroll setup and processing is a complex process, and errors can be costly, a security threat, and lead to legal or regulatory trouble. Trying to perform this process by yourself will also mean less time seeing to your customers’ needs and more time administering your business.
Another option is to hire an in-house accountant or payroll manager. Doing so will ensure a trained professional is handling your accounting while allowing you to focus on your customers/clients. However, this will mean adding another full-time member to your staff, which may not be your most cost-effective option as a small-business owner.
#3: Consider Outsourcing
There’s a third option for small business owners like you planning your payroll setup: Outsource to a third-party payroll service provider. Hiring a payroll service provider can offer numerous benefits that streamline operations, ensure compliance, and save valuable time and resources. Managing payroll involves a professional payroll service provider with expertise in navigating complex tax laws, regulations, and reporting requirements, reducing the risk of errors, and ensuring compliance with all relevant laws and regulations.
Outsourcing payroll to a service provider also frees up valuable time for business owners and staff to focus on core operations and strategic initiatives. It also eliminates the need for investing in costly payroll software and ongoing training. Speaking of costly software, payroll data is sensitive and confidential and needs good-quality security software to prevent leaks. A reliable payroll service will have robust security measures to protect your data from unauthorized access, ensuring privacy and confidentiality.
Another boon is having payroll distribution options. Many payroll services offer direct deposit options, simplifying the payment process for employees. Additionally, they may provide employee self-service portals where staff can access and manage their own payroll information, such as pay stubs and tax documents, reducing administrative burdens.
Finally, a payroll service typically offers dedicated customer support to assist with any payroll-related inquiries or issues. This can be invaluable for small businesses that may not have in-house payroll expertise, ensuring prompt and accurate resolutions.
Let Payroll Vault Set Up Your Payroll for You
We’re eager to provide you with our selection of payroll and HR outsourcing solutions. Our boutique-style payroll service provides you with a customized service package based on your needs, whether that’s paycheck processing, tax filing, background checks, payroll financing, or employee timekeeping. Visit your nearest Payroll Vault location or contact us at Payroll Vault - Hampton Roads at (757) 330-3637 to find out more.