Most business owners value their employees above everything else, so making sure they are paid in full and on time should be their number one priority. However, many find that handling payroll is just too overwhelming. Here are a few tips to help you avoid making mistakes when handling your payroll:
Using Unreliable Payroll Methods or Software
Payroll is usually handled using an automated process, so it’s vital that you use reliable software known for its efficiency. It is up to you to make sure you research your options so that the payroll system you choose is right for the size and type of your business.
The payroll systems most small business owners implement are Xero, MYOB and ADP. The costs depend on how many employees the business has on its payroll.
Employees vs. Contract Workers
You need to know who works for you as a hired employee as opposed to who is a contract worker. This is very important when it comes to covering tax obligations and superannuation payments because payroll tax, fringe benefits tax, federal PAYG withholding and superannuation payments do not apply to contract workers.
This is why some employers hire contract workers rather than employees. But, it’s not so cut and dry because the Australian Taxation Office (ATO) makes its own determination. If you classify someone incorrectly your business could end up paying penalties, which means you definitely want to verify this with ATO using their online tool.
Using Obsolete Tax Code Information
Unfortunately, the tax code is always changing with new regulations that apply in different jurisdictions, so it’s complicated. When you fail to keep up with all the changes you can run into trouble with an audit. Fortunately, the ATO does give small businesses some leeway if the owner or administrator has very little legal or accounting experience.
To play it safe, you should routinely check the ATO’s website to see if there are any changes or updates you need to know about. If the business can afford it, hire a good bookkeeper or accountant to handle your payroll and to keep everything current.
Missing Tax & Reporting Deadlines
Every business must meet federal and state deadlines when it comes to making monthly, quarterly or annual payments to the government. There are also reports that must be filed regularly and on time. All this has to be kept track of.
When your hands are full running your business it would be wise to hire a tax professional to assume responsibility for meeting all these deadlines with the proper payments and reports. Otherwise you can always get important dates and deadlines from both your state taxation authority’s and ATO’s websites and just put them in your digital or Google email calendar.
Not Making Critical Backup Plans
Knowing the costly penalties for making mistakes and/or missing deadlines, it is critical that you have reliable backup plans. Never leave it to one individual person or software program to keep you compliant regarding payroll. Your trusted employee could become sick and miss critical deadlines. Your payroll system can also malfunction or crash, so it only makes sense to have a good reliable backup system in place.
The good news is that you can now use the cloud for this purpose. By making sure that your information is all stored in the cloud and by allowing more than one trusted employee access, you will not be putting your business at risk.
Even huge multinational corporations can make payroll mistakes, but they can usually afford to “take the hit.” Small businesses don’t often have that luxury. But if you follow the rules, incorporate the correct solutions for your size and type of business, you should avoid payroll problems. It’s important that small businesses owners, agencies and tradies pay everyone in full and on time in order to maintain a happy workforce.
If you’re looking to update the payroll systems in your business or hire a book keeper Unsecured Finance Australia can help with a unsecured business loan, have a chat with our team today.