Cash In with Small Business Payroll Software

Any small business with employees has already figured out a system to make sure its people get paid. But the payroll function isn’t just about employee wages. A good payroll software platform will also let you “keep up with all the payroll regulations and make sure that you’re compliant,” says Amy Vetter, a CPA and the global vice president of education, head of accounting, USA, for Xero, an online accounting company that also offers payroll solutions.

Vetter says that when she worked as an accountant, “many of my small business clients got in trouble very quickly if they filed their payroll late.” Penalties can add up quickly and become a significant financial burden. “It’s not something to take lightly,” says Vetter. “You want to feel confident in your payroll provider.” The right payroll platform lets you devote your time to running your business rather than chasing after payroll records or tax filings.

Small Business Payroll Features

Tax calculation is one of the primary capabilities of most payroll platforms today, including income tax withholding, other payroll taxes, workers compensation, and disability insurance. Many systems can also handle direct deposit of employees’ paychecks to their individual bank accounts.

“Another function is actual payroll tax filing,” says Isaac Oates, founder and CEO of payroll platform provider Justworks. “You’ll find that some solutions will calculate your taxes, but you still have to do the filing. Other payroll programs will actually do the filings for you and send the money.”

As you consider various payroll platforms, ask the vendors how their system handles both tax filing and tax payments. Don’t assume that the payroll system automatically handles either task—you may be in for an unpleasant, and potentially expensive, surprise.

 Small business payroll platforms

Small business operators should also evaluate how well any potential payroll software reduces unnecessary work and data duplication. The better a payroll solution integrates with your existing accounting software, the less time you’ll spend entering the same data twice.

“If you type data into one software program and record it separately in your payroll software, that’s where numbers go off kilter,” says Vetter. “Or if you don’t realize how much has been withdrawn from your bank account in order to file and pay your taxes and make your deposits, then your accounting records can get off.” When one system pulls numbers from the other, your figures are easier to reconcile and your records are more accurate.

Small Business Payroll Preparation

In addition to obtaining the necessary registration numbers—from a federal employer identification number (EIN) to any state-level equivalents that may be necessary—Oates says that small businesses should gather their employees’ details and be ready to upload those before the new payroll system goes live. “Names, addresses, social security numbers, tax withholding settings and bank account details are all important,” he says.

Some payroll platforms can actually gather this data directly from employees, an approach Oates prefers, as it typically results in fewer mistakes. No matter how you plan to enter that information into the new platform, it’s best to bring it all together prior to launch.

Depending on when your business plans to implement its new payroll solution, you may have old payroll records that you should upload during installation. “If you have issued any checks for the year, you’re going to need to draw that information into the new system to preserve the history,” says Vetter.

Be sure to add records of payments already made to each employee to the new system as a way to keep the files current—both for the business and for the employee. “That way, when you issue your first paycheck through the new payroll provider, all the year-to-date withholdings will be accurate. The tax calculations for social security and so forth will calculate appropriately, too, based on what’s already been withheld for the year,” says Vetter.

Tips for a Smooth Payroll Launch

Rolling out any new software system takes time and effort, but small business owners don’t need to go it alone. “When you’re assessing payroll providers, look for what kind of on-boarding process they have to help you,” says Vetter. She adds that a strong support infrastructure can make implementing your new system “easy and seamless, so you can just get on your way with your business.”

Support offerings range widely; some vendors provide help through online chat while others offer educational videos that walk small business owners through each task in their new system.

Remember, too, that you wield power over people’s paychecks. It’s a scenario that needs to be treated with respect and prudence. “If you’re introducing a new payroll system and you have an existing employee base, be sure to define the timeline and communicate with your employees about what’s going on,” says Oates.

Keep employees informed about the process, along with how and when the transition to the new payroll platform will occur. Oates says that frequent and transparent communication “is critical for managing employee anxiety.”

Julie Knudson is a freelance writer whose articles have appeared in technology magazines including BizTech, Processor, and For The Record. She has covered technology issues for publications in other industries, from foodservice to insurance, and she also writes a recurring column in Integrated Systems Contractor magazine.

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