Common payroll mistakes small businesses make and how software can help

Efficient payroll is essential for every small business. Even the smallest mistakes can have a huge impact on morale and productivity. It’s crucial to get it right. 

But getting it right isn’t easy. Keeping up with the latest payroll legislation, staying on the cusp of tax regulations, and ensuring all records are current, compliant and accurate can be complicated and time consuming. 

Payroll software can help streamline this process by making payroll more efficient. It’ll also reduce the number of errors made, leading to happier, more productive staff. 

In this guide, we at QuickBooks will dive deeper into payroll processing software and explore how it can benefit your business and lighten your workload. 

The Importance of Accurate Payroll for Small Businesses

Payroll accuracy is fundamental to the smooth running of your small business. Errors can be financially costly for you as the employer. They can also have a negative impact on the morale of your workforce. Ultimately, staff want to know that they will be paid the correct amount for their work. Failing to do this can seriously harm employer/employee relations. 

Then, there are the legal consequences if your payroll is inaccurate. Miscalculations and inconsistencies can trigger an audit by the tax authorities. 

Similarly, late remittance of tax and social insurance contributions to the relevant tax body can also result in penalties. 

In short, it’s really important that payroll management is a priority for your small business. It isn’t just about short-term finances. It’s about long-term relationships with your employees, and avoiding serious penalties from authorities. For that reason, it’s useful to have a helping hand that can streamline the process. 

An automated payroll system will process, maintain and track all employee pay, benefits and compensation. This reduces the chances of mistakes, late payments and poor record keeping. It also helps you stay on the right side of compliance year-round. Let’s explore why that’s so important.

Common Payroll Mistakes Small Businesses Make

Managing payroll for small businesses is vital. Many SMEs are close knit teams who depend on one another to keep everything progressing and profitable. Therefore, any failures or mistakes in one area can have an immediate and serious impact on the business as a whole. 

Securing and maintaining the trust and confidence of your employees, keeping within all legal regulations, and ensuring all records are accurate is particularly important for small businesses. But these can be challenging to achieve when payroll errors are commonplace. Let’s take a look at some of those payroll errors now. 

• Payroll miscalculations: Incorrect payroll calculations can result in financial implications for you and a loss of confidence and morale on the part of your employee.

• Late payments: Missing deadlines for paying your workers can demotivate your workforce. Late remittance of tax and social insurance contributions to the tax authorities can also incur penalties.

• Inaccurate tax withholding: Putting workers into the wrong classification for tax withholding means they are either paying too much tax or not enough, both of which will be a problem for your employee and your business.

• Poor record keeping: Having the correct information and data on your employees is essential, as is maintaining a record of all overtime, sickness and other payroll details.  

Running payroll for a small business can be filled with mistakes and errors. Finding a way to make the process more efficient, less time consuming and importantly, error free, should be a priority for your company.

Miscalculating Wages and Deductions

Getting the calculations for your employee’s pay correct is fundamentally important. You’re legally obliged to pay what you owe, including any agreed overtime and benefits, while subtracting the right deductions.  

Payroll miscalculations equals unintended errors and unhappy employees. It can also mean a loss of trust in you as an employer. Errors in deductions may mean underpaying your workers, leading to reduced motivation, while overpayment can have serious implications for your company’s finances.

Software for small business payroll provides you with all the tools you need to do your pay run quickly and accurately. Instead of spending time poring over timesheets and collating information from different spreadsheets, everything is at your fingertips. This means an accurate payroll and satisfied employees. 

Missing Payroll Deadlines

Ensuring that your payroll runs on time is crucial for employee trust. An employer that’s consistently late with wages leads to a dissatisfied workforce who lack confidence in the business to pay them on time. 

As a small business, it’s often the case that one person is doing multiple jobs at once, including payroll. This can mean late pay runs and missed deadlines if other tasks take longer than expected. 

Small business payroll softwares means pay runs can be scheduled in advance, helping you to avoid missed deadlines or rushed mistakes. This ensures that employees get the correct wages on time, every time. 

Inaccurate Tax Withholding

Mistakes with tax withholding can result in the wrong tax codes being applied to a worker’s pay. This can lead you to pay too much or too little tax, both of which are problematic for you and your team. 

If your payroll department inputs the wrong tax code despite having the correct one on file your business may have to repay the balance of the underpayment. More often the tax authorities will pursue the employee for the tax owed. An employee who has overpaid tax isn’t usually an employee with high morale. 

Small business software is the key to avoiding these kinds of mistakes. They reduce the likelihood of having the wrong tax code for your employees, as this information is automatically updated when required. This keeps you tax compliant and reduces the chance of an audit. 

Poor Record-Keeping

Accurate record keeping isn’t just essential for your own operations. It also keeps you compliant with employment and tax laws. If you are ever audited, you will need to provide these records to the tax inspector, so it’s important they are precise and complete. 

Being non-compliant due to poor record keeping is bad for your business and increases the chances of payroll errors. Small business payroll software stores and organises your data, making sure that all employee information is up to date and any tax changes are applied automatically. 

How Payroll Software Can Help Small Businesses Avoid These Mistakes

With small business payroll software, you’ll benefit from automated calculations, comprehensive data storage, pay run scheduling, as well as invaluable tax compliance tools. This makes your life easier, and keeps your finances in check. 

The best part about payroll processing software is that you can operate it from anywhere. There’s no need to be tied to the office when it’s payday. The pay run schedule feature lets you make timely payments to different categories of workers—from permanent employees to self-employed contractors. 

You’ll also have all the help you need to ensure your business is compliant with statutory payments associated with sickness, maternity leave and automatic pension submissions. Online support, the ability to connect with your accountant or bookkeeper and link your bank accounts to your business will simplify the entire process. 

The ease of use and time saved with payroll software leaves you free to focus on other aspects of your business. You can tackle all high-value tasks, safe in the knowledge your employees will be paid correctly and on time. This results in less stress and a happier, more productive workforce.

Automated Payroll Calculations

Payroll software automatically processes all calculations on your behalf. This makes it simpler to determine tax on earnings, social insurance contributions and other deductions. This automation minimises any errors or omissions that often occur with manual entry and human calculations. 

With an automated system, you’ll pay the correct amounts to the tax authorities every time. Employees will also receive accurate net pay. It takes care of every task quickly and efficiently so you have less to think about and can focus on growing your brand. 

The ease of use and time saved with payroll software leaves you free to focus on other aspects of your business. You can tackle all high-value tasks, safe in the knowledge your employees will be paid correctly and on time. This results in less stress and a happier, more productive workforce.

Tax Compliance and Deductions

Complying with all tax requirements and calculating accurate deductions for your employees can be a source of stress and confusion. With the right payroll software, you can relax knowing that the system will handle all of that for you.

The automatic integration of tax and social insurance regulations means you don’t have to worry about not being up to date with the latest changes. Statutory payments such as maternity leave or sickness pay are automatically recorded. Other functions such as benefit and expenses tracking, if needed, can also simplify the payroll process and ensure compliance.

Data Security and Record-Keeping

Small business payroll software gives you the ability to record and maintain accurate information and data relating to all your payroll transactions. These records are essential for your business to remain compliant with all employment laws and to present to authorities in the event of an audit. 

Payroll processing software has robust data security features to keep your employees’ information safe while complying with all data safety laws. State of the art encryption protocols, robust password protection, automatic data backup, cloud based storage and regular updates keep your sensitive information protected and secure. 

Scheduling and Reminders

With a small venture, employees often multi-task and take on several roles. This can lead to deadlines being missed for doing the pay run. This means workers get paid late which is not good for your business. 

An automated payroll system allows you to schedule your pay run in advance, ensuring funds are available for payday and wages are sent directly to your employee’s bank account. This is better for your enterprise as it provides accurate financial planning and it reassures employees’ that their money will be paid on time, every week or month.

Choosing the Right Payroll Software for Your Small Business

Running manual payroll takes up a lot of your time, energy and attention, all of which can be better directed to other areas of your business. Switching to payroll software lets you claim that time back by making your payroll process more efficient. 

When choosing the right payroll software for your small business, you should look for the type of features that best suit your needs. 

Maybe you’re completely new to the business world and want to find the easiest-to-use software and interface. Or, perhaps you’re an experienced owner who wants advanced automation so they can escape the back office admin and concentrate on business growth. 

In either case, the best payroll software is the one that makes your pay run more efficient, accurate, and reliable. Consider things like how easy the system will be to scale up as your business grows and how cost effective the software is based on your enterprise.

Key Features to Look for in Small Business Payroll Software

Your small business payroll software should include automated calculations, tax filing, payroll scheduling and reminders. It should also prioritise robust data security. We’d consider these the basics for online payroll providers. 

You may also want to consider employee access so your workers can check and maintain their pay slips and tax documents. It’s also helpful to choose a payroll provider that syncs with your existing accounting software. 

Overall, your chosen software should make your operation more efficient and accurate. There are also two additional features that set the best payroll software options apart from the rest. 

Tax Filing and Compliance Tools

Automated tax compliance features are vital for any small business. Manual entry can result in unintentional errors. Ensure your software has built-in compliance checks as well as regular updates to help you avoid financial penalties. 

A small business can rarely afford to be hit with penalties for tax non-compliance. The right payroll software ensures these fines are off the table. Accuracy, consistency and security helps keep your business compliant year-round. 

At QuickBooks, for instance, we’ll automatically calculate, file, and pay your payroll taxes with complete accuracy. This removes stress and frees up more time during tax season for you to focus on running your business.

Employee Self-Service Access

An employee self-service portal gives workers access to all of their work related documentation. 

This includes the ability to view and retrieve pay slips, tax information and other payroll related details. With this type of access, either through an app or the company intranet, the employee has more autonomy over their work related paperwork. This is also a good way to promote greater transparency between employer and employee. 

Employees can view the number of hours they’ve worked, check their current tax code and download their pay slips. When workers can access their own information, this reduces the amount of time that administrators need to spend on the task.

Final thoughts on improving payroll efficiency with software

Navigating payroll can be challenging for businesses. With the difficulties of payment accuracy and timeliness, alongside the concerns that come with tax season, there’s a lot to get right. 

That’s why it’s always a good idea to get support from a platform that can handle the details on your behalf. Automatic tax calculations, fast payroll processing, and error-free inputs are excellent for compliance and morale. They’re also the ideal way to free up more time to run your small business. 

Turn a complex and time consuming task into a fast and efficient process with QuickBooks. Our payroll small business software will automate your pay run, keep you compliant at tax time, and streamline your time tracking. And with a built-in workforce app, your team can track everything themselves, keeping your employees up-to-date and morale high. 

In the long term, this investment will allow your business to expand, employ and retain satisfied workers and ensure you never receive a penalty for missed tax payments again