Understanding Payroll Accounting – best practice explained
Get a strong of understanding payroll accounting in this handy guide. Learn the best and easiest ways up keeping on top of payroll.
4 min read
Year end is a pretty stressful time for small businesses and accountants alike.
Employees want their P60s and HMRC is checking how much money you owe them. If you don’t submit your company tax returns on time, you’ll pay penalties. It’s especially stressful if you haven’t kept on top of your record keeping.
Is your system up to scratch?
Another thing to worry about is whether you’ve calculated correctly throughout the year. If you’re not using an automated system or an integrated system with your current accounting software, you’ll have been relying on your formulas, calculations and manual data entry to get you by.
Is this really working? All too often, accountants find themselves faced with a mountain of their clients’ payroll records on their desks, many of which just don’t make sense. They’re faced with calculating each and every payroll run for the entire year because their client used out-of-date spreadsheets.
Another common problem is Excel. It’s all too easy to hit the space bar and delete formulas mid-spreadsheet. And of course no one notices because the final formula still shows and there’s no data verification over the spreadsheet.
Getting payroll right
Apart from costing you more money, as your accountant has to recalculate your year-end reconciliations, you could end up in trouble. Payroll is a task that holds extremely high responsibility to the employer, and it can carry significant penalties if you get it wrong.
Many a small business owner has come a cropper through miscalculations, under-deductions or late payments. Why? Human error. Through tracking their payroll manually, too many people make small, but significant mistakes. This means their payroll is wrong and they’re then faced with paying four-figure penalties.
The most important task you have as an employer is to stay compliant with payroll guidelines and regulatory requirements. But what does that really mean? It means staying up-to-date with current tax rates, as they’re liable to change annually, as well as tracking holiday and sickness pay, overtime, benefits and even stock options.
This is a lot to manage and could potentially take up a lot of time if you do it manually, or separately from your current accounting system. So how much less time could you be spending managing your employees’ pay?
Automate the process
There’s so much to remember already alongside deadlines, managing vendors, customers and employees. You can simplify everything by automating your payroll processes with online (or cloud) accounting software such as QuickBooks.
Even better, integrating your payroll process with your existing accounting software carries significant benefits:
It eliminates the possibility of transposition errors. There’s no need to copy the figures from your online payroll calculator or third party payroll service into QuickBooks.
More efficient data reporting and budgeting. As payroll figures can be combined into budgets, it’s easier to spot overtime or over budget figures. This gives managers the information they need efficiently so they can make appropriate decisions quickly.
Confidently track Changing Tax Rates. The points at which your employees hit particular tax thresholds can change regularly – especially for those at the lower end of the tax scale.
Maintain one central source for all employee data. It’s then so much easier to complete P60s and other forms. QuickBooks streamlines the process so the actual data entry for these forms is flawless.
Better job tracking, billing and matching hours to jobs. As a business owner, understanding which jobs are most profitable, and why, is essential to growing your business. Having all your data in one system allows for complementary reporting so you can drill down and see what items are affecting the bottom line.
Up-to-date tax tables. An automated system with regular scheduled updates keeps you in safe waters when you make deductions. The correct numbers are inputted automatically. There are companies who will offer to do this job for you, but a system that’s integrated with your current QuickBooks software is the only way to ensure complete data integrity and consistency.
Integrate your systems
The majority of accountants recommend their clients use a fully integrated accounting system. One like QuickBooks, which manages all aspects of the business, from bookkeeping, to inventory management, to payroll. It’s the only way to ensure maximum time management, reliability and accuracy.
Gone are the days of sweating over mile-long spreadsheets and manual calculations and reconciliations. It makes sense to simplify your payroll – you’ll be glad of this when it comes to year end.
We hope you found this article useful. Why not try QuickBooks free for 30 days and see for yourself how it improves your workload, and your stress levels.