Doing payroll is an important function in any business. This is crucial in ensuring that your employees are getting paid properly. At the same time, doing it right is important to avoid costly mistakes.
You might be wondering how to do payroll. Whether you are a new business owner or owns an existing one, the following are the general steps:
Setting Up the Necessary Payroll Accounts
This usually happens in your business startup stage. After getting the necessary licenses, you need to set up your payroll accounts.
Ideally, you should separate your payroll bank account from your main business account. Create a payroll bank account. Use this account only for payroll transactions.
Different states have different payroll requirements. Some of these requirements include electronic tax payments and workers’ compensation insurance. Take note of and follow these requirements.
Establishing the Payroll Process
You have to decide the specifics of your payroll process. When making a decision, think about which works best for the kind of business you are running.
Some of the questions that can help you in your decision are:
- Will you be paying your employees on a weekly, semi-monthly, or monthly basis?
- Do you hire full-time employees or only part-timers?
- How will you track your employees’ work hours?
- What benefits will you offer to them?
- How will you calculate the payroll amounts?
- Will you pay your employees in cash, check, or direct deposit?
Make the process as clear as possible.
Collecting New Hires’ Payroll Forms
This step and the succeeding ones are recurring steps on how to do payroll. Every time you hire an employee, they will need to sign and submit payroll forms to you. The details on these forms have an impact on the payroll function.
Some important forms include tax forms, work authorization forms, and others. The kinds of forms you need will depend on factors like your state and nature of operations.
Gathering, Reviewing and Approving Employees’ Time Sheets
Checking your employees’ actual work time determines how much you will pay them. So, set a schedule on when you will collect their timesheets. You also need to specify which cutoff period the timesheets should be for.
Calculating Payroll Amounts
Now comes the challenging part! Payroll involves working with numbers. You will need to calculate gross pay, applicable deductions, benefits, and net pay, among others.
Be sure to know and apply the payroll laws and regulations in your area. Use a calculator or software to help you add figures up. Double-check the amounts to verify their correctness.
Making the Payments
Once you know how much you owe to your employees, pay them. But, they are not the only ones you should be paying. You also need to pay for employment taxes and employee benefits. Know which agencies you should be making these payments to.
Documenting and Storing Payroll Documents
Just because the pay period is over does not mean you can already throw documents in the trash. Make it a habit to have copies of important payroll documents. Store them properly. This way, you will have references in case something unexpected happens.
Hire an Accountant for Your Payroll Needs!
If you are still confused about how to do payroll, an accountant offers significant help. Numbers can be intimidating but a CPA knows how to deal with them.
When you need help with your payroll needs, contact Susan Gordon Lee CPA! You can rely on years’ of experience and accounting expertise to help you avoid costly payroll mistakes. Contact Susan Now!