Payroll Best Practices Every Business Should Follow

For most businesses, regardless of industry, payroll tends to be the single largest monthly expenditure. If your payroll is inaccurate, there will be consequences. You risk upsetting employees if paychecks are off or late. You also risk noncompliance with reporting requirements, potentially leading to fines.

Following payroll best practices helps eliminate mistakes and omissions and boost productivity. A payroll expert can help you identify gaps and implement practices most suitable for your firm. There are also many things you can do on your own to ensure confidence in your payroll department.

List of Payroll Best Practices 

There are certain things every company should be doing to handle payroll accounting efficiently, accurately, and thoroughly:

• Create a manual that explains all payroll-related processes. This ensures continuity, especially when bringing in backup staff and new employees.
• Create a calendar that shows when everything is due—not just paychecks but also reporting documents and payments—so nothing slips through the cracks.
• Make sure trained backup staff are available to process payroll.
• Institute good internal controls. For example, the person responsible for approving or adjusting salary amounts should not be the one who processes payroll. The person who reconciles monthly bank statements should not be the one who issues checks either. Sometimes in small firms, there are not enough staff members to achieve this much separation, which makes it all the more important to maintain a good paper trail for all payments and deductions.
• Use direct deposit rather than spending time and money on check writing. This is more efficient for employees, too.
• Reconcile individual payrolls against quarterly and annual figures to make sure everything balances.
  Stay up to date on changing legal and regulatory requirements.
• Keep accurate records. Ensure you have comprehensive documentation detailing payments made and their respective dates, along with supporting documents such as employee time cards. Keep your records in an organized manner to ensure easy access for audits or in case of tax notices.

Automate where you can so your payroll department can function as efficiently as possible. Technology saves time and improves accuracy, and there are multiple tech options that can complement your overall payroll processing system. For example:

• Timekeeping software allows employees to track their work and payroll staff to capture that information without manually entering the data.
• HR self-service software provides employees with the autonomy to update personal information and change their tax withholding and banking on their own.

So How Are Things Going with Your Payroll? 

Ask yourself these questions:

• Are you complying with all applicable payroll tax and labor laws? This becomes even more complex for organizations that operate in more than one state and/or have employees who work remotely as well as onsite.
• Are you taking all available tax credits that run through payroll?
• Have you had turnover among payroll staff?
• Is your office manager or administrative staff responsible for processing payroll? If so, are you confident they are up-to-date on current requirements, best practices, and your own internal processes so you can be certain your payroll accounting is accurate?
• If you are using a third-party payroll provider, are you able to get timely responses and answers when needed?

Concerns such as these are all good reasons to consult with a payroll expert.