Payroll is one of the most important aspects of running a business. It is an integral part of organizations around the globe. A sound payroll process can improve financial stability, ensure fair wages, and provide strict compliance to city and state laws, which are vital to any growing business. After spending years working with small business owners, we have found that payroll issues are one of the first reasons that small businesses fail. Here are some of the top payroll challenges that can negatively affect your business.
Time Record Errors
It is imperative to make sure that you are accurately recording time and attendance data on your employees. Without accurately recording the time worked by each employee, throughout different projects, it would be hard to correctly charge your customers and ensure fair wages amongst your employees. Inaccurate reporting can severely cost your business time and money when trying to rectify any errors. Even instances where there is not necessarily an error, you will still lose money if working time is not calculated correctly.
Nobody likes late payments. You don't like chasing down your customers when they aren’t paying by deadlines. As a business owner, you also cannot afford to just wait around for your money either. But there is a worry that the time and energy spent to chase down late payments might hinder your profit margin. You have also spent time cultivating and building rapport with your customers. Consistently inquiring your customers whether they have the funds available is not a great look and could hinder the business relationship in the future. Likewise, your employees do not want to wait a couple days after pay day to get paid. Not paying your employees on time can hurt worker morale and can cause some of your best workers to search for other opportunities.
Many business owners do not realize that not everyone that works for them is not necessarily an employee. Workers such as independent contractors, temporary employees, or freelancers are treated differently in terms of payroll rather than traditional employees. It is extremely important to make this distinction because whether they are an actual employee or not dictates whether federal income and employment taxes are withheld. Additionally, it also determines whether you need to use a W-2 (for employees) or a 1099 (for non-employees) when reporting to the IRS. Failure to correctly classify an employee could result in costly fines and other administrative challenges.
Many business owners feel overwhelmed with the challenges that come with running payroll. Luckily, there are organizations called Professionally Employer Organizations (PEOs) that can take over all your back office needs so that you can focus on running your business smoothly. PEOs are experts at all things payroll and can assist with any issues you are facing. PEOs ensure that all outgoing payrolls have accurate time data, are going out in a timely manner, and that all employee classifications are correct.
Partnering with a PEO like CornerstonePEO may be in your best interest. CornerstonePEO covers everything from HR and employee benefits to payroll and workers comp. Our industry leading PEO services offer innovative, cost effective, easy to understand business solutions for companies of any size and industry. Contact us to learn more.