It is no secret that 20% of small businesses fail their first year. And unfortunately many others follow suit beyond their first year in business. Sadly, payroll mistakes are often the primary reason for small business struggles.
Getting your payroll under control can ease cashflow and help keep your company afloat. But payroll success is also dependent on the other systems and procedures you have in place to make sure everything is running smooth.
This Halloween, don’t get spooked by your payroll nightmares. Instead, take a trip with us through this list of 6 common payroll mistakes and our tips to vanquish those payroll fears once and for all!
1. Human Error
Everybody makes mistakes. Employees enter incorrect hours and time cards get lost. Sometimes employees forget to clock out. On occasion, supervisors even fail to track overtime or make data entry mistakes. The fact is, as long as you’re keying in data, you’re susceptible to data entry mistakes.
If these errors were isolated, they wouldn’t be such a big deal. However, this is unfortunately not the case; human error often causes a domino effect leading to even more trouble down the road.
Secret Weapon: Automated time and attendance can help reduce or even eliminate opportunities for human error to affect your payroll. Smart punches and schedule enforcement keep employee time accurate and compliant. But more importantly, directly importing hours into payroll will save you time and errors.
2. Missed Deadlines
If you’re like most small business owners, you spend your week focusing on pleasing customers. Unfortunately, that means operational demands often come as an afterthought.
But payroll deadlines simply can’t be missed. There are penalties to be paid if you do–and not just financial ones. There are also federal, state, and local tax filing deadlines to worry about.
Secret Weapon: Partnering with a good payroll company to back you up and help carry some of the burden is an invaluable resource for any business owner. After all, you started your business to follow your passion–not because you were an expert in employment law and business taxes!
Compliance is a big issue that many employers often overlook. It isn’t simple, and it requires constant vigilance with laws changing and new regulations popping up all the time.
Compliance with the Fair Labor Standards Act (FLSA) is the most common area of trouble for small businesses. However, new Affordable Care Act (ACA) regulations are also coming up and will need to be considered. Healthcare providers will be burdened with Payroll Based Journaling requirements. (The list goes on…)
Secret Weapon: All SDP Clients receive free access to our HR Support Center, an online library of articles, laws, job descriptions, checklists, and more. That means no more scouring the internet or wondering if your information is up-to-date. Our HR solutions are designed to keep you compliant with all federal and state laws!
4. Preparing For Audits and Legal Challenges
No one likes an audit. And few business owners think about them until they occur. Preparing for an audit can steal a lot of time from your focus. Additionally, if you don’t have good records, this process can be terrifying.
Secret Weapon: Ultimately, preparation for an audit should be a matter of automation. When you use modern time and attendance tracking integrated with payroll, your records are always ready. That’s why our time and attendance software runs in the cloud: so backups are off-site and available 24/7. Audits no longer need to be a frightening event.
Looking for a more proactive approach? Ask about our HR Complete solution to learn how our very own Director of Compliance Brett Strauss, Esq. can visit your office to conduct an on-site audit and build you a custom roadmap to overcome any potential compliance roadblocks you may be facing.
5. Improper Employee Classifications
Incorrect employee classification is a common payroll pitfall. It’s amazing that this is a common reason for business failure, but it is.
The three critical classifications are:
The “exempt” refers to overtime protections. Non-exempt employees earn overtime when they work more than 40 hours a week. Exempt employees don’t earn overtime.
Improper classification of an employee can result in fines or non-compliance penalties. Further, employees might not receive credit for the right pay scale, resulting in a short paycheck.
Secret Weapon: You can find step-by-step guides to properly classify your employees in our HR Support Center. Need some more hands-on help? Let us know here and we’ll have our Director of Compliance reach out to help answer any other questions you may have!
Many of the problems we have discussed have roots in cashflow. When funds are low, it’s easy for situations to become desperate.
Scheduling and time and attendance can have a huge impact on cashflow. For example, unplanned overtime can sink a business without you even knowing. Alternately, overstaffing can drain your budget when income doesn’t match the resources.
Secret Weapon: Workforce management software with integrated scheduling can help you avoid these problems. Efficient time and attendance management can help you shave time and increase productivity. With workforce management software doing the heavy lifting, you can optimize your cashflow.
Are you ready to face your payroll fears head-on? We hope these tips and reminders are helpful to streamline your own business’ payroll processing experience. If you’re interested in learning more about SDP Connect, our automated workforce management technology, or HR support, let us know in the comments below! Want more ways to keep your business compliant? Check us out on Facebook, Twitter, and LinkedIn to make sure you never miss a beat!