10 Essential Tips for Payroll Management of Small Businesses

• Reading Time: 3 Minutes
• Published: December 2, 2020
• Last Updated: March 5, 2025

Is payroll management driving you crazy? Payroll is one of the number one concerns for small businesses, struggling to get everything right. Payroll processing is time-consuming, monotonous, and tedious. It is tough but necessary. Every small business owner is seeking ways to make their payroll process accurate and efficient.

Following are some tips to manage and enhance the process of payroll services of the small business:

• Create a policy for payroll
  The company must be familiar with labor laws and follow them. It must define and implement a payroll policy from the start to ensure that all employees are aware of what remuneration to expect, how exactly the payroll works, the period of payroll, and any employee benefits.
• Set up a system
  The aim of a system, whether manual, automated or outsourced, is to manage and calculate pay checks of employees. Many small businesses use a manual system. But this is tedious, time-consuming and prone to errors. The automation of payroll saves energy and time. If there is a staff shortage, the best solution is to outsource payroll processing.
• Proper categorization
  Small businesses must distinguish between regular employees and independent contractors. Employees must be remunerated as per minimum wage, payment for overtime, etc. This is not required for independent contractors.
• Uniform schedule of payment
  For accuracy and efficiency, it is vital to have a uniform schedule of payment. It is easy to maintain and less susceptible to error. The schedule of payment must be defined whether hourly, weekly or monthly.
• Link to payment systems or bank accounts
  The payment for the employee must be transferred to his/her bank account or via payment systems to avoid travelling to the bank. This will send automatic alerts to employees.
• Know big deadlines
  If it is known well in advance, it is easier to deal with employee returns and accounting deadlines. The company must ensure to put in place a good system which alerts about crucial dates and if any action is required. Working ahead provides time to sort out any problems or blips.
• Use payroll software
  The whole process of payroll processing can be automated using the software. The latter will take care of tax details, general pay slips, end of year payroll taxes , etc. Time tracking software can be used to track the productivity of an employee, gain real-time data on office attendance, use biometrics, etc.
• Be strict about details
  One can setup accurate employee detail on the system of payroll. This includes start dates, dates of birth, up-to-date addresses as well as details of job like attendance, leaves, overtime pay, etc. Any mistakes will pose potential problems.
• Financial back-up
  It is crucial for a growing business to stay on top of all payments. The business could be in trouble if customers fail to pay up and it is not able to pay employees. Always, the company must arrange sufficient operating funds for a rainy day.
• Outsourcing
  If payroll processing is a headache, even after automation, it will do well for the company to outsource the function to a company specializing in payroll processing.

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