Six Tips to Process Payroll Successfully

December 06, 2023

For small business owners completing payroll can often be extremely detailed and confusing. They must keep many dates and times straight and fully understand and be aware of when they must complete and submit certain forms and paperwork.

In order to simplify this process for ambitious small business owners who strive to be successful at payroll, PaySmart has made a guide to support the process. This guide outlines important actions they must take to successfully process their payroll. This guide is a MUST READ for any small business owner.

Here are Six Details Small Business Owners should be aware of when they are Processing Payroll:

1. Choose a payroll service to assist you.

Before small business owners attempt to complete their payroll completely on their own for the first time, they should consider selecting a payroll service to assist them. One of these services will help small business owners keep all of the information straight that they will need to successfully process their payroll. This information includes employee pay rates, tax deductions, receipts, mileage, etc. Selecting this service before beginning to process payroll is essential to small business owners doing so successfully. They will want to have all of their information easily accessible in one place before they begin the process. Businesses that have tried to perform this function on their own can contact PaySmart at any time to learn more about small business payroll solutions.

2. Select a payroll schedule.

Next, small business owners must choose which payroll schedule they plan to implement before they begin the process. A payroll schedule is when employees will be paid. This schedule can be monthly, twice a month, every other week, or weekly. Small business owners should select the schedule they believe works best for their business and employees. It is important for them to consider how often their business will bring in enough money to pay employees as well as how long their employees can comfortably live between paychecks. Therefore, this schedule will give small business owners a clear understanding of when and how frequently they must devote their time to processing their payroll. Businesses that are processing and are having challenges with their current schedule may want to work with PaySmart to strategize what other schedules may work best for them.

3. Ensure you have an employer identification number established and other tax IDs.


Once small business owners have completed the preliminary work to ensure they are ready to begin processing their payroll, they must secure an employer identification number. State and local tax IDs need obtained. Small business owners can set up their employer identification number, also known as an EIN, by using the IRS website. Furthermore, in order to get their state and local tax IDS, they will need to contact their state and municipality. An EIN and other tax IDs are used by the government to track a business’s payroll taxes and ensure they are completing the process correctly. Therefore, once they have their EIN and state and local tax IDs established, small business owners are ready to begin the payroll process. Small businesses that are unsure of how to obtain this information may contact PaySmart to receive direction.

4. Collect all tax information from employees.


When each new employee is hired, it is the job of the small business owner to collect all relevant tax information from them. This is needed to pay them and complete their payroll.

Most commonly, employees provide this information by completing a W-4 or I-9 in addition to any state or local tax withholding forms that may be relevant to the business where they are employed. These forms will outline how much tax should be withheld from their paychecks. They outline this and any deductions, such as those used for benefits or a retirement account.

PaySmart provides clients with all the forms necessary to collect this information. It is imperative for small business owners to have this information for each employee to ensure they pay them the correct amount and on time from their first paycheck with the business to their last.

5. Determining the pay for employees (Gross Vs. Net)


Determining the calculations involved in determining each employee’s gross pay is important for accuracy. This may be the portion of their salary they will receive for this paycheck. Typically this is the number of hours they worked for that pay period multiplied by their hourly rate for non-salaried employees.

Also, small business owners should make note of any overtime each employee worked. Hourly employees need compensated appropriate for this time. Often, this is time and a half for every hour over 40 in a given work week.

Once this number is determined, small business owners must make any deductions to each employee’s paycheck. These deductions include any taxes, benefits, retirement account contributions, or other deductions. After these deductions have been made, this is the employee’s net pay.

The small business owner can then move forward with paying each employee this amount. As you can see there are a lot of calculations per employee involved. This is why working with a payroll provider has a huge value in that the resources provided take great care in getting these calculations right eliminating guesswork and manual calculations.

Employers are responsible for remitting taxes to all regulatory agencies and meeting those regulatory deadlines. This piece is not a walk in the park for a business owner that may have little resources. PaySmart makes this process and all of payroll much simpler for small business. PaySmart collects and remit these payments on the employer’s behalf. It is one of many reasons small business owners that may have tried to perform this services on their own have sought out the expertise of PaySmart.

6. Keep payroll records.


As small business owners are responsible their payroll, it is imperative that they keep the appropriate records on file.

One particularly important record they must have for each employee is their W-2. Small business owners will have to distribute W-2s to all employees by January 31st each year. This will allow them to complete their income taxes on time and correctly.

PaySmart provides this service (W-2 and W-2 distribution) to their clients. It is important that small businesses ensure the employee’s records are accurate and up to date. It would be a good idea to validate their list of employees have not had any changes such as an address change and if they have that their employee’s demographic records be updated. This allows W-2s to be completed and received accurately by employees allowing those that want to file their taxes timely making for happy employees.

Small business owners should keep records of their own tax information, including their EIN and state and local tax IDs. This will allow them to successfully file their own taxes timely and accurately.

Processing payroll can be challenging for small business owners that are focused on working hard at their day to day tasks. PaySmart is here to help and has helped hundreds of local small businesses as small as one simplify payroll. When working with our team of specialists, small businesses have found that we have been able to support the needs of clients by making things easier to understand and simplifying payroll. We pride ourselves in giving business owners their time back so they can run their business. This guide is designed to inform small business owners of all that is involved with the payroll responsibility.

PaySmart is a payroll provider located in Mechanicsburg, Pennsylvania, supporting small businesses in the Central PA region. We are dedicated to helping small businesses take care of their payroll needs. To learn more information about how PaySmart may provide payroll solutions, please get in touch with us at 717-766-1777. Our New Client Concierge is waiting for you!