Businesses that run payroll manually are all too common, and we've seen the unfortunate and damaging effects. There are many things you can and should DIY. Payroll isn't one of them.
When we say manual payroll, it's really a shorthand expression for not using an industry-standard payroll processing software tool or outsourced payroll service. Many small businesses with only a handful of employees think they're saving time and money by writing out paychecks, calculating withholdings, and keeping records for tax time. Unfortunately, time and money are exactly what these businesses risk losing, in big ways.
Employers have a great many responsibilities on top of making sure people get paid the right amount of money on time. It's critical to choose a payroll tool that keeps you on top of every last rule, regulation, and requirement, while also saving you from the slog of endless data entry.
When evaluating payroll tools, look for the following features:
Calculating and automatic filing of payroll taxes with every payroll
Once those tax dollars are withheld from an employee's paycheck, they shouldn't appear as available cash on your books. We've seen companies delay their payroll taxes as a way to provide temporary relief to cash flow struggles, and it hasn't once worked out well in the end. The penalties and interest charged for failure to remit payroll taxes on time end up costing far more than other cash flow management strategies. Using a software tool that automatically pulls the taxes out of your account with every payroll will lead you to better cash management in the long run, even if it seems difficult at first.
Integrated management of everything that affects paychecks
There's no reason you need to have a bunch of different systems to manage all the various details associated with payroll. Look for a tool that includes integrations for:
- Time tracking
- Retirement accounts
- Health insurance premiums
- Workers' compensation
- Paid time off
If your business has specialized needs, seek a flexible tool that can adapt to serve those needs.
Compliance with all federal and state documentation requirements
Most business owners know they need to collect and keep forms like W-2s, I-9s, and contractor 1099s. It's the individual requirements of each state that tend to trip people up. Your payroll software should be up to date with the latest rules and regulations for federal and state documents, and also help you manage the process of collecting and storing all that paperwork.
Time records for hourly employees that show compliance with labor regulations
We dream of a world where no one has to manually enter employee hours in order to run payroll. Further, you need to be able to show compliance with labor regulations related to break times and lunches for hourly employees. Look for a payroll software with integrated time tracking capabilities.
Automatic syncing with your bookkeeping software
Double data entry is a thing of the past. Every payroll should be automatically recorded on your books, ensuring you have an up-to-the-minute picture of your cash standings.
The payroll tool of choice
Gusto is our payroll system of choice for many reasons, not the least of which is its seamless integration with Xero's cloud-based bookkeeping software. In addition to all of the above features, Gusto offers an industry-leading platform that includes benefits management, time tracking, and stellar customer service.
It's all tailored to small businesses, so you aren't stuck navigating through a bunch of enterprise-class features you'll never use. Gusto makes payroll easy, compliant, and (dare we say it) even fun. We offer professional Gusto onboarding that ensures your payroll is set up correctly, integrated with Xero, and collecting all required documentation. We also train you to set up new employees so you're ready to run with every new hire. Contact us today to learn more.