Why Good Payroll Management is Important for Business
by Simplice Essou | July 24, 2023
Payroll management is one of the most important tasks that a business owner has to perform. It is an important function as it helps ensure that employees are paid accurately and on time. For most employers, employees are one of the company’s most valuable assets. Keeping employees motivated, engaged and productive is crucial to the company’s stability and success. Additionally, good payroll management helps ensure regulatory compliance.
Having a Reliable Payroll Management System
Payroll management is the process used to gather payroll data (including employee hours), calculate payroll, pay wages, as well as file and pay payroll taxes to state and federal agencies. According to the Internal Revenue Service (IRS), employers are required to retain payroll documents for a minimum of four years. Therefore, having a good payroll management system is crucial. Many small business owners prefer to outsource the payroll process to payroll processing companies. This allows management to focus on growing the business.
Keeping Employees Motivated
Employees make the business, as they are its most important asset. Employees are often the company’s ambassadors and the face of the business due to their direct interaction with customers and clients. It is therefore important to keep them motivated. This in turn positively affects productivity and increases their loyalty to the business. Keeping an accurate track of hours worked is crucial for hourly workers. According to an article published by dailypay.com, the turnover rate for hourly workers can be up to three times that of salaried workers. A good payroll management system would allow for keeping an accurate track of hours worked. Turnover can be costly as it often takes time to find the right employee, train them and get them up to speed. Having a good payroll management system ensures that employee paychecks are calculated accurately and on time.
Keeping the Business Compliant
A good payroll management system will keep the company compliant with state and federal tax agencies. This will help avoid late fees and penalties that can affect cash flows. Most employers have problems with the IRS because of payroll taxes since the IRS is very demanding when it comes to payroll taxes and aggressively pursues collection activities and enforces compliance for failing to file payroll tax returns on time.
Keeping Good Books
Financial integrity is crucial for the business. For many businesses, payroll represents the largest expense and therefore it is an important component of financial management. Having a well-managed payroll system will ensure clean and transparent financials. Accurately calculating taxes also provides a tax break in the form of deductions.
Payroll Management Software
Investing in a payroll management software may be one of the best investments a business owner can make. Nowadays, there are computerized payroll systems that business owners can access online to run payroll from anywhere. These systems allow for faster and more accurate payroll processing. For business owners who would prefer not to outsource this function, they can find payroll-processing companies who will process payroll, paying employees by check or direct deposit. They will also file quarterly and yearly payroll tax returns and send payments to the IRS and state agencies.
Overall, having good payroll management is crucial for a business to succeed, which is why having a reliable payroll management system or software is needed. It keeps employees motivated, keeps the business compliant, and helps with accurate record-keeping for the company.
Simplice Essou, CPA
Certification Consultants, Consultants, Essou, TampaSpecialty: Accounting, Business Planning, Financial Management, Startup Simplice Essou joined the Florida SBDC at University of South Florida in March 2020 as a business consultant, bringing almost two decades of experience in accounting, finance and entrepreneurship. Essou started and managed an international consulting firm in 2008, specializing in advising African government on issues related to small-to-medium-enterprise development. Previously, he has worked for large corporations, including Bank of America, BP-Amoco, General Electric, and Lehman Brothers. These roles gave him a wide breadth of experience, including the ability to handle forecasting, analyze revenue entries, actively communicate account receivable risks, and lead day-to-day analysis and reporting for credit losses. He earned an MBA in finance from the Wharton School at University of Pennsylvania and a bachelor’s in accounting from the University of Southern Mississippi.