6 Common Mistakes to Avoid on Payroll for Startups
Believe it or not, payroll mistakes can slow down your startup business if not remedied right away. Worse, it can decrease your employee’s morale if you don’t do something about it.
Payroll mistakes often show that there is an internal problem within your business’ culture and process. And you don’t want that to keep happening in your business, right?
We’ve prepared a list of common payroll mistakes that startups should avoid making.
Classifying Employees Incorrectly
Before you can start the payroll process and fill out paystubs, there is one crucial thing to do – you have to categorize your employees correctly.
This means that you have to decide whether your employees are employees, independent contractors, or executives and managers. Failure to do this will make your payroll process harder.
Making a mistake with the payroll calculation is what you don’t want to happen. A mistake with your paystubs is a bigger problem.
Mixing Personal and Business Expenses
If you are a small business owner, you are likely to use your personal account to pay business expenses. But this is a mistake because the Internal Revenue Service (IRS) may view this as a personal expense.
If you mix your business expenses with your personal expenses throughout the year, it can be a problem when you have to do your taxes later on. If you don’t have a separate account for your business, chances are you may lose track of your expenses.
Keeping Incomplete Records
The number one reason startups fail is that they don’t keep their records. This includes payroll records.
Keeping the records means that you have to keep track of your payroll expenses so that you know how much you have spent on your employees. Payroll preparation is a tedious process, and it takes time.
The good thing is that there is software that can do the payroll for you. Just remember, however, that you still need to be aware of your expenses and monitor the software.
Poor Payment Schedule
A good way for you to thank your employees for their hard work is to pay them on time.
To avoid missing any payout, you have to set up a payment schedule. And this payment schedule should be in writing. This way, your employees are aware of their paydays, how they should be paid, and when they are paid.
Incorrect Payment Calculation
Miscalculation of salaries is a grave mistake that you should avoid at all costs. We recommend that you hire a payroll expert if you don’t have the time and knowledge to do your payroll.
Excessive Benefit Payments
One of the greatest benefits of running your own business is that you can take full control. This gives you the freedom to make decisions and updates about your employees’ health benefits.
But often, founders or business owners let their employees dictate terms on their benefits and health insurance. This can lead to overspending on your healthcare and health benefits.
It is important to have a good insurance plan for your business and employees, but don’t let yourself get the short end of the deal as well.
Conclusion
Running a startup business can be difficult. There are so many things to do in such a short amount of time. And you have to do everything right, or your business can fail. With all these, it is easy to make mistakes.
We hope that this short guide can help you avoid some of the mistakes that most startup business owners make.
Totally Booked handles all aspects of bookkeeping, including accounts payable/receivables and payroll services for small businesses. Let us help you streamline your payroll management process. Schedule an appointment with us today!