Instant Payroll: Seven Strategies to Achieve a Faster, More Efficient Payroll Process
As one of the most vital administrative tasks for businesses, proper payroll management has a direct impact on success, profitability, and longevity. Until you spend countless hours editing an Excel spreadsheet, however, you will usually not understand just how complex the process is. Unfortunately, any failure to accurately account for your payroll could misstate your employees' federal withholdings and salaries, which misrepresents your expenses. If the Internal Revenue Service, or the IRS, catches wind of your miscalculations, you may be liable for anywhere from 0.5% to 25% of the under/overstatement..
Since most business resources have gone through a stage of modernization, there are many ways to improve the efficiency and effectiveness of your payroll management. While numerous methods focus on accurate reporting, you should attempt to implement at least one strategy that speeds up the process. After all, those hours spent editing enormous sets of data would be much more beneficial when invested in product innovation or service development. So, if you want to achieve instant payroll, the following seven tips are great starting points.
Step Away From Manual Processes
In 2019, there is no need to have manual calculations in any part of your payroll process. If your employees are still in charge of calculating the number of hours that they worked, your business is practically operating in the 20th century. Besides the fact that it is much more challenging, manual systems are probably the main culprit of inaccurate reporting. Whether it is due to intentional or accidental errors, employees who have the freedom to calculate their hours are more likely to misstate them.
Sometimes, folks may simply add up or transpose their time wrong, and instead of claiming 9.8 hours, per se, they may write down 8.9. Regardless of how advanced your review might be, such minor mistakes can easily slip through the cracks and remain undetected. Consequently, you will understate your employees' checks, the government will receive less federal withholding, and you will overstate your profits. To stay away from numeric issues, you should begin by replacing manual processes with their automated counterparts. For example, letting the computer calculate hours will help you segregate duties and minimize the likelihood of reporting blunders.
Correct Mistakes Immediately
When you become aware of a payroll-related mistake, which could include anything from a simple miscalculation to a large-scale malfunction, you should immediately work toward correcting it. Even when the final misstatement is just a few dollars, you need to make it a priority to detect the underlying cause. Doing so will help you prevent smaller issues from snowballing into major misrepresentations that the IRS is always looking for. For example, if one of your overtime-eligible employees works for 42 hours during the week, you must pay them 1.5 times the normal rate for the additional two hours. For someone who earns $10 per hour, this would yield $430.
In case your system leaves out the one-half increase, thus, paying them $420, the overall misstatement will be relatively small. In fact, the $10 difference would be so marginal that both you and the employee might be tempted to just ignore it. However, what happens when that employee works for 83 hours in a single week? Leaving out the one-half part of the overtime rate will now translate to a very noticeable mistake of $415, and the employee will definitely not be okay with it. Hence why timely corrections of all errors are highly advised.
According to The World Counts, U.S. offices use 12.1 trillion sheets of paper per year. Outside of the fact that this brings up some colossal sustainability concerns, it can adversely impact your profits. When your instant payroll process relies on physical papers, you have to account for a certain amount of downtime that goes towards printing, proofreading, and confirming reports. Although it may not be more than a few minutes, you are still sacrificing precious time.
For example, if you spend five minutes on paperwork-related tasks when creating your bi-weekly payroll summaries, you waste multiple hours every year. Instead of dedicating that time to unnecessary responsibilities, you should consider going paperless. In other words, you should move all of your payroll procedures to a system that provides digital deliverables. So, rather than printing a timesheet report that accompanies each of your employees' checks, you can keep all this information in one place with a digital solution.
Implement an Organization-Wide Payroll Schedule
When you first implemented an instant payroll management system, you probably glanced over the U.S. Department of Labor's list showcasing various state payday requirements. For instance, when an organization resides in Texas, their exempt employees must receive either semi-monthly or monthly salaries. If they suddenly relocate to Michigan, however, the payday frequency can also include weekly and bi-weekly alternatives, depending on the occupation. Once you figure out the way to stay in compliance with the state laws, you should try to create an organization-wide payroll schedule.
If you work with both salaried and hourly workers, there is a good chance that they receive their earnings at different times. The reason why is that most freelancers tend to get paid faster, typically right after they complete rendering their services. The downside of having multiple paydays, though, is the fact that you must run your payroll analyses and reports more often. You should instead create a matching payment schedule for everyone who works for the company, regardless of their employment status or rank.
Regularly Train Employees
When you are trying to maintain an instant payroll system, it is imperative that you train your employees frequently. Given that laws pertaining to businesses are subject to constant change, it is very likely that you will have to adjust your procedures from time to time. One of the greatest examples of this would be the "Tax Cuts and Jobs Act" from 2017. Since it facilitated many large modifications to the U.S. taxation system, which was not changed for over 30 years, businesses had to adapt fast. Some of the important outcomes of the new law included:
- The IRS issued new withholding tables for 2018.
- The standard deduction for individual taxpayers went up.
- The personal exemption for individual taxpayers was suspended.
- The tax brackets for individuals and entities were changed.
Why should payroll workers care about any of these updates? Because they require companies to adapt their payroll management systems. If a business tried to use its procedure from 2017 to account for payroll expenses of 2018, the numbers would be completely wrong. Courtesy of the brand new withholding table for federal income taxes, human resource employees had to undergo training on how to operate instant payroll in a way that adheres to the new law.
Employ a Digital Software
One of the easiest and most effective ways to build an instant payroll system is to upgrade to digital software. When you research some of the automated options that companies like ClockInEasy offer, you will probably find a good combination of all of the aforementioned strategies. Because an instant payroll system needs to minimize mistakes, intentional overstatements, and paper waste, digital systems are the most fitting solutions given their ability to meet comprehensive objectives.
For instance, if you allow your employees to clock in from their smartphones, you will improve accessibility and eliminate geographical restrictions. Furthermore, by leveraging the already-existing technology, which includes things like facial recognition, you can prevent workers from perpetuating payroll fraud by having others complete their clock-ins. Once you connect their reports to online, cloud-based systems, you will be able to analyze and export data from virtually any internet-enabled device. In other words, you will replace outdated methods of reporting with state-of-the-art solutions that engage digital systems, automation, and advanced technology. Hence why ClockInEasy's track record is characterized by positive reviews from business owners who revolutionized their payroll systems via digital alternatives.
Proactively Investigate and Diagnose Inconsistencies
Your final strategy should revolve around a proactive approach when it comes to investigating inconsistencies. When you operate an instant payroll system that utilizes dollar- or hour-based checkpoints, which most do, any outliers should be a cause for concern. Hypothetically, if your acceptable margin of error is two percent and your average payroll amounts to $30,000, a report that is on track to hit $30,700 is quite worrisome. While there could be a perfectly reasonable explanation, you must try to find it before you reach the end of the period. After all, if there is a numeric faux pas in the system, that $100 above the margin of error could rapidly morph into thousands of dollars.
Since finding the perfect instant payroll system requires trial and error, you need to embrace the research process. After you determine your main priorities, you should consider digital solutions that can help you reach your goals almost effortlessly. More importantly, you might be able to save a considerable amount of time and money by incorporating such an advanced tool into your payroll ventures.