Managing Your Payroll

Capitalism drives our country's economic system. What does this mean for you? This means that businesses earning decent profits are the ones that will survive. In order to succeed, you need employees, who, in turn, must receive monetary compensation for their work. Keeping up with various business finances can be a pain, and payroll is one of the most important parts. Simply, put, employees will not work without money. Though payroll management can seem daunting, there are a few things that are standard no matter how large or small your business may be. Deciding how often your employees will receive compensation is the first step. Determining the length of pay period will help you manage the flow of money in and out of your company's accounts. Once compensation periods are set, wages must be set for employees. Usually department heads, alone or with other managers, will set a wage range for each position within the company. A very important part of payroll management is taxes and deductions for federal and state governments, as well as for the employee personally. The amount of these deductions -including federal and state taxes, social security, Medicare, health insurance, 401k and other retirement plans - will vary depending on the employees wage rate. Salary, hourly, part-time and freelance workers all require different taxes and deductions that vary from state to state. And calculating these deductions properly is extremely important in order to avoid government fines and back taxes, or worse, audits. Take the fun of the math and add it to deadlines, and you've got potential for disaster. Depending on the size of the company and the kind of company, taxes are due at varied times throughout the year. If a payment is the wrong amount or late, there can be fines and penalties that can eat into the company assets quickly. After wages are set and deductions are taken out, the employees must get their compensation. The management is responsible for establishing direct deposit links or sending out paper checks if your company provides that option. Another role of your accounting department is to make sure that W-2 forms are mailed to each employee by January 31 of each year. As if this wasn't enough, your payroll department must manage cash flow for the entire company and make sure there is enough cash available in order to pay your employees. Coming up short on cash can throw your company in the red and easily force your office doors to close permanently. There are options for payroll management. If you feel comfortable and have the knowledge, it is possible to maintain the cash flow in-house. You can also use various software programs to help you keep up with wages and deductions, but even computers can prove inaccurate if the information is not entered correctly. Another option is outsourcing your work to a company specializing in this type of work. Some companies choose this route if they are larger or have a numbers of different employees with varied pay rates and deduction levels. Deciding how to handle your employees can seem difficult, but researching your options will allow you to make the best decision based on your company's needs.