Making payroll is perhaps the most important task for a small business. Unfortunately, issues regarding payroll in small business are also common. Here are 5 common payroll problems and how to avoid them.
Hiring Out-Performs Income
Often small companies will experience rapid growth, and a business owner can feel mounting pressure to hire more employees. A small business will not have had time to build up revenue to appropriately pay the added staff in some cases. Before reaching that point, the business owner should assess growing business activity and needs against current payroll staff’s skills and workload. This will allow the owner to develop smart strategies to efficiently use the current human resources without over-extending payroll funds. The expansion of staff should only happen after the business has built enough steady income to meet new employees’ required payroll.
Temporary Staff is Needed
You must know when to hire new staff, how to manage their payroll funding, when the revenue will build up, and how to overcome expenses until your revenue is generated, which means temporary staff might be a good option. For example, if your business wins a project and you need more staff to carry out the task before the deadline, you need to increase your company’s payroll. However, a temporary project also increases the expenses in a company. This is a common scenario in construction companies, landscapers, and designers. Fortunately, this process is predictable and calculable, so prepare in advance and plan out finances and any other foreseeable issues. You can take money out of your business’s last season or borrow money for the payroll funding until the next season yields revenue.
At start-up, business owners often hire more employees than business needs require. New business owners can get in the habit of hiring staff for any new task that arises instead of efficiently dividing the work among the existing staff. Before hiring another team member, explore other options such as outsourcing contractors, finding automated ways for tasks to reduce the burden on the team, and reorganizing existing teams.
Delayed Payments or Discounts Given to Customer
Many customers delay their payments; however, if your small business is running short on income, you can quickly generate invoices and immediately send them to customers. This will help minimize any extenuating delay in receiving payments from your customers.
One incentive to receiving payment quickly is to offer your customers discounts if the payment is made within a given time frame before the deadline.
Another option is to use Invoice Factoring for typically slow-paying customers. Invoice Factoring is when a business sells their invoices to a third party known as a factor or factoring company at a discount. This service can be provided by independent finance providers or even by banks.
Misconstruing Payroll Taxes
It is imperative that you carefully calculate your payroll taxes. Otherwise, the Internal Revenue Service (IRS) will send notice to you that you owe your employees money. This will naturally create payroll issues for your business and for your employees. However, it is important to note that a taxpayer can request the Internal Revenue Service to make a negotiation on payroll taxes for a small business and settle payroll taxes lesser than the full amount.
Payroll problems are a common issue for small businesses. If a business is running short on funds to meet payroll, the priority must be to secure funding from an alternate source. After all, if not carefully planned, payroll funding problems can drastically harm your business’s credibility and financial health. Small business owners should strategically manage their payroll funding by avoiding common mistakes like ill-timed hiring, poorly planned temporary projects and staff, over-staffing, delayed payment receipts and misconstrued payroll taxes.About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.