It’s that time again: Payday.
It’s a day employees celebrate with glee. But if you’re like a lot of small business owners, payday is not exactly the highlight of your month. Running payroll can mean fire drills, late nights, and spending time away from the things that actually go into running your business.
But could finding the right payroll software for your small business make this routine more manageable?
It could. Before you start researching the best payroll companies, let’s first figure out your payroll needs.
Fall in love with modern payroll
Are you paying independent contractors?
If you are only paying independent contractors, then you don’t need payroll.
That’s because independent contractors are generally considered self-employed. You simply need a way to get them their money, like writing them a check or transferring the funds electronically. And you’re typically not responsible for withholding their taxes.
Are you paying employees (including yourself)?
Depending on the type of business entity you own, you may be required to give yourself a salary as an employee. If that’s the case, you’ll have to run payroll in order to pay yourself and any other employees.
Federal rules affect whether a worker is classified as an employee or independent contractor and whether you need to withhold payroll taxes. It’s always a good idea to consult a tax advisor if you have questions.
How can payroll software help?
If you have employees on payroll, you might want to consider using payroll software to handle everything.
Here are just some of the ways it can help:
1. Payroll software can save you time
According to SCORE, most small businesses spend between one and five hours managing payroll every month. And that number doesn’t even include the 41-plus hours spent on year-end tax preparations.
If you use payroll software, you could spend some of that time on other things.
Photographer Nicole Chen used to dread the end of the month when she’d spend an hour and a half sorting through labor codes and technical glitches to get her payroll right. With payroll software, it now takes her five minutes.
“[My business partner] Karen and I can do a lot with that extra hour and 25 minutes,” she said. “We’ve been making a distinct effort to work on personal creative projects, so that additional time is really valuable.”
2. Payroll software can help you avoid crucial mistakes
For the 2018 fiscal year, the IRS levied nearly $5 billion in penalties for mistakes businesses made with their employment taxes.
There’s no way around it: Payroll errors can be costly, time-consuming to fix, and stressful from start to finish.
From calculating and withholding taxes to helping with end-of-year filings, the best payroll software will help you avoid the most common payroll mistakes.
Payroll companies usually update their systems to stay on top of changing state and federal requirements. They even automate tasks like tax filings and send you alerts when you have tax deadlines to meet.
3. Payroll software can help you focus on your business
Using payroll software to streamline payroll means you can focus on actually running your business. Wish there were more hours in the day to interact with customers, bond with your employees, figure out marketing, or brainstorm new ideas? Payroll software can give you more than a few.
“My time is everything to me,” said Andrea Talley, owner of GreenLid restaurants in San Francisco. Using software for payroll gives her “more time to be in the business—like thinking about our products, and our quality and sourcing—and doing the types of things that I started the business to do.”
Signs that you might need payroll software for your small business
If you find yourself drooling as you look over this list, chances are you’re a good candidate for switching payroll providers.
You want to automate your business as much as possible
From filling out forms for new hires to calculating and filing your payroll taxes, to paying your staff and your contractors on time, the ability to set it and forget it (or at least forget parts of it) is what sets modern payroll software apart.
You want customized software that works for your small business
Whether you run payroll weekly or monthly, offer health benefits, allow employees to make charitable donations from paychecks, or give the occasional bonus, your payroll system should be tailored to your needs. Otherwise, you’ll end up doing more administrative work on the side, which really defeats the purpose.
You want to simplify your business taxes
Payroll software can do much of the heavy lifting with your employment taxes—withholding, filing quarterly reports, preparing W-2s and 1099s, and more. This will help your end-of-year accounting go much more smoothly.
You want to offer an employee portal
Employees often need to be able to access their own pay and benefits records. A portal can actually improve employee morale because they’ll have access to information when they need it and better control over their work lives. It’ll also save you time by empowering your employees to access their pay stubs or W-2s on their own.
You want flexible access and integrations with other software
Maybe you want your HR manager to have their own login. Maybe you want your accounting or time-tracking software to sync with payroll.
Whatever the case, payroll software can help take the administrative pressure off yourself by offering integrations and features that let you collaborate with other people on your team.
You want great customer support
You want to know that someone has your back. Any small business payroll provider you work with should be responsive and able to help when you need it.