How to Do Your Own Payroll:
5 Tips to Get Started
There are few things as exciting as leaving your boring 9-to-5 day job to step out on your own and start a new business. At the same time, there are few things scarier than keeping up with all of the new tasks that you suddenly have on your plate.
One of the most difficult tasks that budding entrepreneurs have to tackle is the unenviable task of learning how to do your own payroll. Most entrepreneurs bootstrap their businesses and thus don’t have the budget to hire an in-house bookkeeper to get payroll done right every pay period.
But at the same time, payroll is by no means an easy beast to understand. There’s a reason why most accountants go to school for four years before doing this stuff—it ain’t simple!
In this article, we’ll take out the mystery in learning how to do payroll by providing you with five essential payroll tips.
Use the Right Software
First, make sure that you have the right tools to execute your payroll. The right software can take a lot of the mundane tasks out of payroll, like calculating salaries, overtime, and tax withholdings.
In 2020, there’s no excuse for not using a software tool to do payroll. There are hundreds of options available on the market for you to use, from low-budget to higher-end, more fully-featured tools. PayStubs.net, for instance, is an excellent choice.
Gather Employee Documentation Beforehand
Things will be a lot easier with payroll if you go the extra mile to gather all of your employees’ documentation before you start executing payroll. Make it an integral part of your onboarding process to collect all of the documentation that you’ll need from your employees to pay them.
This includes W-2s and any other tax forms, tax identification numbers, social security numbers, salary info, and a direct deposit bank account number.
Take Out Withholdings, Both Federal and State
Few things can be as big of a setback to a new business than getting on the wrong side of the IRS. Ensure that doesn’t happen by taking out withholdings for federal and state income taxes on your employees’ pay.
List Benefits
List benefits on your pay stub. This serves a very important purpose: it reminds your employees of all the benefits that your company offers that they can take advantage of. The natural consequence of this is that your employees stay happy and don’t leave your company.
Consider Outsourcing
Even though this is an article on how to do payroll by yourself, we would be remiss not to mention that you should consider outsourcing.
How much is your time worth to you as an entrepreneur?
$100/hour is probably a conservative estimate. Compare this to how much you’d pay to a company to outsource payroll—it might be a few hundred dollars a month.
Think about all of the hours that you could save and multiply that amount by your hourly worth. Then you can decide whether this option is worth it.
