There are a few days every employee looks forward to each month – paydays! But while this can be a time of celebration for workers, it can be stressful and tedious for small businesses – especially those just setting up shop. An estimated 20% of small business owners reported spending at least six hours on payroll taxes each month, while others reported spending 10 hours per month, or three work weeks per year, on payroll alone.1 

A way to remedy this and focus your time and efforts on other operational tasks to grow your business is to automate payroll. Payroll software can help your business accurately calculate and file payroll taxes, avoid common mistakes and penalties, notify you of tax deadlines and pay employees the correct amount – including yourself.

Let’s take a look at four benefits you can reap as a business owner by implementing payroll software.

Avoid Payroll Mistakes

Accurately calculating your and any employee’s pay is crucial when it comes to payroll. While certain mistakes, such as typos, are manageable, errors concerning employment taxes cost 40% of small businesses an average of $850 per year in penalty fees.1 Investing in an automated payroll system can help you avoid paying expensive fees and a potential tax audit by:

  • Staying up-to-date on changing state and federal requirements
  • Calculating the correct amount to pay employees, including accrued sick and vacation time
  • Centralizing and organizing important new-hire and payroll tax forms
  • Deducting accurate taxes and filing them automatically

Payroll systems can also help you pay yourself. In most cases, the way you, as an owner, are paid depends on factors such as your business plan, years you have been in operation and your entity type. Based on these criteria, you can choose to be paid via salary or owner’s draw, which a payroll system can help automate.

  • Salary is a standard, recurring payment for those who own an S or C corporation and are involved in daily operations. Paying yourself a reasonable salary triggers payroll taxes to kick in, which a payroll service can assist with.
  • Owner’s Draw is a way for LLC, sole proprietors and partnership owners to withdraw funds from their business to use at their discretion. This method provides the flexibility for business owners to take out a range of payments based on cash flow. Additionally, taxes on these withdrawals are delayed until you file your individual return.

Reduce Overhead

Payroll takes time, and in your business, time is money. Outsourcing your payroll tasks to an automated system can help give you time back. Even if you are just starting out and are your only employee, manually determining your pay and accurate taxes can significantly halt operations, wasting your time and money. 

Remain Compliant

Bringing on additional help including employees, contractors and vendors to help your business grow is exciting. However, involving more individuals in your business often includes additional paperwork to remain compliant with state and federal standards. For instance, many states require you to send them new hire information such as name, address, Social Security number and start date within 20 days of hire.2 Payroll systems can send these new hire reports automatically so you don’t have to.

Plus, certain payroll software systems store, organize and help your new hires complete federally mandated forms, including an I-9, W-2, W-4 and 1099. The system stores all forms for easy access should you need to revisit them at a later date.

Secure Employee Data

In-house payroll means dealing with a plethora of personal employee information. If you are not operating on a secure device or network, cybercriminals could hack into your server, access this data and steal employee information, funds or worse.

Partnering with an automated payroll system could help protect your data through encrypted, highly-secured virtual servers that continually update and back up. Be sure to consult with a tax professional to find a payroll system that’s right for your business.

APGFCU is dedicated to helping you achieve your dreams – visit our website to learn how we can help your business grow and succeed.