Payroll, at its surface, can seem very straightforward. At its core, you record employees time and pay them the agreed rate for that time, or just pay them a salary. But if you get complacent in running payroll, it is easy to make costly errors. Here are the top 5 costly payroll mistakes that we have seen our clients make.
Knowing The Payroll System
The top problem payroll personnel face is the system in which it is run. If you are using a challenging system or a system that does not fit the needs of your business, you are going to face numerous other challenges. But beyond having the right system, having an expert who knows the system working on your payroll is necessary. If the person running payroll is not an expert in the system, they will inevitably face challenges and make errors. So, being intimately familiar with the payroll system is critical for success.
A key to resolving any issues that arise, catching errors, and ensuring correct tax filings is by maintaining complete and thorough records. Each payroll, pull reports from the payroll system and store them in the company’s records. You can lose important data without these reports. Personnel can sometimes overlook this step, but it is essential if an issue comes up.
Incorrect Tax Rates
Tax rates change each year, and payroll personnel frequently overlook tracking down and verifying these changes. Especially if you have employees in multiple states, confirming the updated tax rates is time-consuming. If you overlook this step, employees or the company can owe taxes during tax season. This step is critical, and worth the time investment to ensure accuracy.
Missing Payroll Deadlines
Perhaps the simplest mistake is missing a deadline with payroll. It is easy to get caught up in day-to-day activities, especially if your payroll personnel have other functions. But missing these deadlines can mean employees do not get their pay on time, which can result in financial hardships, confusion, and frustration across the board. It is important that the person or people running payroll are highly organized and punctual to ensure no deadlines are missed.
A company’s and payroll owners’ biggest nightmare is improperly paying employees. It creates a sticky situation for everyone involved. But it does happen – especially with hourly employees. To avoid this major error, the payroll personnel should spot check each payroll for any abnormalities. It is also essential to periodically double check tax rates, ensure time and overtime are being calculated correctly, and ensure various deductions and earnings codes are running properly and are accurate. Taking these steps minimizes the chance for a major mistake in a payroll.
The Eli Advantage
Here at Eli Advisors, we have learned from the mistakes of our clients. We know the system inside and out. We keep thorough records, triple check tax rates with the government agencies themselves, and have a proven payroll process to ensure no deadlines are missed and to catch errors before they run through payroll.