Money scares me! No, not the spending of it, I’m good at that. I’m talking about the tracking and reporting part!
So, I’m in awe of folks who help others manage the tracking…and reporting…and the paying…and even more reporting! One of those folks is Meike Alberts, a Perquest Agency Owner. They do Payroll.
I interviewed Meike to learn more about the benefits of outsourcing payroll services, since some of my readers might be struggling with tracking and reporting too!
Q: What are the key things a business owner should do to keep their business in compliance with federal/state regulations?
A: They can do a number of things…
- attend update seminars since changes occur so quickly
- link to the state and IRS websites to receive updates via email
- regularly read state and federal department of labor websites for changes (ex. Minimum wage changes)
- subscribe to newsletters to get a snapshot of what you need to know (SBA, Chamber of Commerce, your blog, etc…)
Q: How should a business owner get the knowledge they need to operate effectively when it comes to payroll issues?
A: Unfortunately, there is so much to know in payroll and gaining that knowledge is very difficult. The reason it is so difficult is that the IRS have their own payroll forms and payroll tax due dates, the state department of revenue does as well, and so does the state unemployment office. In some areas like Denver and in Pennsylvania, there are also local tax requirements. I teach a Payroll 101 class that brings all of this information together. In the class, we process payroll (the easy part of paying the employee) and then file all 28 tax deposits and returns associated with paying just 2 employees. It’s a great overview and will give business owners the basic information on payroll processing and payroll tax filing. Plus, it will allow them to better budget for payroll liabilities. Otherwise, the business owner has to go to each website and navigate through each reporting entity’s requirements! Very painful!
Q: What typical mistakes or oversights do business owners/payroll managers typically make?
A: Again, there are many…
- Forgetting to make tax deposits is a big one. With so many different due dates, it’s difficult to manage. A business owner is pulled in so many different directions and trying to keep them all straight is difficult.
- Making deductions for items pre-tax instead of post-tax. Programs such as QuickBooks allow payroll managers and business owners to deduct items pre-tax if they select it in the menu. This does not always mean it is allowed. I see this many times with 401k plans, where it is entered in the system as exempt from Social Security and Medicare, when it is only exempt (deferred) from Federal and State income tax.
- Filling out the state unemployment return improperly. This return is one of the more time consuming ones as there is a wage base limit with state unemployment. Each quarter, the business owner/payroll manager has to look at the prior quarter and calculate wages to see if the threshold has been met. Most of the time I see that the error was made in not carrying over the wages from prior quarters and over paying into the unemployment tax.
- Business owners often misclassify employees as contractors. In order to save money and not have to go through the hassle of payroll, business owners will pay an employee as an independent contractor. If they knowingly do this, they will incur huge fines with the IRS and state. It is definitely not worth the fines. What will happen is the ‘contractor’ will be laid off or fired, the ‘contractor’ then goes to collect unemployment, the state unemployment office has no record of this person as they were never paid as an employee, the red flag goes up, and an unemployment audit is underway. The audit will determine that the ‘contractor’ should have been paid as an employee. The fines are either paid or are so hefty that the company goes under. It is a very costly mistake.
Q: What can employees do to help the business owner operate effectively?
First, provide their employer with changes in a timely manner. Utilize employee self service~this is where the employee can go online to view their pay stub, pay history, PTO, withholding information, etc. Most payroll managers spend time just looking up information requested by their employee, when the employee could be doing this themselves.
Next, use direct deposit if offered. The business owner/payroll manager will not have to cut them a check and this saves time, paper, ink, energy, etc. The cost savings are between $2-$4 per employee per payroll.
Q: Do you have any advice for someone opening a new business?
A: Read the E-Myth by Michael Gerber. Surround yourself with people knowledgeable in areas you are not. Outsource your non-core functions so you can focus on your money-making activities
Q: Do business owners ever structure their business differently or opt to operate differently to legally avoid government involvement? If so, how?
A: First, determine your business type: LLC, LLP, Corp, etc… then ffind a legal tax adviser you trust. Also…
- There are many small business owners that will opt to convert to an S-Corporation instead of remaining a Sole Proprietor. The S-Corporation will give them more legal protection as well as tax savings.
- Government involvement cannot be avoided. Taxes have to be paid. A CPA can help navigate the best options for a business structure from a tax perspective and an Attorney can make recommendations as to the legal ramifications of each.
- Lastly, leverage technology wherever possible. Store records, transactions and documents electronically and in a safe place and consider storing data at a backed-up facility.
Q: How could a business owner get the most bang for their buck with a payroll service like yours?
A: There are several ways they can get the most from a payroll service like Perquest. First, use our Go Green Solution. It will save business owners time, as well as resources. The payroll is completely paperless and everything is available on line via our secure website. Companies are required to store payroll records for a minimum of four years; that is a storage and a liability burden since those records contain very sensitive and confidential data. At Perquest, I advise clients to view their payroll reports on line, save them to a disk, or if they have to print them, shred them when done. Let us have the burden of storing the data; clients can at anytime view past payroll history with the click of a mouse. There is no need to waste the paper, ink, and storage area.
Second, I encourage employees be paid via Direct Deposit or PayCard. We set this up for the business. Business owners/payroll managers will not need to print checks, bother with lost checks, nor have to deal with the long lunch hours as employees go to the bank to cash checks. As a compliment to Direct Deposit, we have Employee Self Service. This where the employee can log-in to a secure website with their user name and password and view all of their payroll data. They can print out pay stubs if required by a mortgage company or just view items like their PTO, Tax status, Earnings, etc. Employees will not have to bother the payroll manager for this information.
Another outstanding benefit is our patented Analytics Package. This is where the payroll reports that are generated are converted into useful charts and graphs. This is a great way for a business owner to see Over Time Trends, Payroll Liabilities, PTO Liabilities, Hire/Terminated/Quite Trends, etc. It is a great way to look at your payroll without having to go through the painstaking task of locating all of this information page by page in the reports.
In addition, we are receiving a patent on our Timescape. It should be called Timesave. It allows changes to be made today to an employee’s record that go into effect in the future. Usually, what I see is that the payroll manager has a folder and in the folder is all the information of changes that need to be made with a certain pay date in the future. (Sometimes I see these as little post-it note reminders around a computer screen.) With Perquest, these changes can be entered in today and dated with a start date in the future. This saves so much time and the payroll manager knows the change has been entered and no longer needs to have the folder or post-it note reminders.
(How did she know I have post-it notes on my computer screen?!?)
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