Payroll can be a hectic process for any type of business, even for experienced accountants. That is why although it is a basic and essential part of everyday operations, it can be a difficult concept to grasp for franchisors who are just starting out. Unfortunately, many common payroll mistakes happen all the time, and they may be happening under your radar without you even knowing it.
Common Payroll Mistakes
At Indevia, we take a unique approach to each business in order to encourage the best accounting processes overall. Prevent major bookkeeping errors and common payroll mistakes when you invest in an automated solution for your team. Take a look at these well-known payroll mistakes and learn to prevent them from occurring within your own business.
Forgetting to Track Overtime Hours
Employees can get compensated in many different ways, and there may be certain periods of the year where they are working longer hours than usual. You can’t forget to properly track overtime and employee hours accurately. One mistake could lead to years of corrections on tax forms moving forward.
Overtime isn’t just about employees working over their usual working hours; overtime may also include working during lunch breaks, attending training outside of work hours, and going to work-related parties.
Miscalculating Employee Pay Rates
Nobody likes to receive a paycheck with the incorrect amount on it. It can be embarrassing for both the employee and the employer to have to talk about the financial mistakes that were made on what should be a simple and automated payment process. If you find that your organization is struggling to get the numbers right on a regular basis, you’ll be prone to bigger and bigger errors. Whether your mistake is overpaying or underpaying your staff, it’s important to fix things ASP before you lose the trust of your valuable workers.
Not Properly Classifying Employees
Another common payroll error that tends to happen in newer businesses is misclassifying employers. This is another way to get the numbers wrong on individual paychecks and other financial information. For example, it is often difficult for new accountants to figure out which employees are exempt from overtime and which employees are non-exempt, according to the Fair Labor Standards Act.
Those who are misclassified may end up having tons of afforded overtime pay just not even paid to them at all. The best thing that you can do in this situation is correct the mistakes as quickly as possible and employ a new solution for classifying employees so you don’t run into a costly error again.
Not Reporting Taxable Compensation
There are many different forms of employee compensation that can be taxed, and it can be difficult to sort through the many types of employee pay without an experienced accountant to clear things up. Taxable compensation includes not just regular paychecks and overtime, but also payments such as:
- Travel awards
- Gifts or gift cards
- Company car usage
Even a small gesture from a boss to their employees may not seem like something that needs to be taxed, but the IRS sees things a different way. It’s a good idea to cover all bases and tax all forms of compensation to avoid penalties or even an audit in the future.
Missing or Disorganized Records
Any professional bookkeeper knows that it is vital to keep an organized account of every financial transaction the business has gone through. It’s also important that this data is easily accessible and searchable. In the event of a computer crash, would it take hours to rifle through paper files to find what you need? Is everything accessible on a single secure drive for everyone in the accounting department to equally access? Do you have to rely on one or more people to do all of this organization by themselves?
This is why many new franchisors tend to invest in automated accounting services for a more improved and organized system overall. Having to use manual accounting techniques for all of your record-keeping needs can be very overwhelming, leading to a bigger possibility of disorganization. That way, in the event of an accountant leaving the company or a server going down, you can still rest easy knowing that all of your bookkeeping information is still in a secure space.
Reduce Payroll Errors with Automated Bookkeeping
Our trusted accounting solutions offer better and more programmable techniques for keeping all of your financial records straight. If you are struggling to turn payroll into a well-oiled and accurate process, get in touch with our Indevia accounting experts today. We will help you find a tailored system that can get your franchise up and running the right way. Contact us today to learn more.