Small Business Accounting: Knowing When it’s Time to Outsource Payroll

Posted on May 17, 2016


Common Mistakes in Small Business Accounting Often Occur With Payroll

small business accountingThere’s a reason that small businesses usually choose payroll as the first area they decide to outsource. Payroll taxes are complicated, and correcting a mistake can be a bookkeeping mess. If a company owner is going to make a mistake, it’s usually in small business accounting tasks like payroll.

Here are the most common mistakes owners make in small business accounting that throws their payroll records off course:

Treating employees like contractors: You don’t pay payroll taxes if you hire people to work for you and give them a 1099 instead of a W-2 and call them each an independent contractor. But if they go to file for unemployment your penalties will be heavy. Keep in mind that employees cannot legally sign away their rights as an employee simply by accepting a 1099 instead of a W-2.

Getting behind on payroll taxes: When cash flow gets tight, small business owners make the mistake of waiting to pay taxes so that they can free up money to pay suppliers. The thinking is that, without supplies, production stops. You should instead consider the penalties you’ll pay on late payroll taxes and compare the amount to the interest you’ll pay your supplier. Pay your taxes first.

Failing to treat bonuses as wages: Be careful with holiday bonuses and other perks you hand out to employees. If you don’t treat them as wages and pay your payroll taxes, expect it to become a problem.

Not processing garnishment requests: Processing a garnishment for unpaid child support or a court settlement feels cumbersome when you are doing payroll, but not dealing with it is worse. If you don’t process the garnishment, you may be held responsible for the amount due to the court’s plaintiff.

Not recognizing when it’s time to turn payroll over to a professional: Unfortunately, small business accounting builds on itself. If you begin operating with bad numbers, your problem is going to get more complicated. If you’re too busy as a business owner to take time to sort out payroll headaches, don’t allow it to snowball. Take it to a qualified bookkeeper and give yourself the gift of reduced stress.

At AccuBiz, Bert Doerhoff, CPA, works with many owners to provide small business accounting services. Whether you simply need assistance with setting up accurate payroll records or you’d like to turn over all of your accounting, AccuBiz has the expertise to serve you.