Create Payroll: 5 Tips for SMEs
Table of contents
More than likely, once you first opened your business doors you had no issue handling payroll. After all, you probably had just a handful of employees that you had to account for.
Then, right as you continued growing you noticed that payroll became increasingly more stressful and time-consuming. You brought in more employees, starting handing out more work, and perhaps got a little lost in the books.
While you grow, it is important to get efficient at things like payroll so that you can reserve your time for accomplishing more tasks. Bookkeeping and accounting tasks are becoming a lot easier in the modern business era.
Why Payroll Is Difficult
Remember that there are millions of people around the world who have college degrees in things like finance and accounting. The financial world naturally clicks on the mind of certain people. Especially those who have dedicated years of their lives studying it.
Almost universally, the typical SME owner is jam-packed full of great business ideas. When it comes to the financial side of things, they aren’t always as effective as a leader. After all, we all have strengths and weaknesses. This is why businesses commonly choose to hire CFOs, bookkeepers, accountants, and so on.
Get Better at Payroll: 10 Payroll Tips for SMEs
We understand the importance of having an effective payroll system. The good news is that in the modern era, payroll is something that is becoming a lot easier. Even for those with minimal experience in finance and accounting.
Here are 5 tips to help you improve the payroll process for your SME.
1. Create a Payroll Expense Budget
Every good business plan needs to start with a clear set of steps that are realistic and reachable. As much as you might like to start investing a ton of money on employees, thinking that they will eventually lead to a return on your investment, this may not be the best idea.
Start by setting a budget that you can consistently afford to spend on payroll. One of the most common reasons for a business to fail is that they irresponsibly invested too much money.
As tempting as it may be to always be a risk-taker, there is a certain point where you need to take a pragmatic standpoint. Sure, taking a massive risk is probably what put in the position where you are now. When it comes to payroll, though there is a difference between calculated risk-taking and setting yourself up for failure.
Don’t turn payroll into a risk. Set a clear budget which you will consistently be able to afford for the long-term. Stick to this budget until your income allows a little more cushion.
2. Focus on Employee & B2B Service Quality over Quantity
There is a sense of freedom and personal fulfillment that comes with owning a business that sustains the lifestyle of both yourself and others. When you reach this point, it is important to keep the proper perspective.
When you first started your business, you were probably down and out. Or, maybe close to this point. Remember how good you have it now that your business can provide for both you and your employees. Don’t take small successes and current circumstances for granted.
Once businesses start to get their first taste of success, one of the common mistakes is to start spending irresponsibly. This often means that they start paying for services and employees which aren’t necessary. Or, ones which don’t necessarily provide back the same level of value to the business which is given to them in their paycheck.
You got to this point because you followed a system that works. Just because you have some extra cash doesn’t mean that you need to start spending more on employees and B2B services. Stick to the services and employees which are valuable and most beneficial to your company.
3. Carefully Choose Between Salary, Hourly, and Freelance Wages
Certain jobs for your SME may require a full-time employee. Others may require a certain number of hours of work each week. Then, there are other tasks that are best handled by short-term freelancers.
Let’s imagine that your business supplies internet content. A great person to hire full-time would be someone who finds new clients, assigns content that needs to be created, delivers the content, handles customer concerns, and collects payment after successful deliveries. This is a great example of someone to hire on a salary wage.
Then, you will need people who actually create the content that you deliver. This would be a great example of someone to hire on a long-term hourly basis.
Now, let’s imagine that one of your clients asks you to edit their website itself. Since this isn’t something which your salary or hourly wage workers handle, you can simply hire a freelancer. Since a freelancer will happily work one-time jobs like this, they help you upsell and improve your overall service quality without being too expensive.
4. Have an Effective System for Tracking Payroll Balances
Being organized is the most important step toward sustainable payroll practices. Sure, you may have a set of completely trustworthy employees that would never take advantage of you. This doesn’t mean that you can’t mess things up yourself, though.
If you make a payroll mistake, it is always the fault of the administration. Not your employees. You shouldn’t expect them to point out when you overpay them, underpay them, and so on.
When mistakes happen, it’s the fault of the management. For this reason, it is imperative that you have a foolproof payroll balance tracking system.
For salary workers, their payroll will be constant. For hourly and freelance workers, create something like an online spreadsheet that you or a staff member can constantly keep up-to-date. This way, when it comes time to hand out paychecks there won’t be any surprises.
5. Handle Payroll With an Automatic Accounting System
Once you start handling the payroll for multiple employees, many businesses choose to hire an accountant. In the modern era of business, this isn’t always necessary.
With a Penta Business Account, for example, you can automatically handle payroll payment online. Since this is done in one place and can recur automatically, you will no longer have to spend hours writing checks or handling individual payroll requests.
Penta accounts also come with a dedicated online portal and mobile app designed specifically for business owners. Just about any sort of common bookkeeping and accounting task can be handled instantly online, including expense tracking, categorization, and real-time updates.