Many business owners (especially those owning smaller businesses) often prefer to do the payroll calculation and pay slip generation work by themselves. This can be really helpful and can save you a lot of money. However, to save the money, you’ll have to learn how to calculate the taxes for every individual employee, and how to make their gross and net income. The payroll done by most of the new small business owners is full of errors.
Errors in payroll can prove to be a costly mistake for you. The IRS might hand you yearly penalties, and the employees you have might also return home unsatisfied when they receive their paycheck.
So, we can conclude that doing the payroll by hand is be a dangerous and an expensive mistake. Here are some of the proven dangers of attempting to do the payroll by hand.
The Calculations Might Be Incorrect
Payroll calculations and tax formulas aren’t the easiest math work that you’ll ever do. So, it is completely possible that you might make mistakes when doing the calculations manually by hand. Manual payroll system really just depends on your math skills, the errors can be huge evenif you forget to add or multiply one thing.
Small calculation errors are still seen as errors both by the IRS and your employees. These errors might make you pay an inappropriate amount of money to an employee on accident, or you might end up not withholding enough money to pay their taxes at the end of the year.
The mistakes made in the manual payroll calculations are usually very difficult to detect. You only detect them when it’s literally too late for you to do anything about it.
It Might Waste A Lot Of Your Time
Doing payroll manually/ by hand means that you’ll have to sit for hours straight at the end of every month/ payment time period to manually make payroll and pay slips for every single employee working for your company. Not only is this process prone to a lot of errors, it you take you many hours to complete the task. In some scenarios, the business owner fails to manage the time in the right way and ends up delaying the paychecks of their employees.
Small businesses spend 2 to 5 hours every month in doing the math and making the paychecks for their employees, just imagine how that time can be used productively if you invest in a Florida Payroll Calculator and fully automate the payroll process.
Another thing that causes the wastage of time is the disorganized information. You are likely to take a lot of additional hours in searching for the relevant information if the information you have is disorganized. Switching between different documents even in the case of organized information can take you a lot of time, that can otherwise be saved by automating the process.
The Risk Of Losing Information
If you run a business, odds are that you know the importance of keeping all the important information safely stored in an easily accessible location (maybe an online cloud). But of you do the payroll manually either by yourself or have the HR do the task for you, then you might face a risk of losing some important information.
Using papers to manually calculate and arrange the data is another big mistake. You can loose the page in the blink of an eye, or a thing as simple as a knocked over coffee cup can ruin all of your efforts.
It’s not only the paper that is prone to be lost. But your computer can also lose the information stored in it. For example, a virus can take away all of the most important financial information, and do an unrecoverable loss to your business. So, the best way to avoid this risk is by using a cloud service to backup all of the payroll related and other important data.
Following The Old Taxation Requirements
This risk is also a big one. Since the taxation laws and regulations are always being amended and changed for certain businesses, you are more likely to miss out on an important development if you do the payroll by yourself.
So, if you are going your payroll manually by yourself, you must keep updated with the latest developments and changes in taxation laws and any other legalities that’d directly impact your business. Even if you use a payroll software, make sure that it is regularly updated.