10 expert tips to stay payroll compliant in 2020
This video has 10 important tips for your clients to help them manage their payroll and their financials. Share it with your clients to help them stay organized and compliant, along with any tips of your own!
What's up, tax savers? My name is Tyler McBroom, and we are in the middle of a series, taking a deep dive into the importance of payroll for small business owners. If you missed the first video, we covered the high level components of what payroll is, so go take a look and watch that if you haven't had a chance to. So, I'm Tyler McBroom. I am the CEO and managing partner of Measure Results. We're a CPA firm that has a big focus on helping small business owners, all around the country, pay as little tax as legally possible, and have gathered some tips to help you keep your payroll, your finances, and your business as a whole organized and compliant. So, let's get into those.
First, you must know your budget. 50% of businesses that start in the United States fail within the first five years, and the number one reason that they go out of business is because they couldn't get a hold of their numbers. They were spending too much. They couldn't build up the muscle and the discipline to have a budget, stick to it, and actually become profitable. So, the very first thing you need to do is know your budget, work it, implement it, plug it in to your books, and monitor that thing like your life depends on it.
Second, know your tax and reporting deadlines. There are two things for certain in life, and that's death and taxes, and while we don't know what the deadline is for our death, thank goodness, we do know what it is for taxes. We have no excuse for not knowing it because we're just a quick search away, across the different types of tax deadlines that we have, from figuring out what those deadlines are. So, you've got to know them, so that you can adhere to them and not rack up a bunch of penalties and interest by missing them.
Third, know your federal, state, and local laws related to payroll and taxes. If you don't want to do all that homework, partner with a payroll provider or expert who does. Working with someone who knows those different entities and different reporting authorities that you have to file with, and the different laws, is absolutely critical.
Fourth, know your exposure to liabilities in other areas related to your employees and managing your workers. Make sure that you not only have HR laws and written policies in place, but that you also have the proper workers’ comp coverage.
Fifth, know how you spend your time because what you measure, you can manage. And, a lot of times, when you're running a business and getting a business off the ground, it's 24 hours of chaos every day of the week, and all of a sudden, it's the end of the work day and you have no idea where your time went. So, you want to make sure that you have the habits and muscle in place to know where your time is going. And, on that note, how much time are you actually spending on your finances, your systems, and your payroll? Is it not enough? Is it too much? If you're not spending enough time on it, maybe you need to really look at beefing up the time. Perhaps, you need to focus, get your systems in place, and make sure that you’re actually looking at your numbers and build that up. Make that your habit and your discipline. If you're just spending all of your time on it, that's not good either. If that's the case, and you're just constantly logging into your bank and checking your bank account, and looking at your books and pouring over reports, you're probably spending too much time on your finances. So, you need to look at automating it through technology, or hiring it out to get that help.
Sixth, know how your employees are spending their time. This is critical for a couple of reasons. Number one, it helps you stay compliant. When you get into overtime laws and proper compensation, you want to make sure that you're having people track their time properly and accurately. Second, it helps you figure out where you're profitable and where you're not in your business. If you don't have some sort of software or technology that's helping you track that, there are some payroll software options that actually have it integrated within the payroll software provider, so make sure you're looking at that as a factor when you're going through analyzing your technology and your systems.
Seventh, know what records and paperwork you need to collect, both from your employees and from the taxing authorities. Know what you need to send in to the IRS and your state. One thing I know about working with business owners is they're not usually the type that loves doing paperwork. That's not why they wake up every day. Unfortunately, this is that boring, yet essential part of being a business owner. So, either do it yourself, or pay an assistant or admin, to make sure you've got your records and your paperwork in line.
Eighth, know your books. The best thing you can do to lower your taxes is actually having a good set of books because it helps you pick up all the deductions and expenses that you might've missed from not being accurate. The other thing it does goes back to what we talked about at the very top. Number one was know your budget. Without knowing your budget, having a budget, having a budget in your books, and comparing the actuals against the budget, you're just flying blind on your business. So, think of your books as a compass. And, then, as it relates to payroll, is payroll reflected accurately in your books? Are your records current? When you cut a payroll run, is that going into your books with the right wage expense? Because there's a difference between actual payroll expense, gross pay, and what's actually coming out of the account to go into your employees’ bank account, make sure that your payroll expense is accurate as well.
Number nine, know the requirements for loan eligibility. One of the coolest things about tax planning is that we can make you pay a whole lot less tax than you would've if you didn't do tax planning, but the downside of it is we can tax plan you into the poor house on paper, so that you literally can't even qualify for a car loan if you handed the lender your tax term. So, you want to know what you need for any loan, the different loans out there, and if there are government assistance programs, or just getting a private loan through a hard money lender or through the SBA. Make sure that you know the requirements for your loan eligibility, so that you have the proper records in place, because it's not just about having the right amount of income, but also having accurate, up-to-date current records. That's essential.
And, number ten, choose the right payroll option for you. There are tons of choices out there, and your decision is going to be different, depending on how big or small of a company you are. You probably don't want that DIY option if you're a massive Fortune 100 company. That being said, , if you're just getting started, you don't need the option that the Fortune 100 company is going to choose. So, you've got to make sure you're picking the right payroll option that suits your specific needs. I know all of this might sound like a lot, but there are service providers, software, and people that can help you through this. Specifically on the payroll provider piece, this next video is entirely devoted to how to make those decisions and choose the right provider for you. So, I’m looking forward to diving into that with you, and we'll see you next time.