Manual Payroll Calculations, Human Error Lead to Costly Mistakes

If there’s one thing small business owners obsess over the most, it’s the success, profitability, and growth of their business.

And one of the biggest keys to this success? Efficiency.

Small business owners know that positioning their business to operate in the smartest, most efficient way possible is paramount to creating long-term, sustained success.

But a common – and often overlooked – area that hurts a business’s and business owner’s efficiency is payroll, the catalyst keeping your company moving forward.

Here are 7 of the biggest payroll mistakes small business owners make – and how to help fix them.

1. Manually Calculating Payroll the Old-Fashioned Way

Calculating payroll manually, the old-fashioned way, is kind of like riding a bike without a helmet: just because you haven’t crashed before riding no-hands doesn’t mean you’ll be so lucky forever.

The same goes with payroll. Human error is easy in a busy business and it’s easy to slip up once in a while. While doing payroll manually can save money in the short term, the consequences of doing it by hand almost invariably lead to back wages, taxes, penalties, and sometimes even legal fees.

On top of human error, manual payroll wastes significant time. HR departments can often spend up to 35% of their time on payroll – hurting a business’s efficiency in the long-term and taking away from profitable, better usage of employees’ time.

2. Missing Important Payroll Dates and Payment Deadlines

Ah, yes. Nothing quite says excellent company culture like no-payment Fridays.

Your employees work hard and clock their hours because they’re committed to your business, but also because they expect payment at the end of the week.

Missing it can not only decrease employee morale and productivity, leading to poor retention, but it can also be costly – to both time and money.

Regardless of where you live, you’ll need to take the time to rectify payment quickly, take the time to document the errors and accurate payroll records, and potentially face penalties from the CRA (not fun).

3. Underpaying Taxes and Misclassifying Employee Payments

Underpaying taxes and misclassifying employee payments leads to one thing: problems.

This can come in the form of penalties, retroactive pay, back taxes, and other unfortunate repercussions, with the company sometimes becoming more closely watched over by the CRA – taking even more time away from a business’s ability to better focus its time on growth and profitability.

4. Overpaying Employees (and Dealing with the Timely Consequences)

Hey, it happens. Over $865 billion is paid to Canadians every year. But when it does happen (and it’s the fault of the employer), it’s not only uncomfortable and awkward – it can be costly.

In this case, you can either choose to accept the overpayment (and the time it’ll take to reflect this overpayment on the employee’s employment insurance) or you can make arrangements with the employee to have the amount repaid.

Overpayment regulations vary by province so, if you do make an error, it’s important to know the rules and regulations you’ll need to follow to maintain payroll compliance.

5. Failing to Maintain Payroll & Employee Confidentiality

In the age of the rise of awareness in data privacy, it’s no surprise that disclosing an employee’s payroll information to anyone outside the payroll department is a big no-no.

Disclosing this information without an employee’s consent can lead to major headaches, a loss of time, and potential legal troubles.

6. Not Having Adequate Backup to Ensure Efficient Payroll Processes

If a computer goes down or your go-to payroll person goes off sick, things can go awry quickly.

Having more than one person, or a full payroll system and processes to follow in place, can serve as an effective backup plan, but the most effective and efficient payroll backup solution brings us to #7.

7. Not Using Payroll Software to Eliminate Error & Streamline Efficiency

Payroll software is the best way to eliminate errors and streamline your payroll efficiency – freeing up time to focus your business’s time on the most important tasks to drive growth.

Using a payroll software makes it easy to manage payroll, maintain payment and tax compliance, and ensure your business is positioned for optimal efficiency.

Add Payroll Software Now

Ready to improve your business’s payroll efficiency and prevent costly, time-consuming mistakes?

Get easy-to-use online payroll to accurately pay your staff on time. Our experts are ready to help you every step of the way. Log in to your PaymentEvolution account and check out the payroll link.

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  • Sam Vassa

    With a passion for technology, Sam looks for ways to help small companies to compete and save money. He's worked in Foreign Affairs for the Government of Canada, geeked out at Digital Equipment Corp and hung out at Microsoft. He founded to help businesses like yours.