Payroll is an essential part of your business – not just a weekly, bi-weekly, or monthly annoyance. Payroll is the primary way that employees are rewarded for good job performance and retained. If you are issuing late or incorrect paychecks it can lead to dissatisfied, unmotivated workers – or worse. It’s hard to keep good employees when a company gets payroll wrong.
The relationship between employees and employers is highly regulated by the government and many of these regulations involve payroll. There are literally hundreds of things that you have to know, as well as hundreds of mistakes that you can make. As a result, the payroll process is much more complicated than anyone who has never done it can possibly know.
The consequences of some mistakes can be more serious than just your paychecks simply being incorrect. Many mistakes result in getting a very hard time from people you don’t know (and certainly don’t want to know) – the federal and state enforcement types.
Below are 5 Common General/Miscellaneous Payroll Mistakes that can occur all year long.
1. Poor Record Keeping
You’ll need to maintain payroll records as a chronological history of your employment practices, which is certainly troublesome; but, the alternatives are the usual – fines, penalties, interest, and even jail.
Approximately 10 different agencies and laws have their own requirements – counting the state as only one. Did someone mention the “paperless office”? Below is a list of common items that you must keep – but we certainly won’t even try to advise you on the “how long you have to keep them” aspect.
- Cancelled or cashed checks, check stubs
- Payroll registers (reports) showing payment, work or trade classification, and deduction detail
- Federal and State W-4 Forms
- Copies of Certified Payroll Reports for each prevailing wage job
- Copies of Form W-2 and 1099
Some states and/or agencies require an employer to be able to provide copies of these records within a certain period of time or incur the fines.
2. Being Ill-Prepared for an Audit
An audit of any sort – be it Worker’s Compensation Insurance, Prevailing Wage Audit, State Unemployment Audit, or a General Liability Insurance Audit – can happen at any time. Being prepared for that Audit can cut down on the amount of time you have to spend gathering all the data and even can cut down the amount of time that the auditor has to spend to do the review. (Which translates into you not being able to do the other things that you need to because you have to keep stopping what you are doing and running off to “find” something.)
Be organized, keep good records, and make QuickBooks track some of the information for you.
- If you work on Prevailing Wage Jobs – purchase inexpensive 3-ring binders and keep a job notebook with copies of the Certified Payroll reports.
- File Weekly timesheets and payroll summaries together.
- Make sure that you use QuickBooks payroll wage items to track employee work or trade classifications.
- Make sure that you have current W-4’s, I-9, and W-9 information on hand.
- Create a custom field in QuickBooks to track when Subcontractor Worker’s Compensation Insurance Expires
These are just a few of the things that you’ll need to track – it does give you a starting point.
3. Breaches in Confidentiality
It’s seldom that anyone talks specifics about their salary in public and no one should find out someone else’s salary in private.
There is at least one taboo left in public discourse: your weekly salary. The best place to find out someone else’s salary is in your company’s payroll processing records.
Most large companies have full-time professionals using automated systems with high levels of security. But, when you do payroll, do you push your ledger sheets aside to the corner of your desk to take a call or does your accountant pass the task around to several bookkeepers in the office?
Your payroll system should be designed with complete confidentiality in mind. Remember, it tells how much money you make, too!
Of course, all this tends to go right out the door if you work on Prevailing Wage jobs as this information is used to verify that employees are being paid the pre-determined rate for the Work or Trade Classification in which they performed work. So, even here, there is an exception….
4. Check Fraud
There are dozens of ways to change the dollar amount on a regular business check and, unfortunately, more are being invented every day. With sophisticated color scanners, copiers and printers easily available, reproducing checks to commit fraud isn’t rocket science!
Perhaps no one working for you would ever commit check fraud, but they might endorse your check over to someone who would. . . or, could it be that the person who you least suspect (your accountant, bookkeeper, even a ProAdvisor) will commit check fraud – we all read about it often enough in the newspaper. As a business owner, make sure that you monitor your checking account on a regular basis – monthly – or, that you actually balance the company account on a monthly basis and question checks appropriately.
5. Thinking that “NONE of THIS APPLIES” to me
This is the most dangerous mistake of all! Please don’t think that your business is too small, to local, or too simple to have to comply with all these constantly changing federal and state rules and regulations. Thinking that “None of This Applies to Me” is dangerous – so don’t fool yourself.
Assume that you must comply until you are definitely told otherwise. If you aren’t sure ….. pick up the phone, make some calls and ASK!
FREE Payroll Mistakes eBook:
Did you find QuickBooks Tips – Payroll Mistakes – Parts 1-4 helpful and informative? If so, request our FREE 18 page eBook; Payroll Mistakes – It’s NOT As Easy As 1-2-3, which expands on this series.