Registering every financial aspect of your business’s daily operations and understanding what you need to deliver to your employees is crucial to run a successful company for many years. Even if you’re just starting with a small team and your operations may not require a massive amount of effort to keep track of every expense and payment, relying on proper accounting practices will save everyone time and effort down the line.
As a business owner, paying your employees on time is only part of your ethical responsibilities towards them. Pay statements play a crucial role in keeping an accurate and precise track of your employee’s earnings and applied taxes. If you want to learn the importance of getting your pay statements right, we want to share some insight on the matter in our following guide.
You Need to Comply with Tax Regulations
With every paycheck, your business is expected to discount a percentage of each employee’s salary to allocate it for several taxes before they’re allowed to release the money. These discounts include Social Security and Medicare taxes, alongside mandatory income taxes imposed at a state and federal level, and your company should be able to report and pay them on time according to what the payroll activity has shown for the period. An accurate pay statement allows your HR department to have a clear registry of this information and allows your employees to recognize where their discounts are going.
Otherwise, you will have to spend additional money and time fixing any mistakes that arise during your bookkeeping efforts. If this situation prolongs itself over longer periods, state and federal entities can subject you to tax audits and hefty fines. You might also offer taxable benefits and bonuses that should get included in the pay statement to accurately describe your employee’s total amount received for the payroll period.
Your Payroll Processing will Become Easier
Once you start using digital solutions to ensure that your pay statements are always accurate, your business will benefit from the saved costs and efficiency you gain from the process. As professionals from mrpaystubs.com point out, nowadays, small businesses can access free digital resources to generate these documents and create the necessary paper trail for their accounting efforts. Most companies hire people on salaries or hourly pay rates, and it’s crucial to keep correct track of each employee’s period earnings or if any withholds are necessary from previous payroll advances. Having a clear, transparent pay statement in your system makes sure that every information is correct before sending the bank deposits or emitting the pay stubs will always be a no-hassle task. That way, employees can also proofread and let the HR department know if they detect any irregularity or issue in their pay statement.
You Get a Complete Insight of your Business’ Financial State
A robust accounting system will help you enter all the necessary information related to your employees once and only modify their sensitive data when required. For daily operations, you can easily track your employee’s performance and logged hours alongside other integrated software to know how much you owe them for the current payroll period.
However, when your business keeps proper track of how much goes to your employees, you’re also able to have another way to see how profitable your company is doing at any given moment. This is because you’re able to compare the available data with other expenses and financial information you have at hand. Getting paid on time is crucial for everyone involved, so having the necessary funds to complete these transactions should be a priority, alongside having enough profit to continue reinvesting in the company’s operations and infrastructure. Keeping your payroll statement in order prevents you from wasting resources in fixing preventable mistakes. However, it also gives you a better insight into the cash flow that goes towards your employees and may help you make decisions related to bonuses, cost-saving efforts, and more.
Another detail to keep in mind when learning about the importance of getting your business’s pay statements right on the first try is that this document can also help your employees when applying for loans or other credit benefits. Therefore, many factors come into play that any responsible business owner should consider placing enough resources and effort to implement good HR software for their company. Complying with the law should always be a crucial component in your operations. Emitting accurate pay statements on time is not only part of your ethical compromise to your employees, but it’s also a benefit for your company’s finances when tax audits and internal evaluations arise.
Photo by Scott Graham
About the Author/s
Tom is a lifelong New Jersey resident, Rutgers and FDU alumni and the publisher of The Digest.
