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How to handle payroll for a small business

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Owners of small businesses must make many administrative decisions while the business is first starting. They will find that they have not planned for everything in their business plan, or that they do not have a policy for certain situations. One aspect of a small business that owners should consider is how to handle payroll. While not always the most pressing need, having an effective payroll system is essential to any small business. A small business owner will have many options when it comes to handling payroll. Here are a few:

Hire a Private Company

Some small business owners decide up front that they will hire a private company to handle their payroll. The private company is usually an accounting firm that has experienced accountants handling accounts for many different companies. The positive side to this decision is that the new business owner will not have to worry about the tedious act of doing payroll. However, on the negative side, small business owners will not have much control over how the private firm handles their payroll. Owners should be sure to find a firm that will do things similarly to the way the owner would do the payroll to avoid problems or miscommunications.

Purchase Software

Small business owners have the option of purchasing software that will handle their payroll. The payroll software will do the work of adding up totals, putting names, dates, and totals on checks, organizing each account, etc. This could help business owners who may shy away from thick coding in a spreadsheet program. However, even if the software is connected to an electronic time clock, the owner will have to designate time or an employee to monitor the software and make sure no errors have occurred. Time will also have to be dedicated to correcting any errors.

Hire an Accountant

Accountants are trained individuals that can handle the organization of all of the financial aspect of a company. Small business owners, depending on the size of their company, may hire an accountant to take care of the finances. The accountant would then keep track of the expenditures and profits. They would also track the hours that employees have worked and cut checks for their compensation. Smaller companies may consider only hiring a part-time accountant until they have grown large enough to need one full-time.

Do It Alone

Small business owners that have a background in accounting may consider handling the payroll themselves. This can be very cost effective if the business owner knows what they are doing. If they are not sure how to do payroll, they should seek training to avoid costly errors that could hurt both employees and the business as a whole. Small business owners could sign up for an accounting class at a local university, or they could seek out a local small business start-up location in their community. These community based programs often offer simple accounting classes.

Figuring out how to do payroll will not be a small business's largest concern, but overlooking it could cause huge problems for the company. Small business owners should consider hiring a firm, buying payroll software, hiring an accountant, or learning out how to do payroll themselves in order to avoid potential problems. This will allow small business owners the convenience of worrying about more immediate issues that arise with the start of a new business.

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Posted by DF
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