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Payroll Processing Mistakes made by small businesses

Posted on 12 July 2014

Not calculating payroll correctly may lead to a series of problems, and if you own a small company and you have little experience with doing payroll, you may end up making costly mistakes. If you process the payroll for your small company, pay a lot of attention and try to verify several times. Also, make time to do the payroll in the same day of the month, and if you don’t have the time to do so, maybe you should outsource or delegate an employee or accountant to do the payroll.

If you have an employee who is in charge of the payroll, always make sure he has the experience and the attention this job requires. Paying the personnel is a great responsibility and you have to make sure you leave it in the right hands. Even a small calculation error could lead to overpaying employees or similar mistakes, so let’s take a look at the most common payroll mistakes made by small companies.

• 1. One very common mistake for small business owners is missing the important deadlines that are set by the HMRC. In order to avoid this mistake, you should mark all deadlines in a calendar and try to keep up and be as organised as possible.
• 2. Depending too much on the payroll system. Remember that a payroll system is only as good as the person who introduces the data, so don’t depend or rely too much on the payroll system you use.
• 3. Remember that all business should store their records for at least 3 years to prove compliance with auditors. Most companies fail to do so, especially at the beginning.
• 4. Another common mistake is failing to backup records, and the HMRC also has penalties for that.
• 5. Most problems in payroll are due to human error or inexperienced staff, but remember ignorance can’t be used as a defence if your company faces charges from the HMRC.
• 6. In case of inadequate training or experience, it’s possible to make confusion over payments such as SSP and this will cost your company.
• 7. You should compile your business records on the same day each month, in order to have accurate results. Many small company owners fail to do so, since they have too many attributions.
• 8. Underpaying or overpaying your staff can happen if you don’t pay a lot of attention to detail. This is a serious error that may result in payment difference or employees being paid for months after they’ve left.
• 9. Many small businesses make mistakes in the calculation of the Year-End submission. During the year, it’s possible to make small mistakes that go unnoticed, but they may have an important effect on the year-end figures.

In order to avoid such mistakes, you could outsource your payroll, since all the mistakes described above can be avoided if your payroll is handled by someone with experience.

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