How To: How Do You Handle Payroll?

There is a difference between what is possible, what should be done and what an owner manager may want to do.  Decide how you want  to handle payroll then determine if your desires and best practices are in agreement.  Before I point out the decisions that need to be made, let me make two points.  First, all personnel for your business do not have to be employees.  Some entities can be run with all non-employee personnel or a combination of both.  This is one of the reasons why doing a business plan first is a good idea.  The second point deals with the payroll execution decisions.  Since payroll is generally run from January to December separately for each calendar year, owner managers could change to another outsource or payroll solution at the beginnning of the next calendar year if the payroll solution decision turns out to not be a good fit for business operations.

Hopefully part of the business plan decisions has been made even if the first draft is not completely written out.  The person making the payroll decisions needs to know what personnel positions are required to operate the business entity and whether employees are required for the most effective performance of the job.  A payroll system involving employees is different from one where all personnel are non-employees.  The personnel decisions could not only impact payroll, taxes and reporting, but the bookkeeping, accounting and EIN decisions as well.  Do realize that regardless of whatever decisons you make and implement regarding these matters, most payroll execution decisions are adjustable.  It could be that some potential unpleasant issue can be avoided by researching your wishes and planning ahead.

Once the decision of what your team will be doing and who will be on the team is decided, the decision of who is doing payroll is next.  Start with the question of doing payroll internally or externally.  Do you want to develop an insourcing payroll venture?  Do you want to ue a freelancer so you can control the paying of your own payroll taxes?  Doyou want to use an established outsourcer? Your research will reveal some elements that you like and dislike for most of the payroll solutions, but there is also a chance to discover a way to design a system that works for you.  Take your time and do your homework.  Do informative interviews with key people involved in the possible choices.  Asking other small business owner managers to share their stories may also help you.  Make this an enjoyable learning experience.

Chris