To run a business employees satisfaction and ensuring compliance are very important. The business owners hire an accountant to manage accounting, which is an important thing. In accounting, payroll, and bookkeeping are essential process which helps a business to manage compliance and improve the employees’ trust. But a small mistake in payroll and bookkeeping can take your business downward. So for that reason, every accountant and business owner must know about common payroll and bookkeeping mistakes. In this article, we are giving you the list of common payroll and bookkeeping mistakes in detail. So walk through this informative guide to understand the common payroll and bookkeeping mistakes.
What is Payroll?
Payroll is the process of releasing employees’ payments, where an accountant calculates wages, distributes paychecks, and pays all the necessary company taxes. In today’s market, many payroll management software and applications are available, such as QuickBooks, ADP, Zoho Payroll, Gusto, ect, that automate the payroll process and reduce the risk of error. With the help of the payroll automatic feature, you can schedule all the employees’ salaries, which automatically calculates the employees’ payment on time by calculating salary with overtime, bonuses, and commissions perfectly.
What is Bookkeeping?
Bookkeeping is the way in which a business can record, track, and organize all the financial transactions, such as business income and expenses, to ensure compliance. This helps to manage invoices and bills, perfectly maintain the overall business’s financial stability and growth, and increase decision-making capability. To manage bookkeeping, there are also many software and applications available, such as QuickBooks Online, Xero, Wave, FreshBooks, Zoho, ect that help a business automate financial tasks and display real-time financial status.
8 Common Payroll and Bookkeeping Mistakes and Their Solutions
Below, we are providing 8 common payroll and bookkeeping mistakes that help you maintain a distance from legal issues, waste time, maintain employees’ trust, and make perfect business decisions.
1. Merging Business and Personal Finances
Mixing business and personal finances can build a major problem where you can face the risk of errors, tax penalties, risk of tax audit, and many more. This increases your expenses and affects your business growth, where you have issues in making a decision. So the solution is, you need to make a different bank/credit card account where you paying salary yourself and can perfectly track all the cash flows and tax compliance.
2. Misclassifying Employees
Misclassifying employees is a legal issue where a company labels workers as independent contractors in an illegal manner. That is a legal issue where a company can get expensive penalties. So the solution to that problem is run your business smoothly and legally by following the IRS guidelines and doing the regular audits.
3. Missing Tax Deadlines
Missing tax deadlines has many reasons, but it can have an impact on your business and take your company to face many legal issues and expensive financial penalties, which damage your company’s reputation. So, as the solution, you need to use an automatic payroll management system where you can schedule your employee compensation and file the tax returns on time.
4. Delaying Entries
Delaying entries may create many sensitive errors, compliance issues, and build a bad impression of your company. So, as the solution, you need to use an automated bookkeeping service or software, do the staff training on tax laws and software, and make a clear document by fixing the minor errors.
5. Use Outdated Softwares
Outdated payroll and bookkeeping software do not process and record the data as per the legal laws. This softwares are run and record the data according to the old laws. So, as the solution, you can use the latest version of payroll and bookkeeping software, which automates most of the processes, reduces manual errors, update them self automatically according to the todays legal laws.
6. Not Backing Up Data
Not backing up data is such an irresponsible practice where your company loss the important financial data due to a small glitch or a minor error, which increases the possibility of financial losses and reduces your business growth. So to avoid that mistake, you need to use an automated and multi-backup strategy, try to regularly view all the processes, and focus on proper staff training.
7. Ignoring Expense Tracking
Neglecting expense tracking has major negative consequences for a business that create issues in finding accurate financial statements, and you can miss the cost-saving opportunities and face many legal issues. To avoid that mistake, you also need automated software that can track all the transactions and record them with accuracy.
8. Inadequate Record-Keeping
Record keeping is a very sensible thing where all the financial information is stored. When you do not find enough financial information in the record, you may face expensive penalties, insufficient funds, poor decisions, and also lose your business reputation. So to prevent that mistake, try to schedule regular reconciliations by using advanced automatic systems, update the business’s financial health, add the complete details in the record, and ensure legal compliance.
Best Software for Both Payroll and Bookkeeping Management
To manage both payroll and bookkeeping accurately, you need to use a modern and automatic payroll and bookkeeping management tool that provides an accurate result by ensuring compliance. Below, we recommend some software and applications that help you to avoid common payroll and bookkeeping mistakes perfectly.
- QuickBook: QuickBooks is the market leader, which provides highly versatile and scales with business growth, and this software suits all sizes. It has strong integrations, but it can get pricey.
- Gusto: This software is also known as one of the best onboarding software. And it has a user-friendly payroll, which helps in integrating and help user to easily access it.
- Zoho Books: Zoho Books is a very popular software, and it’s a part of the Zoho ecosystem. Business owners use this software because it’s affordable, smart, great for new businesses, and offers a full suite.
- Wave: It is the best software for freelancers and solo businesses, offering free accounting with integrated payroll.
- ADP: ADP software works as an industry leader, and it is best for complex payroll needs and scalability for medium-to-large businesses
- Xero: This software is really helpful for small and mid-sized businesses. Every business owner who have small business uses this Xero software for excellent bank feed integration, and its is easy to use because of user friendly.
Conclusion
To avoid common payroll and bookkeeping mistakes, you need to upgrade your manual payroll and bookkeeping management tool to an automated tool. We have provided the much-needed information on the 8 common payroll and bookkeeping mistakes and their solutions in detail, and recommend some best software and applications for payroll and bookkeeping management. We hope you can understand how to avoid common payroll and bookkeeping mistakes after reading this article.