The idea of setting up payroll for your new employee/s can seem a very daunting prospect. It poses many questions that need very serious consideration. Getting payroll wrong can cost you and your business dearly. Where do you start?
To get straight to the point, did you know you can outsource your payroll? No, I hear you say! Won't that cost me a lot of money? Not necessarily. There are many payroll companies in the market that have different levels of service with various price tiers. Depending on how organised you are with your processes you can keep your payroll subscription to a minimum.
Clients I talk to are unaware of these particular services being available. I recently put a client on to a payroll intermediary service that could offer very reasonable rates. If the client submitted the timesheets for a two-day turnaround then they could save an extra charge per employee per pay run. If the turnaround was overnight then they would pay the maximum charge per employee. The payroll service then collects the payroll total from the client, they then pay the employee/s and file the returns with the IRD.
Who wouldn’t want to leave the hard bits to someone else? In New Zealand, payroll is very complicated especially when it comes to calculating leave entitlements. Payroll intermediaries are trained in compliance and should be able to keep you on track in that respect.
Take a look to see what options are out there for you, and make peace with your payroll.
One thing I learned when I first started out in small business was to open some operating bank accounts dedicated just to the business; one of them being a tax account. The small business I used to work for always put a portion of their GST away into the tax account so they could cover any GST to pay at the end of the period - thumbs up, good business practice.
After five years in my own business I have seen how very easy it is to forget or not be able to put that portion of sales aside to cover the GST. In reality it's a challenge, you have an expense pop out of the blue, or you haven't quite budgeted properly to manage your outgoings. It's a learning curve for new business owners and we can all muck it up from time to time.
However, I have seen the opposite thing happen. Small business owners suddenly have income from great sales, there is a lot of money sitting in the main business account. It is very tempting to take that money as drawings, after all you've worked hard to earn it! But before you know it, a few GST payments have been missed. There are penalties and interest and it all adds up. You are a bit scared to call and arrange weekly/monthly repayments. You bury your head in the sand and hope it all goes away. It won't.
The best thing to do is accept you are behind. Call and arrange repayments as soon as possible (you won't get in trouble), and get back on track. Work out a budget, get someone to help you with your cashflow reporting, open that tax account and start putting some of your sales revenue into it. It really is that simple.