Every company has employees, which means that you need to carry the burden of recording and distributing paychecks. Even though it might seem simple to cut a paycheck for the time that was worked, many other factors need to be considered for this accounting task.
The truth is that payroll accounting can be complicated. So it is essential that you have an experienced financial professional to oversee payroll processing. When payroll is calculated these are a few of the items that need to be included in the totals:
- Wages and Salaries
- Commissions and Bonuses
- Overtime Pay
- Payroll Taxes (Medicare, Social Security, Federal and State Income, Unemployment, and Worker’s Comp)
- Benefits (Vacation time, Paid Holidays, Sick Days, Insurance, Profit-Sharing, and Retirement)
The tax laws change depending on your location and the type of compensation that is offered. So it is essential that you keep up with the changes in the industry each year.
Business Financials and Cash Flow
Not only do you need to have the cash available for payroll, but there are additional taxes and costs that come up as well. For example, a portion is withheld from each paycheck for state and federal taxes. But, there is also an additional amount that needs to be paid by the employer. Knowing this information in advance will ensure that you have the cash flow available to pay the costs when they are due.
At the same time, it is also necessary to make sure that the accounts balance when payroll is distributed. Payroll is a business expense, with the money being paid out to cover labor costs. It isn’t unusual for the expenses to be incurred in a different accounting period than when the checks are paid. Your accountant can help you track these expenses to ensure the financial reports are accurate.
The most effective solution is to implement an accounting system that integrates payroll processing. But, regardless of the structure of the payroll system, it is essential that you have a financial expert overseeing the payroll processing and reports. Payroll tends to be one of the largest expenses on the company books, so a few small mistakes can have a catastrophic impact on the financial outlook of the company.
Without the integration of payroll and accounting, you are probably facing big holes in the financial statements for your company. As a result, major decisions are made with only partial information. Instead of making a wrong decision that could impact the future of your company, it is better to maintain accurate financial reports at all times. To learn more, talk to us about the benefits of outsourced accounting and CFO services. We are here to assist with payroll accounting and other business financial services.