Running a small business is complicated. So much is going on at once that even the simplest of strategies can get lost in the shuffle. Matt Venuto, Regional Sales Manager at ConnectPay, has a basic list of best practices he shares with his clients, in order to help every small business owner avoid big headaches. From embracing the privacy of direct deposit to avoid the pressure of pay frequency, follow these eight tips and you’ll be set up for success.1. Don’t cave to weekly pay frequency pressure
Matt Venuto sees brand-new businesses make the same mistake over and over. “A business will start up and think, ‘Oh I need to pay my employees on a weekly basis,” he says. It’s not true, and it’s usually a bad idea. Venuto counsels clients to avoid locking themselves into the weekly pay cycle in favor a biweekly one. On top of incurring less cost from the payroll provider, you cut the time spent processing payroll in half. “You’ve automatically given yourself a ton of time to give back to the business,” he says. “Biweekly is going to set the business owner up for success for a number of years to come.” Every state has different rules so make sure understand your responsibilities when reviewing pay frequency.
2. Open a business-only bank account
It may sound obvious, but it’s one of those basic things that’s often overlooked. You don’t want to mix your personal accounts with your business banking accounts. Even if doing so seems OK right now, it can create lots of headaches down the road. So, make sure you have a separate bank account to process all your business dealings. It will make things smoother and cleaner as your business grows, and if the worst ever happens and your business assets are under siege, your personal assets will never be in danger.3. Go digital for time tracking
The days of punch cards are long gone, but for many companies, the habit of using paper forms to record employee time and attendance has stuck around longer than you might expect. “A paper form is not as accurate as punching digitally,” says Venuto. Employees tend to inflate their hours when they write them in, a situation that web-based systems help avoid. “You’re improving your accuracy by being on web-based time and attendance,” says Venuto. “You’re eliminating the human factor of it, of someone who wants to gain an extra five minutes here or there.” Overall the records are more accurate and integrate more easily, organization is streamlined, and you avoid getting lost in a mess of paperwork.4. Cut out paper checks
When it comes to how you make payments, you’ll often hear from employees and freelancers that they want paper checks. Resist that call. By going green and electronic you probably add at least $500 annually back into the business. On top of that, direct deposit keeps your business routing and account numbers secure versus in circulation, where they could get lost and fall into the wrong hands. Pay cards can be useful if you have employees that do not have bank accounts. Check your state laws to confirm if you are able to mandate direct deposit for your employees – or not.5. Keep it confidential
A second problem with paper checks showing up on the premises on a Friday for distribution is that it increases the likelihood that colleagues will see what the others are making. “That’s never a great thing culturally to go on in a business,” says Venuto. “We want to keep that more private, and direct deposit helps support that.”6. Create an employee handbook
“We advise everyone to have an employee handbook that’s clear,” says Venuto. If there’s any communication issue or challenge with an employee about whether they’re adhering to everything they’ve signed off on when joining the company, just head to the handbook. This is particularly important should you ever have to terminate an employee, and find yourself with an unemployment claim. The handbook can keep you safe from liability in that instance. ConnectPay offers a customizable handbook via their Human Resource portal, and you can use that to get started. You should also run your handbook by an HR representative or labor attorney to get their blessing.7. Play out your pay period
“We see this happen all the time,” says Venuto, “A business starts up and they say, ‘I want to see my employees get paid as quickly as possible.’” It’s coming from a good place, but Venuto encourages businesses to stretch out their pay period as long as they are legally allowed. In Massachusetts, that’s six days. “Don’t set yourself up for failure,” Venuto advises. “Elongate your pay cycle and pay period to give you 1, 2, 3 days in order to get all of your time cards approved and keep the money in your account longer.”8. Don’t estimate workers comp. Integrate it.
Years ago, workers comp used to be an estimation game. A business owner and insurance broker sat down to estimate how much payroll they expected to incur within the policy period. They’d find an estimated number for workers comp and build a policy based on that. Down payments and installation payments were often frontloaded to the beginning of the year, and additional hires might throw those estimates off entirely when audit time came around. Venuto strongly encourages a pay-as-you-payroll model in which workers comp is integrated directly into biweekly payroll. “Whenever you process payroll,” he explains, “The exact amount of workers comp liability you have incurred is going to be sent directly to the insurance company. You’re never going to be overpaid, you’re never going to be underpaid. You’re going to be paid on exactly what you earn.”
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