An Introduction to Accounting and Payroll Services
Accounting and payroll management are difficult to work around. People see numbers and run for the hills. And getting an accountant to do the work for you can be a bit heavy on the purse. So, what can you do?
Fortunately, you don’t have to shell out the big bucks to keep your expenditures and employee salaries in line and on time. Why? Because of accounting and payroll services.
But what are these mythical services? And how can they help you spend less while keeping your accounts in order? Let’s talk about it.
What Are Accounting and Payroll Services?
Accounting and payroll services, also known as payroll accounting, consist of tracking and filing employee compensation data like taxes, benefits, and money withheld from each paycheck. They record all business expenses, liabilities, and assets.
Accountants use financial balance sheets to collect and summarize a company’s total cash flow and transaction history. Once they collect all the payroll information of an employee, it’s forwarded to HR personnel, who pull this data and send it to the HR manager. The HR manager subsequently records this information in the employee’s annual performance evaluation reports.
What Does Payroll Accounting Include?
Payroll accounting includes the following information:
- Gross Salary – It accounts for the total amount of money you made in a fiscal year. It includes the annual salary.
- Bonuses and Commissions – These include the additional wages you received.
- Payroll Taxes – These include federal and state income taxes.
- FICA Taxes – FICA taxes refer to the mandatory Social Security and Medicare taxes deducted from employees’ earnings.
- Amount Withheld from Salary – It notes the amount withheld from your salary for savings plans for retirement, 401(k) match payments, and insurance premiums.
- Fringe Benefits’ Expenses – These include the costs an employer incurs when providing their employees with health and dental benefits, paid holidays, and workers’ compensation.
Usually, payroll accounting includes the following tasks:
- Performing payroll processing
- Issuing paychecks
- Entering pay and benefits into the company’s accounting ledger
- Withholding payroll taxes
- Paying tax to the IRS
- Managing withholdings from employees’ gross salaries for benefit contributions
- Ensuring the business remains in compliance with payroll reporting regulations.
How to Set Up Payroll Accounting
Processing employee payroll can be challenging, but using accounting software can make it much more manageable. However, you can’t just enter some numbers into your software and expect it to make a correct accounting statement or ledger.
To draw up an accurate accounting ledger and remain in compliance with tax and labor laws, you have to follow the process below for setting up your payroll accounting:
- Choose and Set Up Your Accounting Software – Once you’ve decided to track your payroll yourself, set up your accounting software.
- Draw Up Accounts for Each Expense Type – Once you’ve completed the registration process, create separate accounts to track each payroll-related expense, including employee wages, bonuses, commissions, FICA withholdings, payroll tax obligations, and any other compensation costs.
- Program the Software – Configure the software to automate recurring payroll tasks once your accounts are in place. It can process employee payments on schedule, generate the necessary financial records, and use its built-in pay stub generator to create accurate pay stubs for every pay period.
- Break Up Payments – Separate your employees’ payments into categories for each covered expense, e.g., payroll taxes, FICA, Medicare, etc.
- Process Employee Payments – Pay your employees once they’ve done their monthly work.
- Run Reports – Have your software compile yearly reports that break down your business expenses by category to make it easier for you to make tax filings.
Benefits of Payroll Accounting
Payroll accounting is essential for tracking employee payroll, but it does more than that. Here’s a list of tasks payroll accounting software can do for you:
3. Begin, Alter, and Stop Payments
Your payroll accounting software can add, change, and remove payments as employees enter and leave your company and their compensation or benefits change. It can also automatically alter payments when an employee moves to another state.
2. Automate Regular Payments
Using the right accounting software, you can schedule regular payments for each month. Automating the process saves time you can spend on more important tasks.
Plus, automatic payments ensure your employees won’t have any problem with compensation delays, which is the number one cause of employee churn.
3. Create Detailed Accounting Reports
Your payroll accounting software can compile reports for any length of time you want. For example, if you want to create an accounting report for Q1, you can ask the software to do it.
Plus, you can track changes in your payroll expenses over time. This insight helps you identify the primary sources of your business expenses, evaluate the true cost of each employee, and make informed decisions about when it’s the right time to expand your workforce.
4. Integrate with Other Software
Often, accounting software can sync with other financial programs, allowing you to share data across applications. This feature can come in handy when you’re reviewing yearly balance sheets or checking them for inconsistencies.
The Bottom Line
Accounting and payroll management are crucial to business success. If you don’t keep track of your expenditures, you may spend more than you save, which can harm your business and stop it from scaling.
Plus, untracked spending can lead to payroll delays, which can cause your best employees to lose motivation and say goodbye to your company. However, getting an accountant on board can be expensive if you’re a small business.
Fortunately, you’ve got excellent help in accounting and payroll software. All you have to do is subscribe to a company you like.
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