Running payroll for a small team in QuickBooks Payroll: what to have ready

Payroll is one of those jobs that feels small until it goes wrong. A missed hour, a wrong address or an unrecorded raise doesn't stay a small thing for long, because it ends up on a pay stub, then in your books, then on a year-end form your employee needs. Software like QuickBooks Payroll does the arithmetic well. What it can't do is know what you didn't tell it. Here's what to have ready, and when.

Before you add the first employee

Set up the people and the company properly once, and later pay runs get easier. Each employee needs their full legal name, address and the paperwork that tells payroll how to treat them, along with how they want to be paid, whether by direct deposit or a check. The company side needs its own details entered accurately, since they flow onto every document that follows. If you're unsure which forms apply to a particular hire, your tax preparer or a payroll specialist can tell you before the first run, which is a lot easier than after.

Decide also how you'll classify each person. Employee or contractor is a question with real consequences, and it deserves a proper answer from someone qualified, not a guess made at the last minute.

What to have ready for each pay run

• Hours for every hourly employee, approved and complete, including overtime where it applies.
• Salary employees confirmed, with any change in pay rate written down and dated.
• Bonuses, commissions or tips for the period, with the amounts.
• Time off taken, if you track it, so balances stay accurate.
• Any new hire or departure since the last run, with the dates.
• Deductions that changed, such as a benefit election or a garnishment notice you've received.
• Reimbursements, kept separate from wages so they're recorded properly.

A good habit is to send this information on the same day each cycle, in the same format. A shared timesheet or a short email template is enough. The point is to make it hard to forget something, because the cost of a forgotten item is a correction run, and nobody enjoys those.

After the run: keeping the books in step

Payroll does not finish when the money moves. The run has to be reflected in your books, with wages, employer costs and the amounts held back for payroll liabilities each landing in the right account. Then those liabilities have to be paid on the schedule your situation requires, and your books should show them as paid. Compare the payroll reports with what actually left your bank account. When the two disagree, there is nearly always a simple reason, and it's easiest to find the same week.

This is where payroll and bookkeeping meet, and it's the place small teams most often get stuck: the payroll is correct, but the books are a month behind, so the profit and loss understates labor cost.

Getting ready for year end

Year-end forms are only as good as the twelve months behind them. A few weeks before the end of the year, review each employee's record. Check that names are spelled as they appear on their Social Security cards, addresses are current, and the year-to-date wages look right to you. Look at anyone who started or left mid-year, and at anyone whose pay changed. Confirm that the payroll liabilities you've paid agree with what your reports say you owed.

Filing dates and requirements change and vary by situation, so check the current deadlines with your tax preparer rather than relying on a number you saw once. What you can control is having clean records when the time comes, so that W-2s go out accurate the first time and your preparer isn't chasing you for explanations.

When to hand it off

Plenty of owners run their own payroll happily. Others reach a point where the time, the worry or the corrections add up, and handing it over is the cheaper choice. Guirian Bookkeeping Services LLC offers payroll processing, along with accounts payable and receivable, for small businesses, medium-sized businesses and nonprofits in Waldorf, White Plains, Washington DC, Bethesda and Silver Spring. Amy Guiriansoro is an Advanced Certified QuickBooks ProAdvisor in QuickBooks Payroll. Read about Guirian's payroll service on this site, then call (301) 848-6619 to set up a consultation by appointment.