An effective way of growing your business is through building strategic alliances. It’s a smart solution to expand your reach without a lot extra overhead, but as your small business grows larger, there comes a time when you may need more than strategic alliances. You may need employees.
And hiring employees means managing payroll.
While Smart Foundations manages payroll for small businesses, it is something you can do yourself, if you so choose. To set you on the right track, here are a few simple tips to follow.
5 tips to remember about doing payroll
1) Payroll is all about the numbers. Many business owners confuse payroll with Human Resources. This is a mistake. Human Resources is managing certain labour laws and understanding the human side of your business. Payroll is numbers. In Canada, there are strict rules to follow with very little latitude for exceptions or errors.
2) Use payroll software. No one does payroll by hand anymore and anyone who does shouldn’t be. Small businesses that already use QuickBooks can also use the software to run payroll reports, print pay cheques and even file and pay payroll taxes. (And the appropriate source deductions will be calculated for you.)
3) Pay your source deductions. Collecting source deductions—CPP and EI payments, for example—falls into a category of taxes known as trust money, or trust accounting. It’s the same category of taxes as when you collect GST/HST. Essentially this means that as a business owner, you are collecting and holding that money ‘in trust’ for the government. The tax law surrounding this is complex and it’s easy to make costly mistakes. What’s more, CRA auditors are more than eager to find those mistakes for you.
4) Know the difference between an employee and a contractor. Many small businesses employ independent contractors to fulfil certain contracts or obligations. This is fine, but make sure you understand the difference between an employee and a contractor and when a contractor may cross over that line. Because even if your business has deemed someone to be a contractor, if the CRA deems that same person to be an employee, you’ll be on the hook for payroll taxes.
5) Keep good records. This goes without saying. Business returns are heavily scrutinized by the CRA (and some audits are even randomly selected). The best way to prepare for an inevitable audit is to keep organized records all year round so that what you need is at the ready. This means always maintaining good bookkeeping and payroll habits.
Doing payroll, while not overly complex, is incredibly important. After all, your employees depend on you to do it right and do it on time every single time.
How does your business generate new leads? Our next blog discusses the most effective lead generation techniques.