Bookkeeping Blog

Advice and tips for Australian Businesses

Why Payroll Is Critical To Get Right

Why Payroll Is Critical To Get Right

Payroll, or the process of managing employee wage payments, is a critical task for all businesses to get right.

As a small business owner, it’s likely that you’re currently handling payroll yourself, but as your team grows, investing in professional payroll services will save you a lot of time and help you avoid the unexpected costs and hefty penalties that come with getting your payroll wrong.

In this article, we explain the essentials any business owner needs to know about payroll.

1. The critical role payroll plays in your business

If there’s one area of your business to get right, it’s payroll.

Not processing payroll correctly can affect the morale and trust of your employees, who are relying on reliable and timely access to their wages.

Payroll errors can also impact your compliance and have a negative impact on your business’ reputation and financial stability.

2. So, what does payroll compliance mean?

As outlined by government regulations, a business meets payroll compliance by:

  • Making accurate payments and deductions to its employees
  • Providing employees with a detailed payslip showing the minimum requirements as outlined by the Fair Work Australia laws
  • File and pay withholding taxes on time to the Australian Tax Office (ATO)
  • For larger businesses: file and pay payroll tax to the relevant state authorities on time
  • File and report STP to the Tax Office on time
  • Pay other deductions – such as superannuation contributions by the due dates
  • Keep payroll records for at least seven years.

3. Common mistakes to avoid when processing your payroll

Doing payroll to the level required these days can be complicated and time consuming, especially if you’re not a trained payroll services professional.

With so many legal requirements to keep track of, we often see the same payroll mistakes happening, including:

Incorrect wage payments

As an employer, you’re responsible for ensuring that your employees receive the correct wage payments, including all relevant entitlements under their award or employment agreement. This includes any overtime, penalty rates and allowances.

You can find comprehensive information about pay rates and entitlements via the Fair Work Australia website, including their pay calculator.

Incorrect leave accruals

This often occurs when a new employee is set up in the system.

When setting up your employees, remember that leave accrual only applies to full time and part time employees and part time employees need to be set up with pro-rata leave entitlements.

One other step to prioritise is ticking the option for annual leave to be paid out upon employee termination – this will ensure the final payslip calculates the leave owed.

Incorrect or late superannuation payments

Including:

  • Incorrectly calculating super or missing key situations where super is payable, such as for contractors, people under 18, and sometimes for shift loadings and leave loading
  • Not setting up a default employer super fund (or sometimes setting one up but having the incorrect type)
  • And, not paying superannuation by the quarterly due date.

Being clear on these steps, or investing in a payroll services professional, can help you avoid some of the most common payroll mistakes.

4. What happens when you make a payroll mistake?

Payroll is such a critical process for businesses to get right, and unfortunately the consequences for payroll mistakes can be both costly and have a negative impact on your business, including:

  • Being audited by the ATO
  • Receiving penalties and paying interest for superannuation underpayment
  • Receiving penalties and paying interest for late superannuation payments
  • Issues with cash flow due to incorrect employee wage payments and trying to catch up by paying them back pay
  • Fines from Fair Work Inspectors.

5. How to reduce payroll errors and set yourself up for clear and efficient payroll processing

If you’re feeling a bit daunted by all there is to know and get right with your payroll, these simple tips can help to streamline the process for you.

Payroll processing tips:
  • Before you start your payroll processing, it’s essential to make sure you have all the necessary documentation and details prepared and readily available. Taking some time to do this first can save on costly mistakes
  • Setting up a system that tracks all the payroll hours worked will give you clarity and confidence that all employees are paid accurate and timely wages
  • And last but not least, make sure you clearly communicate wage details with each of your employees so they know how much they will be paid and when to expect their paycheck.

6. How outsourcing payroll to a payroll services professional benefits businesses

With payroll playing such a critical role in the health of your business (and being a time-intensive activity), many business owners choose to invest in experts to manage their payroll.

Because payroll service providers live and breathe payroll (and thanks to the help of automation tools), their services are often more affordable than you might think.

This can be a great investment in healthy payroll, and can give you more time back to do what you do best and the peace of mind of knowing that your payroll is in experienced hands.

Depending on who you choose, many payroll professionals can support you with:

  • Working out pay (including benefits and reimbursements)
  • Deducting employee income taxes
  • Sorting out other deductions such as retirement contributions
  • Paying employees
  • Maintaining your payroll records, and
  • Filing taxes with the ATO.

7. Get professional help

So, if you’re ready to spend less time worrying about whether your payroll is accurate, finding the right fit payroll services support can be a game changer.

Maree’s Mobile Bookkeeping provides a complete Bookkeeping, BAS Lodgement and Payroll Service for small business owners. As we work virtually, we service business owners from anywhere in Australia. From bookkeeping services through to payroll services, we’re here to help you take control of your bookkeeping and compliance functions so that you can focus on growing your business.

To find out more about how a professional bookkeeping service can save you time and money, phone Maree today on 0429 363 047.

Why The New Financial Year Is Always The Best Time To Get Your Finances And Bookkeeping In Order

The new financial year is always the best time to get your finances and bookkeeping in order. In this article, we explain what bookkeeping things you need to consider for the new financial year.

1. Ditch The Spreadsheets And Get The Right Bookkeeping App

One of the main reasons some businesses fail is because they don’t have a good bookkeeping system. With the right bookkeeping, you’ll receive enough warning if it looks like your business might run out of cash.

Using the latest bookkeeping software is the most efficient choice. The most popular bookkeeping apps include Xero, MYOB and Quickbooks, which you can trial each one for free and see what works better for you.

The new financial year is the perfect time to switch to a bookkeeping app so by the time this financial year is over, you’ll have a full financial year worth of data.

 2. Make Sure Your GST And Other Registrations Are In Order

The new financial year is a good time to assess if you need to register for GST.

You must register for GST if:

  • Your business has a GST turnover of $75,000 or more
  • You provide taxi or limousine travel (including ride-sourcing services like Uber, GoCatch, Didi or OLA) regardless of your GST turnover
  • You want to claim fuel tax credits for your business, regardless of your GST turnover

Other registrations you may need include:

  1. Tax File Number (if you’re operating as a partnership, trust or company) – required
  2. Australian business number (ABN) – recommended 
  3. Pay as you go (PAYG) withholding – required if you employ staff
  4. Payroll tax – required in certain circumstances
  5. Fringe benefits tax (FBT) – required in certain circumstances

3. Get Your Bookkeeping Processes In Order

Do your bookkeeping weekly no matter how busy you are. If you genuinely cannot keep up, you are far better off to outsource the bookkeeping to a professional to keep on top of.

Regular bookkeeping means that your BAS preparation and lodgment will be much easier to keep on top of too. Make note of the BAS lodgment and payment due dates and pop these into your calendar so you won’t forget to lodge on time:  https://www.ato.gov.au/Business/Business-activity-statements-(BAS)/Due-dates-for-lodging-and-paying-your-BAS/ 

Your financial reports are only useful if your bookkeeping is up to date and accurate, so don’t let this get out of hand. Make sure your bookkeeping is done weekly (minimum) so you can see the financial state of your business at a glance.

 4. Review Your Financial Reports Regularly

It’s important to keep a close eye on your business performance. Good accounting software will let you quickly generate useful reports, such as:

  • Profit and Loss Reports – these show your company’s income, expenses and profits over time.
  • Balance Sheet Reports – these show assets, liabilities and equity
  • Accounts Payable and Accounts Receivable Reports – these show how much money is owed by, and to, your company.

5. Keep Your Business And Your Personal Finances Separate

This is essential if you want to understand your business cash flow and forecast how it might change. Mixing your business and personal finances can leave you uncertain about business performance. If you continue to combine your personal and business transactions, you’ll end up doing unnecessary bookkeeping for your personal transactions, as these still need to be processed in order to balance your bank account at month-end.

6. Get Your Cash Flow In Order And Build A Cash Reserve

Access to cash will make or break your business. The ultimate step to managing cash flow like a pro is to build a cash reserve. A cash reserve provides the cushion you need to manage unexpected events. It also gives you the confidence and finances you need to grow your business. It’s not always possible to build a large cash reserve. But if you do, it can insulate you from the economic cycle and the whims of banks and other lenders. It will also let you take advantage of opportunities when they present themselves.

7. Get Professional Help

Doing bookkeeping and payroll to the level required these days can be complicated and time-consuming. Plus there are a lot of legal requirements, which means there are serious risks to getting things wrong. For these reasons, many business owners prefer to leave it to the experts. It can free up their time and give them extra peace of mind.

In addition, professional bookkeeping services providers are often able to do your bookkeeping at a lower cost than you may realise, as they use software to automate many of the tasks involved.

Expert bookkeeping and payroll services are worth their weight in gold. When you find the right outsourced bookkeeping and payroll service, you’ll spend less time thinking about your bookkeeping and more time doing what you do best – running and growing your business!

Maree’s Mobile Bookkeeping provides a complete Bookkeeping, BAS Lodgement and Payroll Service for small business owners. As we work virtually, we service business owners from anywhere in Australia. From bookkeeping services through to payroll services, we’re here to help you take control of your bookkeeping and compliance functions so that you can focus on growing your business. 

To find out more about how a professional bookkeeping service can save you time and money, phone Maree today on 0429 363 047.

Maree Punzet | Maree’s Mobile Bookkeeping | 0429 363 047
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