Many small and mid-sized businesses are basically entrepreneurial ventures whose payroll is managed by one or two accountants. Considering the fact that employees are few in number, it doesn't come as a surprise that such payrolls are quite easy to draft from a general perspective. However, there are a number of actions that one has to take as precautionary measures against accounting flaws to ensure fair remuneration across the board. Which measures are these?
#1 Separate Commission Earners from Basic Salary Earners and pay as required
Unlike many big companies which pay a standard basic salary, most small and mid-sized businesses tend to have a commission-based payment structure. That is, a small basic salary with a commission based on the profit contribution that the employee has brought to the business. The job will be easy when handling employees that are under a basic salary structure. However, for the 'commissioners', you'll have to top it off by calculating the percentage of commission earned with each individual profit contribution. This commission will then be added to the basic salaries to determine final payout to individual employees.
#2 Calculate Personal Employee Miscellaneous Expenses Incurred and deduct them
Every company has a small credit structure which has a borrowing limit for employees footing miscellaneous expenses within business premises. For instance, some employees like their monthly lunch expenses at the cafeteria deducted from their salary altogether, while others prefer having the company purchase monthly copies of their favourite magazines for them to take advantage of bulk discounts. At the end of the month, it's essential to compile the monthly total of individual personal miscellaneous expenses deduct them from each employee's pay to balance the small credit structure.
#3 Re-evaluate salaries of promoted staff, demoted staff and staff on leave
In some situations, you might find that some employees are being overpayed or underpayed. This may be as a result of neglect especially if you didn't consult the management regarding promotions, demotions and employees on leave. It's therefore important to keep close contact with company bosses to avoid being overtaken by such crucial information. It's also important to insist on a signed internal memo from the boss and to seek verification from the involved employee before making any necessary adjustments on his/her salary.
#4 Counter-check employee attendance and performance sheets against individual performance contracts
Each business has its own set of unique standards regarding hours of attendance, work rate, work delivery and so forth. In addition, every employee is bound to adhere to such standards by signing prerequisite performance contracts. These standards are carefully monitored as a motivational mechanism to ensure that every employee gets what he/she deserves. The lazy and undisciplined employees also get to suffer penalties in form of salary deductions commissioned by the management. It's therefore important to audit individual employee attendance and performance sheets to ensure that they're at per with individual performance contracts. The management should also be consulted regarding recommended additions and deductions to be executed on involved employees.
#5 Add incentives and any other compensative benefits
Sometimes, employees are required to dedicate extra hours to meet overwhelming clientèle demands. These extra hours often come with attractive compensative packages to cater for the extra input of dedication. There are also incentives for employees who go the extra mile in fulfilling certain tasks. For instance, travel benefits for meeting with prospective clients in another country. These incentives and compensative benefits should be compiled to come up with a final figure for every individual employee.
#6 Audit payroll to ensure tax payment and avoid incidences of Double Payment
After the payroll is complete, it's essential to put your audit skills to good use by cross-checking the employee list against all information submitted regarding their identities. This will help in fishing out fabricated identities to avoid incidences of double-payment or payment of ghost workers. There are also companies that prefer deducting the necessary taxes prior to paying out the salaries. If that's the case, you should verify that the necessary tax deductions have been made to avoid incidences of tax fraud.
#7 Consult Banks to Verify Employee Accounts
It doesn't make sense to run the entire race only for you to mess at the finish line. Presumptions regarding finances can prove to be disastrous on your part especially if the company requires its employees to compensate for financial losses incurred. The financial loss in this case can come in the form of a wrongful payout. Bank account numbers have many digits and a single digit error can lead to serious repercussions on your part. That's why it's important to submit the account number list to the involved banks for cross-checking to ensure precision in the execution of payouts.
In most business start-ups, accounting is nothing but basic math and thus, the founder is usually the accountant and auditor. This is indeed reasonable considering the hefty costs of hiring an accountant and an auditor during the company's infant stage. With this in mind, it's important for the founder to stay updated regarding crucial accounting measures in every business stage. Otherwise, the business will experience unexplained losses due to neglect of key accounting skills.