Payroll is tricky, yet it’s also a process that requires extreme accuracy and care. It not only involves many compliance measures that you’re required to follow, it also can very negatively affect your business as a whole if it’s not being handled in the best possible manner.
For small businesses, that can sound overwhelming. As a small business, you have limited resources, so the idea of a payroll audit –– a compliance audit conducted by a multi-employee business –– may sound unnecessary or impractical. In other words, you may think there are better uses of your time. It’s a process that will, however, save your business time, money and headaches in the long run and is a necessity for basically every business.
Why is this a process you should not be overlooking?
Verification that your general ledger is correct
While you monitor your payroll, you probably have multiple categories based on the employee type and the salaries. This can easily lead to mistakes or incomplete reporting on your general ledger, which is not only bad for keeping track of your business, but it could get you into legal trouble. Doing a payroll audit will ensure that your general ledger has the most accurate information recorded, and accuracy is key when it comes to payroll and accounting.
Verification that your employees are being paid accurately
Even if your team is small, working with all of the various numbers and hours involved with payroll means the strong possibility for errors. Even just having one employee equates to lots of numbers to calculate. You want to make sure your employees were accurately paid for the hours they worked and confirm their sick time and vacation leave through a payroll audit. Both your employees and your company will be happy this was verified because mistakes can be costly on both ends.
Verification that you are compliant
An audit is especially important because it compares every check to the transactions in your ledger. This is everything from paychecks to insurance to withholdings. You are required by law to have precisely accurate recordkeeping. While you’re not intentionally recording inaccurate information, if it’s not correct, that non-compliance could get you into major legal trouble. If you’re even questioning the time involved in a payroll audit, consider the money you’ll save in not having to fight a long, strenuous legal battle with the government.
Yes, payroll audits are time consuming and involve utilizing valuable human capital. As a small business, you might think this is a practice you can sidestep, but a payroll audit is one of the most important and necessary things you can do for your business. Be sure your business is not being cheated, your employees are getting accurate pay and the government is receiving correct ledgers by putting in the time to double-check. In the long-run, it will save you the time and money involved in dealing with incorrect ledgers.