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October 28, 2020
Every startup and small business needs a reliable payroll management system. After all, it’s the top expense for most startups. At first glance payroll may seem simple, but payroll management goes far beyond making sure employees are paid the correct amount on time.
As an employer, you must submit forms and documentation confirming your employees are qualified to work in the U.S., withhold the appropriate government taxes from employee paychecks during each pay cycle, register to do business in each state where employees reside, file the correct employment taxes, and more. An oversight in any of these areas can cost your business money in government fees, and potential funding and acquisition deals down the line.
At Zeni, we work with several venture-backed startups to help manage every aspect of their business finances, including payroll solutions, for a flat monthly fee. In our finance teams’ 100+ years of combined experience, we’ve identified a number of features in a startup payroll system that shouldn’t be overlooked.
As you’re considering which payroll system is the best fit for your startup, keep the following points in mind:
When it comes to a payroll system, the simpler it is to use, the better. Members of your team, new hires, and your accountant may also need to be able to navigate your payroll system to find and enter information. Clunky software and confusing user interfaces found in many basic payroll providers will cost you time and money to keep your system up to date.
Some payroll providers also offer mobile apps, a convenient 'ease of use' feature for founders and small business owners managing payroll on-the-go.
While it’s not an absolute must, finding a payroll provider that offers a full suite of human resources and employment-related services—1099 independent contractor management, 401(k), attendance and time tracking, vacation or paid time off, commuter benefits and other employee benefits, health insurance administration, and more—can save founders a ton of time and headache.
Finding a full-service payroll platform may mean expanding your search to include PEO services, or professional employer organizations, which provide outsourced HR, payroll, benefits, workers' comp, and compliance services to small and medium sized businesses. Depending on the size and structure of your business, PEOs can be a more expensive option but the ability to consolidate your various payroll processing, HR software, and benefits services under one provider could make running your startup easier—especially as your business grows.
See also: 8 Best Accounting Tools for Startups
The beauty of a modern payroll system is the ability to run payroll automatically. Once it’s set up, it can run itself. Putting your payroll on autopilot saves time, ensures employees are paid on-time, and reduces your monthly bookkeeping or accounting fees (if your bookkeepers or accountants charge hourly, that is).
Hiring remote employees is not atypical for startups and with COVID-19, remote workforces have become the ‘new normal’. If you intend to employ a remote workforce for your startup, be sure your payroll provider is equipped to seamlessly onboard remote new-hires with employee self-service features for things like benefit elections, selecting direct deposits vs paper checks, accessing pay stubs, downloading important tax forms like W-2s or 1099s, and more. They must also be able to ensure your business is operating within local regulations and tax compliance requirements in each state your employees reside.
Payroll taxes are complicated, especially for businesses with remote workforces which must comply with the tax and payroll tax laws of every state remote employees live to avoid penalties and fees. Your payroll provider should offer tax support to help maintain compliance with state and federal guidelines via features like automated payroll tax calculations, tax filings, and tax deductions.
R&D tax credits can be an immediate source of cash and significantly reduce future tax liability for a business. To claim a R&D tax credit, startups and small business owners must provide a number of detailed documentation including specific payroll records. Some payroll management systems have a quick and easy process for gathering this intel, others are more complex and require support from a company representative.
Whether or not your payroll system integrates directly with your existing bookkeeping or accounting software can make the difference between a streamlined accounting system or manual data-entry nightmare. When your payroll data and accounting software are in-sync via direct software integrations, businesses can cut down on data entry tasks, reduce human error, and help maintain up-to-date books.
All but seven of the 50 U.S. states have state-mandated payroll reports related to income taxes and state unemployment taxes, which must be compiled and submitted at different intervals throughout the year. A streamlined payroll reporting system will help employers stay on top of the reporting timelines and requirements necessary to avoid fees and pay employees on time.
If you’ve hired an accountant, you want the ability to easily add them as a user on your payroll service platform so they can manage payroll administration, reporting and other functions autonomously. For startups and small businesses, some bookkeepers and accountants may also help out with payroll analytics, benefits administration, and other payroll needs.
Knowing you have experts at your disposal to help navigate your company’s payroll system is key. Should any issues, questions, or timely requests arise, the ability to call and speak to a customer support representative, live chat online, or exchange emails with a dedicated account representative makes all the difference.
Consider your startup’s needs, current financial position, and growth plans over the next 6 to 12-months, and decide what you’re willing (and able) to invest in a payroll system. Different payroll options have different pricing structures, and some offer discounted or free trials to get you started. Most begin with a base fee and provide different capabilities as add-on services, such as HR support or commuter benefits packages. Others offer its entire suite of services for a set monthly subscription fee determined by the number of employees on payroll.
When you’re evaluating the pricing structures of different payroll services, be sure to look into the ‘nitty gritty’ fees, such as how many payroll runs are included in your monthly fee (some offer unlimited payroll runs, others cap your monthly limit), limitations around adjusting employee information, wages or contractor pay rates and payroll schedules, and more.
Even the best payroll software requires vigilant management. If your startup is growing and you’re considering outsourcing payroll management, Zeni can handle all your bookkeeping, accounting, and payroll management needs on one platform with speed and accuracy, including:
Zeni is an all-in-one finance automation platform for startups that takes care of all your finance functions, from daily bookkeeping to taxes to real-time reporting to payroll management. Our experienced team of accountants, tax advisors, and CFOs know the world of startup finance inside and out, so we’ve seen the challenges many founders and business owners face and can provide expert guidance for every scenario. If Zeni sounds like the right fit for your business, get in touch with our team to learn more.