Do's & Don'ts For Successful Payroll Management

Do's & Don'ts For Successful Payroll Management

Whatever your business may be, payroll is likely to be one of the biggest, if not the biggest, expense. This alone is enough to make most good business owners want to get it exactly right, but payroll management can be stressful for many other reasons as well. It can be a somewhat complicated process, which can cause employers to stress over any potential mistakes or legal issues. And of course, there is the purely human aspect of wanting to ensure that your employees get paid the money they are due. There are many reasons why payroll is important to a business, so here are some of the biggest dos and don’ts of effective payroll management.


1: Do Consider Your Timeline

One of the first things an employee wants to learn once they know how much they will be paid is how often they will be paid. Typically, there are four ways to do this. Weekly pay means an employee will be paid 52 times a year; bi-weekly means they will be paid 26 times; bi-monthly is slightly different, and will result in about 24 payments; and monthly equates to 12 payments.

Regardless of whether an employee is on a fixed wage or an hourly rate, the number of payments will not affect how much they ultimately receive. But while most employees prefer to be paid as often as possible rather than receiving larger amounts less often, this can be more expensive. The costs of printing cheques, paying direct deposit fees, and the time spent calculating how much is due to be paid all increase the more frequently you do it, so you need to consider which frequency is most efficient for your business.

2: Don’t Miscalculate

By definition, a mistake is something you don’t want to make, but while ordering the wrong amount of stock or sending out the wrong order can be inconvenient, payroll mistakes can be very serious. Miscalculating tax can have serious legal repercussions, especially if it is a recurring problem. Overpaying your employees will obviously lead to unnecessary costs and may leave you wondering why your books do not add up. Underpaying your employees on the other hand not only erodes their trust in you as an employer, but can also have major legal and financial repercussions further down the line. For example, a U.S.-based company called West Marine Products underpaid 707 of their employees by a few cents over 5 years. Despite the fact that 88% of these employees were underpaid $50 or less in this period, totalling $18,828, a class-action lawsuit resulted in a payout of $435,000.

3: Do Get Software

One of the best ways to expedite the payroll process and reduce the risk of mistakes is to invest in payroll software. This might not be necessary if you are running a small operation, but if you have more than a handful of employees, it is probably a good investment. In addition to keeping track of various employees and making more accurate calculations faster, payroll software offers a number of other benefits, such as offering an extra layer of security for sensitive personal information, as well as keeping a record of the total annual expenditure.

4: Don’t Invest in an Expensive System

That being said, there is a plethora of payroll software available on the market, and not all of them are created equal. Different products will have different pricing structures, although most will be some sort of subscription model. These prices will reflect the services offered by the software, such as the number of employees you can register, or the number of administrators permitted to access the software. Many will also offer features such as synchronising with your financial modelling software or paying in multiple currencies. There are many features available that your business simply will not require, so shop around, see what features you really need, and try don’t commit to anything longer than 6 months so you can switch or upgrade your subscription if need be.

5: Do Direct Debit

Most of these softwares will have the option of paying your employees by direct debit, which in most cases is preferable to paying by cheque. Apart from eliminating the need to print cheques, direct debit is more reliable, faster, and much more popular with employees, who will have greater control over where their money goes, and won’t have to try to rush to the bank before closing at peak times each week just so they can use the money the already have.

6: Don’t Trust the Software too Much

As helpful as payroll software can be, technology is never perfect. But while a human may notice a mistake made by themselves or someone else, a computer will simply follow its algorithms, and won’t notice if someone is receiving a large payment despite only being in work for a few hours, for example. No matter what software you invest in, its results needs to be examined by human eyes.

7: Do Make a Backup Record

It is also important not to get too complacent with the features offered by your software. They may boast about their security features and backup procedures, but it is your business at stake, and you shouldn’t put total and complete faith in another company to protect it. All it takes is one hack or bug for them to lose lots of your essential data, so be sure to backup all your files, preferably as both a hard copy and on some sort of external hard drive.

8: Don’t Pay Late

Finally, one of the most fundamental aspects of payroll management is making sure you pay people on time. Many employees simply cannot wait an extra few days or even weeks to be paid, and paying late, especially if it is a regular occurence, will erode your relationship with your staff and give you a bad reputation.

In some ways, payroll management is a lot like being a parent: people will rarely notice the long list of things you got right, and are a lot more likely to notice when you get something wrong. It may often seem like a thankless task, but it is an incredibly important one, and successful payroll management can be the thing that makes or breaks a business.

See how our team can help you with your payroll management

10 Tips To Keeping A Positive Cash Flow

10 Tips To Keeping A Positive Cash Flow

The term “cash flow” refers to any money that moves in or out of a business. Maintaining a positive cash flow means keeping more money coming in than you have going out. This is essential not only for the end result of making a profit, but also for enabling your business to run on a day-to-day basis. Cash flow is essentially a barometer for the health and success of your business, so here are 10 tips to keeping a positive cash flow.


1 - Track Everything

From the very beginning, you need to get into the habit of knowing exactly where every bit of money related to your business is coming from and going to. One of the most important aspects of making a business successful, particularly a new business, is making sure that it is running efficiently, and this can only be achieved by keeping as close an eye as possible on your finances. This will help you identify your most popular and profitable products, and enable you to make well-informed business decisions based on fact.

Tracking your financial trends rigourously will help prevent negative dips

Tracking your financial trends rigourously will help prevent negative dips

2 - Identify Negative Trends

Another advantage of comprehensive financial monitoring is that it allows you to identify and address any negative trends. Without keeping track of which products or services are selling and which are not, you might get a general idea of what your customers do or do not like, but it will never paint as accurate a picture as numbers on a page. Furthermore, you may find that certain products or services are selling, but are actually running a loss when all things are taken into account, such as storage or delivery costs. Rigorous financial tracking can reveal trends that you otherwise simply would not see.

3 - Test the Bang for your Buck

With all that being said, you should also bear in mind that just because something is not running at a loss does not mean it is running as efficiently as possible. For example, LED bulbs cost about 4 times more than normal light bulbs, which puts many people off buying them. But not only do LED bulbs lower your energy bills, they also last about 15 times longer, and should pay for themselves in about 6 months. Alternatively, you likely use some sort of software in your business, whether that be for mailing, payroll, or EPoSS (electronic point of sale software). There is such a wide variety of options for all of these today that different brands offer different features according to their own pricing structure, and by shopping around, you may find one that is better suited to your needs for a similar or even lower price.

4 - Save Some for a Rainy Day

The term cash flow refers specifically to the movement of your money, but the flow of cash is not as reliable as the flow of the tide. There will be times when you do not have as much money coming in as you normally would, such as unpaid invoices, lost clients, or seasonal lulls. But while you may not always have money flowing in, you will always have money flowing out to things like wages and utility bills. Since these are necessary expenses, without which the business cannot function, you need to build up some sort of rainy day fund to fall back on, or you run the risk of being unable to bring cash in, even when the customers come back.

5 - Use Discounts and Late Fees

Anyone who issues invoices will tell you that getting them paid is a lot harder than you might expect. Even if they are issued to big corporations that can afford them, or people with whom you have a good relationship, you will inevitably find yourself chasing after them on more than one occasion. One way to curtail this is by offering discounts on early payments, and charging fees for those paid late. The ability to save some cash, or the threat of losing some unnecessarily, are surprisingly powerful incentives, and can save you a lot of time, anguish, and inconvenience.


6 - Take Deposits on Large Orders

Receiving a large order is very exciting for any business, but there is always the risk that the order will fall through. If this happens, it can be a devastating blow, which is why it is so important to ask for a deposit upfront on large orders. The obvious advantage to this is that it lessens the damage dealt to your business, but it could also mean that you are able to sell on any stock you may have invested in so far to another client at a discounted rate, or maybe even full price, which will increase your profit margins on that stock. Furthermore, customers are far less likely to drop out of a deal if they have already invested in it, as they will often prefer to get something rather than nothing in return.

Avoid the potential risk of a large order falling through by taking an up front deposit.

Avoid the potential risk of a large order falling through by taking an up front deposit.

7 - Provide Clear Payment Instructions

You should always remember that nobody cares about the money you are owed as much as you do, even if they’re the ones who owe it to you. While a good business owner will always know how much they owe and to who, the reality is that not everyone pays as close attention to this as they should. By providing clear payment instructions, you minimise the risk of people forgetting what they owe or misunderstanding when it is due. Invoices should be issued as soon as possible to allow for any disputes to be resolved early, and email reminders should be sent a few days before, on the day, and a few days after, if necessary.

8 - Reschedule Payment Dates

Whether it’s coming in or going out, cash never really stops flowing through a business. Ideally, you want that flow to be as steady and predictable as possible, and avoid situations where you are hit with a sudden wave of expenses at one part of the month, and a surge of income at another. This could lead to a scenario where you owe a lot of money, but know you won’t have any coming in for several weeks. Arranging your outgoing and incoming payments so that they are spread evenly across the calendar gives you a lot more flexibility and security, and also makes it less likely that you will spend frivolously.

9 - Use Credit Wisely

Although you always want to have some sort of rainy day fund, having a line of business credit to fall back on can be an added layer of security. But credit can be a complex thing, so you want to start thinking about it before you need it. Even if you have cash to burn, paying your expenses with credit and then paying that debt off on time helps you establish a good credit rating. When doing this, your best option is to maintain a low credit utilisation ratio, which means using only a small percentage of what you are entitled to use (ideally under 30%). This demonstrates that you are a responsible spender and reliable debtor, which will make it far easier to increase your maximum limit in the future.

10 - Consider Outsourcing

While all business owners, especially new ones, want to keep their expenses as low as possible, you need to look at this in terms of how much your time is worth. If it takes you the better part of a day to do your own payroll, you have to consider that you could be spending that time bringing more cash into the business. If the amount you could make in sales is far greater than the cost of outsourcing to a payroll company, refusing to do so is simply a short-sighted decision.


Maintaining a positive cash flow is something that will always be at the forefront of a business owner’s mind, but doing so means looking at a lot more than just the bottom line. Although profit is the ultimate goal, this can only be achieved by looking at the day-to-day decisions you make. In the end, there are countless factors that can affect your cash flow, but the topics laid out above are some of the most impactful, and remembering these will make it a lot easier for you to achieve a positive cash flow.

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5 Reasons Why Your Small Business Needs A Good Bookkeeper

Every small business should have a good bookkeeper.

If you run a small business, particularly one that is just getting started, your finances will be at the forefront of your mind. You will likely have a plan for every penny in your pocket, and will be doing everything to keep costs as low as possible. For these reasons, you may think that hiring a good bookkeeper is a luxury for further down the road, when really it could be a factor that makes or breaks your business. Below are five reasons your small business needs a bookkeeper.


Bookkeeping takes considerable time and effort

Even if you’re a mathematical whizz who got straight As in school, bookkeeping takes a huge amount of time and effort to do properly. Money is coming in and out of every direction, and it quickly becomes very easy to lose track of things. Trying to keep on top of it when there are a million other aspects of your business calling out for attention is a difficult thing to do, and then there come the moments when you realise the final tally doesn’t add up, and you have to go through everything again to find where it all went wrong. In the end, bookkeeping is a black hole that will literally devour your time and pull you away from other tasks.

Handling Payments with Consistency Is Key

When getting started out in business, it’s not unusual for there to be a little bit of disarray, and many suppliers will be somewhat forgiving of this. To a point. But if you are constantly paying late and allowing bills to stack up, people begin to lose their patience rather quickly. More importantly, if you are sending out invoices inconsistently, your incoming cash flow will be inconsistent, which means your outgoing payments will be too. If you don’t know how much money you’re going to need and have at any given point, you may suddenly find yourself unable to replace stock, because your outstanding bills are so high, even if your customers have assured you that their cheque is in the mail. All businesses ultimately boil down to finance, and this level of inconsistency and uncertainty will ultimately come back to haunt you.

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Bookkeeping helps to set targets towards running your business smoothly

If this is your first business, you will be familiar with the fear you feel when you lock the doors after an abysmal day of trading. That same mindset can put dollar signs in your eyes when you suddenly have a day that goes much better than expected, but it’s important not to lose the forest for the trees. One day of doing twice as good as expected is not enough to cancel out three days of weak sales. With proper bookkeeping, you’ll know how much you need to bring in to keep the doors open, not just in a day, week, or month, but all year round. Without a firm target in your sights, it is easy to think things are going a lot better than they are until it all comes crashing down.

A bookkeeper will provide Neutral, Expert Advice

When you hire a bookkeeper, you should remember that you are not just their employer, you are their customer. They want you to keep bringing in cash, because that means they will too. They may not feel the same love and passion for your business as you do, but that also means they won’t be as blinded by fear when things get tough, and will be able to assess the situation in a more logical manner. Furthermore, while this may be your maiden voyage, they will have navigated troubled waters before, and the benefit of that experience is invaluable when it comes to course-correction. The bottom line of your business is your bottom line, so if there is one area where you want logical, expert advice, this is it.

Complexity

The business world is not just complex because of things like calculating profit margins or estimating supply and demand. Whether they come from the Irish government, the EU, or the WTO, regulations abound, and there will be countless challenges, expenses, and blockades that you never would have considered. Similarly, there will be advantages, incentives, breaks, and aid that you may never find on your own. With so much to think of already, a firm and accurate grasp of the legal systems in which you operate is not something you will pick up overnight, but a simple, honest mistake can wreak havoc on your ability to operate. Rather than trying to figure things out as you go, hiring a bookkeeper and learning through observation will serve you best in the long run.


For many new entrepreneurs, hiring a bookkeeper may not seem like the most pressing issue. Most are fired up about their new business, and are trying to do everything they can to make it work. But doing everything you can does not mean doing everything yourself. It may appear that holding off on a bookkeeper is keeping costs down for now, but it is only when you see the cost-benefit analysis in action that you’ll realise how much bang you are truly getting for your bookkeeper.

5 Things That Contractors Starting Out Should Know About From A Financial Perspective

Some things to consider as a start up contractor from a financial perspective.

In just the past few years, the nature of work has undergone a dramatic transformation. While contractors and freelancers have existed for a long time, technological advancements mean that an increasing number of people are drawn to the idea of being their own boss.


Like starting a new job, becoming a contractor can be an intimidating experience. But when you do become a contractor, you have a lot more to worry about than making new friends or meeting sales targets. There are many advantages to contract work, but the financial side of things is very different to that of a traditional 9-5 job, so here are 5 things that start out contractors should know from a financial perspective.

Be Prepared For Financial ups & Downs.

One of the most obvious qualities of contract work is that you won’t have a steady income. Your income one month will be totally different to the months behind and ahead of it, particularly when you are just getting started. Even if you have a few different jobs lined up for the near future, or the promise of regular work, nothing is guaranteed when you are a contractor.

For this reason, it is important to plan ahead, to have some cash you can fall back on, and to be prudent with your spending while you get a feel for your cash flow. Ideally there should be some overlap between the job you are leaving and the contract work you do, so you can make an informed decision about when to take the leap and fully immerse yourself in contract work.

Consider your Pay Rate

If only out of curiosity, most of us have calculated how much we earn per hour. When you become a contractor, this figure can suddenly seem to jump dramatically. While most companies don’t mind paying a higher amount to contractors, because it’s still cheaper than hiring a full-time employee, you need to remember that the per-hour wage is not as scalable for contractors as it is for full-time employees.

Even if you get paid €100 for an hour’s work, you’re not going to fill 40 hours with that rate, and certainly not at the beginning, so don’t expect to be taking home €4,000 a week in the near future. There will always be 168 hours in a week, but there won’t always be 40 hours of work, so you have to stretch whatever you take in.

Be Confident in the value of your work

New contractors often feel awkward when it comes to putting down a price for their work. Many people will be afraid that charging X amount for Y hours will make them look arrogant, or unrealistic. Furthermore, there is a fear that no matter what number you put down, someone else will be willing to do it for less, which drives many people to undervalue their work. Ironically, this can sometimes cost people business, as a lack of confidence can make it seem like the quality of your work is not as high as your competition, and a business may be willing to fork out a little more if they think the result will be better.

This is a hurdle all new contractors must overcome. One of the best ways to do so is to join an online group and ask others how they arrive at their own valuations. There will be plenty of people online with the first-hand experience to know what works, and since most of them won’t be your direct competition, you can get some truly great advice for your specific field.

The Lack of security as a contractor

For all the advantages of contract work, one of the biggest disadvantages is a lack of security. While a person in full-time employment may be entitled to paid annual leave or sick days, contractors enjoy no such benefits, and only get paid when they actually hand over work. For this reason, it is important that you put aside a portion of every pay cheque, no matter how small.

You need this rainy day fund to tap into, because further down the line, whether you simply want some time off or find yourself unable to work, there will come a time when there is no money coming in.

Self Employement and taxes

In order to keep everything above board and avoid incurring penalties further down the line, it is important to register as a self-employed person from the get-go. This can be a little daunting, as people fear running afoul of the tax man, so it may be in your best interests to get some advice from an accountant, or someone who has already been through the process.

The good news is that there are advantages to being self employed with regards to tax, such as a reduced USC rate, and an earned income tax credit for self-employed people that is set to rise from €1,150 to €1,350 in Budget 2019. Making sure you take advantage of all the benefits available to you is another reason to seek expert advice, at least in the beginning.

Entering the world of contract work can seem scary and complex at times, but it can be an attractive alternative to working for someone else. There will be risks and challenges involved, but if you plan properly and do things right, contract work can offer you a tremendous amount of freedom and satisfaction, as well as a high quality of life.

If you would like to discuss anything from this article or have any other questions relating to working as a contractor, get in touch with us today and we’ll be happy to advise you.

Signs of a brilliant bookkeeper

Good bookkeepers are as frequent as rain in Ireland but a truly great bookkeepers are as rare as a week of sunshine. As a business owner you need to recognise the impact a bookkeeper can have on your business Being so rare it’s difficult to hunt a great bookkeeper down but here are some tips on how to know one when you see one.

 

Educate Themselves On Your Business Needs

Great bookkeepers take the time to adapt to your business and understand how you operate so they can make sure that the processes are as simple and efficient as possible. They will be able to identify opportunities for your business to be more organised, labour-saving and efficient.

Excellent Communication Skills


Great bookkeepers are great communicators they are able to explain complex ideas in easy-to-understand ways, if your bookkeeper regularly uses accounting and bookkeeping jargon, the conversations you have will feel restricted and unproductive. Look for someone who’s willing to communicate key concepts at a pace you’re comfortable with, and don’t be afraid to ask questions!

Experience In Your Particular Industry

What may seem like a good bookkeeper to most could be a great bookkeeper in your industry. Working with a bookkeeper who has expertise in Legal bookkeeping would be very different than working with one who has experience with retail. Specialised bookkeepers can provide reports on how your business is performing month-to-month, and have an idea of what success metrics look like in your industry.

Evolve With The Industry

A sign of a really great bookkeeper is one who is up to date on what is happening in the bookkeeping, accounting and technology spaces. The bookkeeping and accounting industries have evolved considerably over the past few years due to changing technologies. When bookkeepers utilize the latest business software and technologies, it shows that they’re committed to increasing efficiency and providing a more robust service. Great bookkeepers should be explaining to you and encouraging you to use technology to save time and money by automating processes with cloud accounting packages.

Are Trustworthy

Finally, the relationship between a client and a bookkeeper is sacred. Most people won’t share their financial details with friends or even family, so it is important when picking a bookkeeper that it is one you can trust. Great bookkeepers are transparent with things like billing and pricing, they’re responsive and you never have to question what kind of value they’re adding to your business, you are one of the lucky ones that have a great bookkeeper.

How "PAYE Modernisation" will affect Employees and Employers?

In 1960 Revenue introduced the PAYE system. This system was designed for employees and employers to have the most accurate, up to date information relating to pay and tax deductions. Ensuring the right tax deductions are made by the right individuals at the right times, improves the accuracy, understanding and transparency for all the stakeholders. This version of the PAYE system has been used for the past 60 years but for not much longer…

On the 1st of January 2019, the PAYE system will get a long overdue update to evolve with the times. For example, people switch job more regularly and changes in personal circumstances   ( i.e marital status) are much more common compared to when PAYE System originally launched

Now you are probably wondering what do these changes mean for me. Don’t worry, this update will benefit both employers and employees.

 

For Employees

Before the start of the tax year, an online statement will be sent detailing your tax credits and standard cut-off points for the upcoming year. This will be based on estimated income and information available to Revenue for the employee. Employees will be prompted to make any necessary adjustments to or to update this online statement, including claiming any additional entitlements. This contrasts with the current system where the employee must wait until the end of the year for such reconciliation and wait for any refund or be faced with a tax underpayment.

For Employers

This update will have changes on how employers pay their employees. When processing payroll, a file must be submitted (electronically) to Revenue containing details of employee payments. The contents of this file will be like the details currently submitted in the annual P35, but unlike the P35 this file must be submitted each pay period e.g. weekly or monthly.

The update enables employers to submit a new employee’s detail before they start employment their details. This allows the final payroll run in the year will generate a pre-populated statement setting out the total tax deductions for the year both at the level of the employer and the employee. This, in turn, should reduce incidences of year end over/underpayments of income tax.

This new reporting process by employers to Revenue is anticipated to be fully integrated into the employer’s payroll run and will result in a significant modernisation of business processes and reduce the administrative cost for employers.

To discuss these changes further Contact us

Should You Do Your Own Bookkeeping?

Should you do your own bookkeeping? Similar to the DIY mentality of the husband doing the plumbing, probably not. Except in this case instead a flood of water in your kitchen you have a flood of paperwork in your office leading up to an audit. It’s not a question could you do your own bookkeeping, it’s not even a question of why should you, it’s a question of why would you? Here are 3 reasons why doing your own bookkeeping isn’t in you or your businesses best interest.


Control

Oftentimes business owners are notorious for Micro-managing. Observing and undertaking any and every task that the business needs. This is unnecessary stress inducer, learn to trust in the ability of the people you hire. You can’t control everything in business. Trying will only lead to frustration. Control the things you can. Attempting to be the jack of all trades will lead you to be the master of none.

 

Time is money

A lie business owners tell themselves when deciding to do their own bookkeeping is that they will make time. Realise that you are highly skilled and that your time has value, after all time is money. If you're hell-bent on being in control of your business's financial health, then you likely need to make the time commitment. Why not commit your time by focusing on what you do best?

 

Interest

It is almost normal not to enjoy maintaining accurate accounting records, it’s a tedious task that can have you leaving the office drained. This can change your outlook, motivation and efficiency in the workplace in a negative way. Don’t under estimate the power of a positive mind-set on not only your work efficiency but the impact it can have on your personal life.

Is your bookkeeper retiring? Here's what to do next.

The working relationship you have with your bookkeeper is oddly intimate, there is a lot of trust involved and a sense of loyalty to one another. This makes the bond hard to break even when it’s in the individual’s best interest. It can be a bit scary when your long-term bookkeeper retires. When looking for a replacement its important you know they will be just as efficient, reliable, honest, and flexible. Here's what to do when your bookkeeper retires:


Bookkeeping is most likely not your forte and now that your bookkeeper is gone, you might be feeling more lost than ever. Find the silver lining and view this situation as an opportunity for you to rebuild how your business financials are being managed, and assess what other aspects of your business can use some fine-tuning and implement. Technology is ever changing in the world of bookkeeping and a new bookkeeper armed with the latest tech and strategies can greatly benefit your business.


As you get ready to start fresh, take some time to consider what your options are. When you’re considering who your next bookkeeper will be, don’t be afraid to ask hard-hitting questions. Look for someone who will nurture the business relationship, who specialises in your particular industry, has a positive track record with their other clients, and someone who’ll go the extra mile.

Also, it is important that you ensure a smooth transition and get all of your latest financial reports and files from your old bookkeeper. Your new bookkeeper needs this data to do their job efficiently. Accuracy is essential in bookkeeping. Without proper records it's a dangerous guessing game at your expense.

It's important to know the signs of a brilliant bookkeeper before finalising your selection. At Shelbourne Accountants our bookkeepers have experience in a variety of industries which allows them to offer sound practical advice to assist you in the day to day administration of your business.

For further information Contact Us.