Is Writing Your Own Paychecks for Your Business Worth the Risk?

Running your own payroll can be done but it is littered with potential pitfalls and risks that could derail the progress you are making in other areas.

For those ‘old school’ types like myself, we still write checks. We go through the process of getting out the check book, writing out who the check is for and praying that the amount is not so large that you run out of space when writing it out below because our handwriting is questionable. (I don’t know how many checks I’ve ruined this way over the years).

Stressful for sure, but nothing compared to the pitfalls of writing a payroll check for your business.  Mess one of those up and you could find yourself, your Company and your employees, in a world of hurt. So why do so many small business owners still insist on doing it themselves?

• Cheaper          Absolutely…until that first mistake.
• Control            Most entrepreneurs love control…that’s why they chose to work for themselves in the first place.

I remember when I had my travel company and the wisest thing I did was to have my Accountant do everything as I got started. As I added employees I started using a Company similar to APlus Payroll.  I was traveling out of the Country almost half the year, so having someone who could still run payroll for me with a phone call or fax, made all the difference. Having them file my taxes and take the liability for any missed deadlines was the cherry on top.

So what minefield do you walk through by continuing to write your own checks and file your own taxes? Here are some key things that can go wrong:

1. Incorrect calculation of wages:
   • Miscalculating regular hours, overtime, or bonuses
   • Applying the wrong pay rate
   • Errors in commission calculations
2. Tax withholding mistakes:
   • Using outdated tax tables
   • Incorrect application of federal, state, or local tax rates
   • Failing to withhold the proper amount for Social Security and Medicare
3. Deduction errors:
   • Forgetting to include or incorrectly calculating deductions for health insurance, retirement plans, or other benefits
   • Applying garnishments incorrectly or failing to apply them at all
4. Compliance issues:
   • Violating minimum wage laws
   • Misclassifying employees as exempt or non-exempt
   • Failing to comply with state-specific payroll regulations
5. Timing problems:
   • Missing payroll deadlines
   • Failing to pay employees on time, which can lead to legal issues
6. Record-keeping mistakes:
   • Not maintaining accurate records of hours worked, wages paid, and deductions
   • Failing to provide proper pay stubs or wage statements
7. Check formatting errors:
   • Writing the wrong amount in words or numbers
   • Incorrect dating of the check
   • Missing signatures or other required information
8. Mishandling of special situations:
   • Errors in final paychecks for terminated employees
   • Mistakes in handling paid time off or sick leave payouts
9. Bank account issues:
   • Writing checks from the wrong account
   • Insufficient funds in the payroll account
10. Data entry errors:
    • Transposing numbers
    • Entering information into the wrong fields in payroll software
11. Failing to stay updated on changing laws:
    • Not implementing new minimum wage rates
    • Missing changes in tax laws or reporting requirements

These mistakes can lead to serious consequences, including:

• Employee dissatisfaction and turnover
• Legal penalties and fines
• Tax audits and back payments
• Damage to company reputation
• Time and resources spent correcting errors

For a fee starting around $60 per payroll, you can get help with all of the above issues. Your employees would be paid on time and you could worry less about taxes and more about profits.  If the complexity of payroll does becomes too great to manage in-house, do consider contacting us. You may be very surprised the difference it makes. Also, our advice is always free!

This blog does not constitute formal Payroll or legal advice and does not address state or local law.