Business payroll accounting is a lot like running a business: you need to keep track of all of your employees’ hours, the number of hours they actually work (or don’t work) and what they make, as well as expenses, bonuses, taxes, insurance and more. Most small businesses do not have the resources to keep up with these records, which is why most small business payroll software was not designed for business use. However, it is very important that you keep all of this information organized, so you can make the most of your resources and have a good record of all employees’ hours.
Calculating your payroll requires some mathematical skills, but fortunately there are some relatively easy processes that you can do on your own if you want to save time. The first thing that you have to do is determine how much your company pays your employees per hour. This includes overtime, which is not factored into the employees gross wage, but can be factored in as an itemized deduction on your year-end income statement. Once you have figured out the rate per hour that your employees are paid, then you can calculate your employees’ hourly wage rate using the following method:
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Your employees gross wages minus your employees taxes and other miscellaneous deductions like the value of any prepaid business expenses you might have. You can also include reasonable charges like gas or parking when figuring your employees’ payroll deductions. You can also adjust the rate of your business’s premium to adjust your employees’ taxes and miscellaneous deductions, so you can provide your employees with an idea of the amount of money that they will actually see each year. Using a computer spreadsheet to calculate your payroll simply takes a little bit of time and you will be able to determine all of your employees’ annual salary accurately every year, which will help you budget better for your business.