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Online Payroll Process: Part 4

Small Business: Payroll Tax Services


One of the most important services we provide is the collection and payment of payroll taxes on behalf of our clients.

Funds are collected from our clients via ACH and deposited into our tax escrow account.

Four Major Tax Fund Categories

These include Federal taxes (income tax, social security and Medicare), Federal unemployment tax, State income tax withholding and state unemployment taxes.

Some cities and counties also have local taxes but this is much less common.

We track the taxes by deposit due date and make sure that all taxes are paid to the appropriate authority on time. We also file any necessary reports such as Federal form 941, 940 and W2s, State unemployment wage reports and many others.

Staying in compliance with payroll tax deposits and filings is critical to the long term health of any business. Being on our tax service also helps enforce good fiscal discipline by ensuring that all tax funds withheld from employees are secure and available when they are due.

Many businesses have found themselves in trouble because funds withheld from employees were used for other immediate cash flow needs and then were not available for deposit.

Our tax service is warranted and guaranteed to be done correctly. If a penalty is assessed due to a failure on our part, then we pay the penalty.

We also carry appropriate insurance to protect against significant errors or omissions. Generally notices from taxing authorities are easily resolved. Often they are generated in error or turn out to be mere requests for clarification.

For a more detailed explanation of the payroll tax process and responsibilities see this article

Audit and Reconciliation:

Southwestern Payroll takes our obligation to clients very seriously. We take great pride in our secure retention of all client funds.

One way we demonstrate this commitment is by the careful daily reconciliation of all our accounts and the reconciliation of all client funds by type. Each type of funds we collect is segregated in an appropriate account.

For example all funds collected are placed in an account that contains ONLY tax funds, direct deposits, direct checks or processing fees. Additionally, our own corporate operating funds are never co-mingled with client escrow funds.

Each year we hire an audit firm to conduct an SSAE-16 audit. While this audit actually looks at all phases of our operation to ensure security and protection of our clients, it focusses in great detail on the disposition of client funds.

We reconcile that all cash due from clients and all cash payable on behalf of clients is collected and paid. Copies of this audit are available on request.

Have questions about your payroll process?

Call 918.587.3321 for answers to your questions, or Get Free Info Here.

Check out the rest of our series:

Payroll Processing Cycle: Gathering Data
Payroll Processing Cycle: Input & Verification
Payroll Processing Cycle: Automated Processing

Online Payroll Process: Part 3

Automated Processing

Payroll Life CycleAfter a payroll is processed and the totals are verified post-processing can include the creation of output files that can’t be automated during processing, verification of all garnishment service data, and verifying any changes that were made to setup such as new bank accounts, general ledger or other file exports and many other items.

Disks with encrypted data, FTP uploads and many other custom processes may occur during this period. These checkpoints allow another opportunity for human intervention to be sure that all payroll data is correct.

Post processing also includes organizing the output into the appropriate categories. For example, some organizations have checks sent to a variety of locations and then reports to the corporate office.

Packaging and Shipping:

Although the adoption of paperless payroll is increasing, most companies still request that paper checks and reports be delivered to their offices or facilities. It is vital that instructions be followed exactly (and they can get complex), and that all information is delivered to the correct location in a timely manner.

For example a large restaurant chain with more than 50 locations needs checks shipped to each restaurant by a variety of shipping methods and delivered on the correct day.

At Southwestern, we use a custom shipping log to track the status of all payrolls and to record how and when it was processed for shipping.

ACH Processing:

After a payroll has been processed and verified, often electronic banking needs to be processed. This includes the collection of funds needed to pay employee direct deposits, company payroll tax deposits, and payroll processing fees.

We may also need to collect funds for any payroll or third party checks written on a client’s behalf out of our bank accounts. ACH processing also includes making payments to employees, third parties and some taxing authorities.

Southwestern Payroll uses strong controls and secure data transfer for all electronic banking.

In order for ACH transactions to be processed on time and to guarantee timely deposit into the destination account, they must be transmitted to the bank two business days prior to the intended settlement date.

This ACH processing deadline is the point from which we work backwards to determine when input must be received from our clients.

Transactions can be initiated one day in advance and still be received on time in most cases, but these deposits are never guaranteed.

When an ACH transaction fails due to incorrect data input, we receive notification from the bank. We track the receipt of funds back into our account and distribute these payments back to the appropriate party per our client’s instructions.

Have questions about your payroll process?

Call 918.587.3321 for answers to your questions, or Get Free Info Here.

Check out the rest of our series:

Payroll Processing Cycle: Gathering Data
Payroll Processing Cycle: Input & Verification
Payroll Processing Cycle: Payroll Taxes

Online Payroll Process: Part 2

Input and Verification

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While time can be tracked many different ways, and through various systems, all relevant information, including every employee‘s time worked and any needs related to payroll, needs to be entered into the payroll system. Southwestern allows you several options here.

Input Payroll Information:

You may access our system in either PC or web-based form and enter the information at your convenience, or you can provide the data to one of our payroll specialists and they will enter it for you.

No matter who enters the data, you can still access the system to review and look up information as needed. We can even provide access for your CPA, or other service providers, so they can access information without having to go through you first.

Three business days before the desired pay date, payroll data should be sent to us for processing with control totals. For example, if pay day is Friday, data should be sent to us some time before close of business on Tuesday.

This allows us 24 hours to process the payroll and to transmit needed electronic banking files.

Payroll Pre-process Steps:

Once the data is entered, it is submitted to us for processing. If the data is sent to us and entered by our staff, we ask that it include totals to which we can balance after data entry is complete.

However, if the data was entered by the employer, then we ask for control totals to be transmitted via email or fax, in the form of a pre-process register. Unlike many systems, with us you know exactly what the result of your data entry will be before you submit it to us.

This report shows the gross to net calculation for every check in the payroll to be processed. We need the totals from this report so that, after processing, we can verify that we match exactly what was submitted.

We believe that this step, requiring human intervention, is one of the critical factors that separates us from our competition. It also acts as a double check that you intended to submit payroll and that we should be looking for an electronic submission. Once the totals are received, the payroll is ready for pre-processing by our operations department.

Pre-processing can include a variety of steps ranging from additional data entry, importing of third party or supplemental information, or changes in company or employee setup to meet the needs of a particular client.

Southwestern Payroll uses a log system to create alerts when payrolls require special pre-processing steps outside the normal processes. One example is setting up a new general ledger export to process with payroll.

Perhaps the most significant pre-process step is our garnishment administration service.

Other pre-processing steps include checking for validity of SSN formats and for the presence of addresses for all new employees. We also verify that the amount of direct deposits is in line with predetermined limits for each company.

Process Payroll Data and Verify:

When all pre-process steps are completed, the payroll is ready for processing by our production department. Submitted payrolls are processed and control totals are verified to be sure that all earnings deductions and taxes match what was submitted by our client.

During processing, several verifications take place that could cause a payroll process to be interrupted and placed on hold. These include looking for abnormally large check amounts and other data integrity checks.

If the post processing totals do not agree with the submitted control totals, then our operations department will contact the client to determine the cause of the discrepancy and to resolve as needed.

Processing payroll can also initiate a variety of automated communications that expedite receipt of information by interested parties. This can be electronic delivery of payroll reports, uploading of files to third party secure sites, or internal communications within our staff.

We go through a few more checks in post-processing, and you can choose to package your payroll in a variety of ways.

Have questions about your payroll process?

Call 918.587.3321 for answers to your questions, or Get Free Info Here.

Check out the rest of our series:

Payroll Processing Cycle: Gathering Data
Payroll Processing Cycle: Automated Processing
Payroll Processing Cycle: Payroll Tax Services

Online Payroll Process: Part 1

Gathering Data

Over the years, I have found that most employers are unaware of the many steps involved with properly processing a payroll.

If you are outsourcing your payroll to Southwestern Payroll, then you might like to learn about the processes, procedures, and controls that are in place when we process your payroll.

If you are not processing with us, then you should ask about these steps with your current provider. Each is critical to maintaining accurate records, as well as ensuring payroll is done correctly and according to your wishes.

Recruiting and Hiring Employees:

The payroll process starts long before data is sent to us to pay employees. It begins when you hire an employee.

Properly documenting employee data is critical so you are in compliance with all state and federal laws and so you can report all information required.

Time and Attendance Tracking:

Once you have properly documented an employee and put them to work, it is likely that you will need to track their time worked and their attendance in general. This can include tracking hours to specific tasks or just tracking how much paid time off they have coming.

Using an electronic system to do this brings great efficiency and provides excellent record keeping. We provide comprehensive web-based time and attendance systems that allow you to track time using computers, time clocks, bio-metric devices, smart phones, mobile devices, and other methods, separately or in combination.

Using an electronic time keeping system should also provide for electronic signatures of employees and supervisors, time card approval, and ultimately electronic feed into the payroll module.

Regardless of how the time is tracked, all employee demographic information, time worked, and all payroll-related information needs to be entered into the payroll system.

Southwestern provides great flexibility in this process.

While time can be tracked many different ways, and through various systems, all relevant information needs to be entered into the payroll system.

Southwestern allows you several options here, which we will cover in our next article.

Have questions about your payroll process?

Call 918.587.3321 for answers to your questions, or Get Free Info Here.

Check out the rest of our series:

Payroll Processing Cycle: Input and Verification
Payroll Processing Cycle: Automated Processing
Payroll Processing Cycle: Payroll Tax Services

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