Where do I start? I’ll give a little example – I had a client the other day who does their payroll manually, they use an excel spreadsheet and prepare the PAYG Summaries by hand at the end of the year. Their bookkeeper doesn’t help them with this, their Accountant doesn’t help them, and they send it all off and hope it is all correct. When we were doing their year-end reconciliations not only did their gross wages not balance to what was reported in their BAS, but the amount of PAYG deducted for themselves was more than $5000 short of what the ATO require given their salary. When we questioned them on this, they said “but we look at the tax tables and that’s what we use”. So I’ve got no idea what tax tables they are looking at but the reality is that they need to be deducting nearly another $100 per week into their PAYG to meet the minimum requirements and not have a tax bill at year end.
When you do manual payroll, there is a lot of data entry that is involved. You either need to get manual timesheets for staff on casual or calculations for staff that are on salary. You need to work out a spreadsheet to calculate the right amount of Superannuation and manually work out the PAYG Withholding. This can be extremely confusing if there is overtime involved because overtime is not included in ordinary times earnings and no superannuation is payable on this. Then of course it needs to sum for everybody for the week to go into your internet banking and also monthly or quarterly for your BAS. I just cannot see why anyone would do it manually, the cost of a cloud system or even a desk based system would far outweigh the savings you think you are getting in the time it takes to prepare it manually, not to mention all the mistakes that can happen if your spreadsheet isn’t set up correctly.
Then we get to the end of the year – you need to manually write out all your PAYG summaries, manually write out the cover sheet and then manually post them to your employees and the ATO!
When if you had a computerised program all you need to do is pull a wages report, check it balances to the P&L, print the PAYG summaries and upload the file to the ATO. It takes maybe 20% of the time, depending on the number of employees not even that much.
The main mistakes in not using a payroll program are:
- Calculation Errors
- Addition Errors
- PAYG Withholding Calculation Errors
- Not Calculating the Super
- The massive amounts of time you are spending in keeping this system going.
The Bookkeeper Hub are specialists in payroll, specifically using Xero and Deputy. If you would like some assistance to setup your payroll or process it on a regular basis, please contact Victoria via email: email@example.com
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