November 14, 2018Payroll & Tax Support, Year End Payroll Planning
The Beginning Of The [Year] End
The end is near! We are already past Halloween, but if you work in payroll, there are still many spooky days ahead. Year-end payroll planning is already underway and the next two months will be busy and full of challenges unique to your business. In addition to the many to-do’s left on your 2018 list, it is already time to start thinking about the year to come. Get ready to put your 2019 payroll calendar together, begin planning to roll all of your systems forward, and most importantly, figure out what you need to add to your all-important, comprehensive checklist. 2019 will be here before you know it, and planning for the New Year has become an essential part of the year-end process.
The year ahead
In planning for next year’s payroll, the first step is to open up clear lines of communication with all relevant internal and external stakeholders in the process. This involves being proactive and scheduling meetings with all vendors, the leadership team, human resources, the IT department, and many others. These meetings can begin in October, as the new payroll year’s preparations should be a part of your year-end meetings and checklist. The goal of these meetings is to set expectations, define roles and figure out who needs to provide what information.
This is where things can get complicated. The software systems that are supposed to make payroll and the day-to-day operations of your business easier can end up being a major cause of your chronic Q4 headaches. Some systems automatically roll forward to the New Year, and some need to be manually prepared and adjusted. Even those that push data directly to your payroll system might have relevant data that is tracked outside because the software is not capable of accommodating your unique business processes.
Does your compensation management software send data in the correct format to be received by your payroll system? You sure hope so. That is why you need to meet with the those who run each system to communicate exactly what data you need, in what specific format. This could be a lot of meetings, which is why it is important to set clear expectations. You might have different points of contact when gathering relevant data for 401(k)/retirement plans, bonuses, benefits, expenses, sick leave and paid time off (PTO).
These meetings should give you the information you need to start refining next year’s checklist. It is important to be aware of new tax changes across different states in which your business operates, and it is up to you to determine which tax changes impact your payroll. This is where it is beneficial to talk to an expert. Businesses frequently make two mistakes when it comes to taxes. They either fail to adjust processes because they don’t understand the impact of a tax change, or they waste time and resources changing processes in anticipation of a tax change that turns out to be irrelevant for the business.
Your checklist for the New Year also needs to be customized for your specific business. You can find many comprehensive payroll checklists with a quick google search, however be leery of relying only solely on what comes up in your search: You risk missing essential information specific to your organization. Those are more likely to serve as a good starting point. Leadership will provide insight into anticipated payroll needs for your specific business and industry for the next year.
Tying up year-end loose ends
The best way to prepare for the new payroll year is to have a strong close to the current year. Year-end payroll planning always sets the tone for the year to come, and the best time to plan for the future is in year-end meetings. If there are lingering issues from the previous year, the first payroll of the new year is going to be extremely difficult. This means many of your new payroll year activities depend heavily on a strong and accurate finish to the previous year. Follow these tips when you are closing out 2018:
- Monitor throughout the year. Preparing for the end of the year is a 12-month process. Reconcile payroll by payroll. If there is an issue, discrepancy or mistake in the previous payroll, it will compound and become more difficult to find and fix come December. Finding issues as they occur is the best way to set yourself up for a smooth year-end.
- Watch out for special holiday bonuses. Stay in touch with leadership and make sure you know about any bonuses or gift cards handed out at holiday parties. These are not always planned far in advance and can throw a last-second wrench into your year-end payroll activities. If this is a regular occurrence, go ahead and build it into next year’s checklist.
- Think back on mid-year tax changes. Even if payroll has gone perfectly for the last 10 years, it only takes one change to get you in trouble and potentially force you to pay penalties. Remember that tax laws don’t wait for the end of the year to change. They can occur at any time and can impact the payroll for a portion of the year.
- Get your data straight. Bad data ruins everything. Check the impact of software updates and any new software implemented throughout the year. One bad currency conversion or one misplaced decimal is all it takes to make your data inaccurate from that point forward. Mergers and acquisitions also complicate data and make] the end of the year more difficult, so think about the impact they have on the year-end payroll as they are occurring.
Payroll planning is difficult but critical. That doesn’t mean that having trouble with payroll is a bad sign for the health of your business. Many businesses struggle with payroll because they are expanding quickly, doing business in new states, facing new taxes and implementing new systems to keep up with a growing workforce. These are the businesses that benefit the most from the expertise of a third party that can help consolidate data, reconcile payroll and handle tax changes.
Wise Consulting understands payroll and HR, providing expertise in HCM system technologies, workforce management and payroll consulting services. Wise takes the time to understand your goals and offers the right level of support to meet your timeline and budget. Contact us to learn how we can help you have a smooth payroll transition into 2019.
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