While the word “routine” may come to mind as you consider the payroll process of your practice, there are several reasons why you need to take the entire process seriously. Without the proper expertise and oversite, the likelihood of financial mistakes, IRS penalties and employee fraud all increase.
However, there is good news! By taking the time to think through the payroll process upfront and make wise decisions, you’ll be much more likely to avoid issues down the road.
Here are 4 critical things to keep in mind when it comes to your medical, dental, or vision practice payroll process.
Have Clarity on How Your Practice Owners Should be Paid
Yes, owners should be paying themselves a reasonable salary on a regular basis but CAUTION… if the business entity is not setup correctly, owners are not allowed to be on payroll. If your practice is setup as a Sole Proprietor or LLC, the IRS says the business entity cannot pay owners a salary, they are only allowed to take an Owners Draw. If the practice is setup as an S-Corporation, then owners are required to pay themselves a reasonable salary.
Establish Regular Pay Period and Pay Dates
As an owner, you have the freedom to establish pay periods that best suits your practice’s needs, but it’s important that a regular cadence be followed. The most common one our clients utilize is semi-monthly as this gives the practice staff enough time to approve timesheets and gather any documents or other information needed for payroll.
With a semimonthly we recommend the following pay dates:
– Pay Period 1st-15th, the employees are paid on the last business day of the month.
– Pay Period 16th – EOM, the employees are paid on the 15th
The second most common pay period is biweekly. With this pay period we recommend the following pay dates:
– Pay Period Sunday – Saturday, the employees are paid every other Friday.
Ensure You Have a System to Track Time for Your Hourly Employees
Make sure hourly employees are clocking in and out every day. We recommend using a timesheet system vs a paper timesheet. If your practice management system does not have a built-in timeclock, consider using QuickBooks Time: www.tsheets.com/#a:shawnaaho
We like this online timeclock for several reasons – the first one is that it automatically calculates the overtime each week (in Texas you must pay overtime for hours worked over 40 each week). Another reason is that it has an audit trail, showing when and where the employee clock in/out, if there were any manual adjustments to time, and who approved the time for payroll.
Maintain a Watchful Eye to Avoid Fraud
Payroll fraud is very common and extremely costly to a practice. Staying on top of who is being paid, how much and how often is important to your bottom line. Due to this, we recommend either the practice owner process payroll or outsource it. Do not have in-house staff process payroll!
Here are a few ways in-house staff can commit payroll fraud:
Timesheets – employees can falsify hours worked. To prevent this, we recommend a timeclock system that contains an audit trail, and that the timesheet approver reviews that each pay period.
Ghost employees – are you paying employees who do not work for you? It’s possible and it is why we do not recommend in-house staff have any responsibility for payroll processing. If you currently have in-house staff process payroll or have them maintaining employee records, we recommend the practice owner audits the payroll reports each payday to ensure all employees are valid.
Unapproved pay raises and bonuses – are employees pay rates correct? Again, check these on a regular basis. Here’s one of many examples of why we recommend either owners process payroll or outsource it to a full-service bookkeeper – this Office Manager paid herself an extra $47,525! OUCH! www.dentalfraudbusters.com/miranda-wolf
By following these best practices you’ll go a long way toward avoiding some of the most common payroll issues. However, as you can see it will take a fair amount of effort and oversite. If you’d like to discuss the possibility of having an expert payroll provider manage things for you, just give us a call at 844-424-9637. If you’d like to receive a preliminary quote for outsourcing payroll for your practice, just complete the form below!