Managing payroll effectively is a cornerstone of any successful business. QuickBooks Online (QBO) makes it easy to pay your employees on time and in compliance with local regulations. But what happens when your business needs to change the pay period? Adjusting your payroll schedule in QuickBooks Online can offer significant benefits, from improving cash flow management to simplifying your payroll process.
In this article, we'll explore the top reasons to consider changing pay period in QuickBooks Online and how making the switch can impact your business.
Reasons For Changing Pay Period in QuickBooks Online
1. Improved Cash Flow Management
Cash flow is one of the biggest challenges for small and growing businesses. Changing the pay period can help manage cash outflows more predictably. For example:
- Monthly Payroll: This option allows you to make fewer payments, which can provide more financial breathing room between pay cycles.
- Biweekly Payroll: While more frequent, this can align better with your business's cash inflow from sales or services.
Switching to a different pay period helps match payroll expenses to your cash flow patterns, providing stability in your financial planning.
How QuickBooks Online Helps:
QBO allows you to easily adjust payroll schedules to match your business needs. Whether you need to switch to monthly, biweekly, or semimonthly, the platform makes it simple to align payroll with cash flow.
2. Better Alignment with Payroll Deadlines
Payroll submission deadlines can vary based on the pay period. For businesses processing payroll more frequently (e.g., weekly or biweekly), meeting those deadlines may feel rushed, especially if your business is growing and the number of employees increases. Changing the pay period can reduce the administrative burden associated with tight payroll processing windows.
Example:
Switching from a weekly to a biweekly or semimonthly pay period means you have fewer payroll processing dates to manage each month, giving your payroll team more time to handle other responsibilities and preventing last-minute rushes to meet deadlines.
3. Reducing Payroll Costs
Processing payroll comes with its own set of costs, especially if you’re outsourcing it or paying for payroll services based on frequency. By changing your pay period, you can reduce the number of payroll runs and potentially lower your processing costs.
For instance:
- Moving from weekly to biweekly means you’re cutting the number of payroll runs in half.
- Switching from biweekly to semimonthly (24 times a year) can further reduce the payroll cycle compared to biweekly (26 times a year).
While the difference in the number of payrolls may seem small, the savings on processing fees over time can add up, especially for small businesses with limited resources.
4. Employee Satisfaction
Your employees' financial well-being can play a role in their satisfaction with how often they are paid. Changing your pay period to better suit employee needs can boost morale and retention.
Common Employee Preferences:
- Some employees prefer biweekly pay for more regular income.
- Others may favor semimonthly or monthly pay for easier budgeting, especially when major bills (e.g., rent, mortgage) come due.
Surveying employees before making changes can help ensure that the new pay period aligns with their preferences, reducing the risk of dissatisfaction.
How QuickBooks Online Helps:
QBO allows you to customize payroll schedules and even create different pay periods for different groups of employees. This flexibility can ensure that your team’s needs are met, helping you retain talent.
5. Compliance with Legal Requirements
State and federal labor laws often dictate how frequently employees must be paid. If your current pay period doesn't meet the legal requirements for your industry or state, changing the pay schedule can help keep your business in compliance.
Example:
Some states mandate that employees be paid at least semi-monthly, while others allow monthly payroll for certain types of workers. Ensure that your payroll period complies with both state and federal laws to avoid fines and penalties.
How QuickBooks Online Helps:
QBO allows you to adjust pay periods while keeping track of compliance with local labor laws. You can also integrate QBO with tax and legal advisors to ensure everything is set up correctly when making changes.
6. Simplifying Payroll Administration
For businesses with complex payroll needs—such as those with hourly employees, salaried employees, contractors, and bonuses—a simplified payroll period can ease the administrative burden. For example:
- Semimonthly payroll: Useful for businesses that want to align payroll dates with month-end financial reporting, since it divides payments evenly across the month (e.g., on the 1st and 15th or the 15th and last day of the month).
- Biweekly payroll: Ideal for businesses that want predictable two-week pay periods, with the benefit of fewer adjustments for things like overtime calculations.
Changing your payroll schedule can streamline the administrative side of payroll management, especially for businesses with multiple departments or varying pay structures.
How QuickBooks Online Helps:
QBO automates much of the payroll process, including tax calculations, direct deposits, and reporting. Switching to a pay period that aligns with your business's structure can further simplify payroll tasks.
7. Seasonal or Growth Changes
As your business grows or experiences seasonal fluctuations, the frequency of pay periods might need to change. For example:
- Seasonal businesses might prefer less frequent pay periods during off-peak months to conserve cash flow.
- Rapidly expanding companies may shift from monthly to biweekly pay periods to better manage payroll and attract top talent.
As your business evolves, your payroll strategy should adapt to match, ensuring that you’re operating efficiently while meeting employee needs.
Conclusion
There are many valid reasons to consider changing your pay period in QuickBooks Online. From improving cash flow and reducing payroll costs to ensuring compliance with labor laws and boosting employee satisfaction, the benefits of switching your pay schedule can have a lasting positive impact on your business.
