Artificial intelligence has been very important for modern businesses. The market for AI technology is expected to be worth $37.9 billion within the next three years.
Some of the changes that AI has brought are more obvious than others. A number of companies are using AI technology to improve their websites, design new logos, bolster their online marketing efforts and predict future trends.
However, there are other AI benefits that don’t get as much attention. One way to use AI is to deal with common payroll problems.
AI is Solving Some of the Most Pressing Payroll Challenges
We previously talked about the evolution of machine learning technology with payroll software. New AI algorithms can solve a number of payroll challenges facing countless businesses.
When you’re just starting out as a small business owner, mistakes are bound to happen. From recruitment to online marketing to finance, you’ve got a lot on your plate, so it’s inevitable that human error will occur at some point. While this is completely normal, it’s a good idea to do everything in your power to avoid costly mistakes that could derail your company’s efficiency. The good news is that AI tools can help address some of these major issues.
Small business payroll is one of the most important areas in which you’ll want to ensure accuracy. After all, your employees are one of your most valuable assets, so you want to make sure they’re paid correctly and on time. Here are three common payroll errors small business owners often make, and how to do payroll for small business while avoiding these mistakes by using the most reliable AI solutions.
Error 1: Using an Unreliable AI Payroll Software System
Oftentimes, small business owners look to cut costs wherever they can. It’s completely understandable, since starting a new venture is expensive. However, one area where you don’t want to skimp is your payroll software system. The most reliable payroll software systems that use AI technology tend to be more costly, so businesses often neglect to invest in them. Doing so often leads to costly errors, such as inaccurate payments, late payments or no payments at all. This can significantly damage the morale of your hard-working staff and affect your business poorly.
How to Avoid It: The solution to this error is relatively simple: opt for a reliable, reputable payroll software system. Do your research, compare your options and read reviews to find the most suitable system for your business. You want to make sure that they have sophisticated AI features that can help make it more reliable. You should also avoid prioritizing a cheap price over function; investing in an excellent payroll system will save you money in the long run. You are going to need to see what AI features are embedded in various applications.
Error 2: Not Understanding the Difference Between Employees and Contractors
Employees and independent contractors are not the same, and as a result, they’re not paid the same way, and many small business owners don’t realize this. While an employee is a person hired to do a job defined by you, a contractor is an external individual hired to perform certain tasks for your business without any permanent employment relationship. While an employee is on your payroll, a contractor is not; instead, contractors are usually paid via invoices. As a result, these professionals will face different tax obligations.
How to Avoid It: Make sure to do your due diligence in distinguishing your employees from your contractors. Additionally, be thorough when assessing your requirements for each type of worker and check your records to make sure you’re meeting these requirements.
AI technology can actually be surprisingly useful here. You can use data mining tools to see how the IRS previously classified various workers and use an AI system to help make classification recommendations.
Error 3: Not Knowing Your Tax Obligations
Your small business’ payroll tax obligations will vary depending on your location. Where your business is based will affect what you pay, who you pay and when you need to pay. Many small business owners, particularly first-timers, don’t realize how many payroll tax obligations they face and therefore aren’t properly prepared to meet these requirements.
How to Avoid It: To understand your payroll tax obligations, you need to educate yourself on the applicable local, state and federal taxes, as well as the bodies you’ll need to pay. The taxes that are typically withheld from employees’ paychecks include FICA (Medicare and Social Security taxes), as well as federal, state, and local income taxes.
Want to ensure that your small business is as successful as possible? Want to keep your employees happy and fairly paid? Be sure to watch out for these common payroll errors made by small business owners and employ these strategies to avoid making them yourself.
This is another very important reason AI tax software can be helpful. You can use use AI to assess your business situation and learn more about any lesser known taxes. You can also identify important credits and deductions to take advantage of.