As an employer, the future of your business relies on your ability to account for your expenses and to accurately compare them to your revenue. A key component of this is understanding how to track your Year-to-Date (YTD) Payroll.
Year-to-Date Payroll Explained
When you generate a paystub for one of your employees, there will be a section for their YTD gross income. This is the amount of money that the employee has made from the start of the year to the current payroll period.
There are two different ways to quantify your employee’s YTD earnings. This can be done through a fiscal year or a calendar year. Calendar years begin on January 1st and go to December 31st. A fiscal year is a one-year period that government and financial institutions use for budgeting purposes. This extends from July 1st to June 30th.
It is also important to note that YTD payroll may include things other than Year-to-Date gross income. Their gross is the amount of money an employee makes before deductions are taken out. That said, some paystubs can provide an employee’s YTD net income (the amount earned after taxes and deductions), YTD hours worked, or even their YTD deductions.
Why YTD Payroll is Important to You and Your Employees
At the end of the year, when you need to fill out a W-2 for each of your employees, you will need to know their gross income. This number will be the same one they use to file their annual taxes, so it has to be accurate to the cent.
As a small business owner, payroll is likely going to be your biggest expense. Tracking how much you are spending on human capital will help you manage your quarterly and yearly budgetary needs.
Your employees need to know their YTD gross as well. Taking care of your employees is a part of being an employer. They have their own financial goals, and if they can access their YTD totals with their paystub, they will be able to plan accordingly. Precise reporting lets them know that you are careful with their money and that they can put their faith in you as their employer. Your attention to detail is a way of showing how much you value their services.
The Challenges with Managing Year-to-Date Payroll
A common mistake for employers is that they fail to pay themselves. When starting a business, owners will take on more tasks because it is a way for them to cut costs. Doing something yourself saves you from having to pay someone else to do it.
But how much is your time worth?
For example, if you’re running a business by yourself, and you bring in $50,000 more than you spent, you didn’t make $50,000 in profit. Your profit should be determined after you pay yourself. Remember all those assignments you took on to avoid paying employees? Your time needs to be compensated. Once you have determined what your time is worth, then you can calculate your profits.
Because business owners need to take on more tasks than they should to save money, it is imperative to find ways to save time. The less time you spend doing things like calculating YTD payroll means more profits for you. This saved time may be reinvested into growing other aspects of your business.
If you pay your employees weekly, that will require you to generate 52 paystubs. Each one needs to be accurate because the totals will go into other paystubs for the YTD totals.
The easiest way to do this efficiently and accurately is by using a paystub generator. It saves you time because there are no calculations for you to do. Enter in your employee’s information and you will see how taxes, deductions, and YTD income is generated for you.
Checkout this video to know about the Year to date in payroll.
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