There are four main areas to consider:

1. Separation of duties
2. Authorisation to approve payment
3. Security of assets (e.g. stock)
4. Review and reconciliation

So here are some best practice tips for each area:

Separation of duties

Ensure that payment documents are processed correctly by having different people involved in the payment process. This principle is called separation of duties.

Best practice is to have different people:

• Approve purchases
• Receive ordered materials
• Approve invoices for payment
• Reconcile financial records
• Review financial records

Potential consequences if duties are not separated:

• Erroneous or fraudulent invoices approved for payment
• Unauthorised payments made to non-existent vendors

Outsourcing part of your accounts and payroll processing seperates these duties from internal employees.

Authorisation and approval

Ensure that you authorise, review, and approve invoices for payment based on signed agreements, contract terms, and purchase orders.

Best practices:

• Review and update authorised signatories periodically.
• Obtain pre-approval for any consultant agreements.
• Verify receipt of goods and services to the contract, purchase order and invoice information.
• Reconcile ledgers for accuracy of recorded transactions.
• Monitor that invoices are paid in a timely manner.

Potential consequences if accountability does not exist:

• Unauthorised, unnecessary, or fraudulent payments or purchases
• Unauthorised work performed by vendors
• Loss of supplier discounts due to late payments
• Improper charges to incorrect accounts
• Conflict of interest when paying an employee for outside work

Security of assets

Once you receive your goods purchased, secure them in a safe location. To account for resources, periodically count your inventory and compare the results with amounts shown in operational, warehouse, point of sale and accounting records.

Best practices:

• Secure goods received in a restricted area.
• Restrict inventory access to appropriate staff only.
• Lock up goods and materials, and provide key or combination to as few people as possible.
• Keep inventory records and periodically calculate opening and closing inventory amounts.

Potential consequences if your assets have not been secured:

• Theft of goods
• Inventory shortages / stock losses
• Additional costs incurred for replacement of goods

Review and reconciliation

Your reconciliations confirm that you’re paying for approved purchases and are being billed correctly. Perform regular bank account and ledger reconciliations to catch improper charges and validate transactions.

Best practices:

• Review vendor invoices for accuracy by comparing charges to purchase orders.
• Verify that the goods and services purchased have been received.
• Perform daily, weekly or monthly bank account reconciliations.
• Perform monthly reconciliations of operating ledgers to assure accuracy and timeliness of expenses.
• Perform monthly review of profit and loss (month, year to date, compared with previous 11 months, actual compared to budget) and balance sheet.

Potential consequences if review and reconciliation is not performed:

• Improper charges made to your business
• Costs charged to incorrect accounts
• Payments made for items or services not provided
• Penalties for not paying for goods or services received on time

Click here for help with reconciliation of accounts and report production.

As an employer you may have a customary annual business closedown once a year and require your employees to take annual leave during  the closedown.

You must provide employees with at least 14 days’ notice before the closure.

For employees with less than 12 months’ service, their holiday pay for the closedown can be calculated by either:

• the employer paying the employee 8% of gross earnings to date (the employee’s anniversary date will then be treated as starting on the date on which the closedown began); or
• the employer and employee agreeing to the employee taking paid annual holidays in advance even though the leave has not yet accrued.

See –  Annual holidays – regular annual closedowns.

If handling payroll yourself has become a hassle, maybe it’s time to outsource it. Smarts payroll services eliminate the hassle-and the tedium! Click here to enquire.

Under the Holidays Act 2003, your employees are entitled to four weeks’ annual holidays after the first year of employment.

The leave can be taken at any time agreed between the employer and the employee. Employees must be given the opportunity to take at least two of the four weeks leave in a continuous period, if they wish to do so.

Under two circumstances, the date on which the employee becomes entitled to annual holidays is adjusted:

• When the business has an annual closedown period:
  See –  Annual holidays – regular annual closedowns.
• When an employee takes unpaid leave of more than a week during the year:
  See – Annual holidays – the effect of unpaid holidays on annual leave.

When should annual holiday pay be paid?

Employees are entitled to receive their pay for annual holidays before the holiday commences, unless the employer and employee agree that the normal pay cycle will continue undisturbed by the time off work.

How much holiday pay should be paid?

Payment for annual holidays is at the greater of the ordinary weekly pay at the time the holiday is taken or the employee’s average weekly earnings over the 12-month period before the holiday.

See - Annual holidays – calculating “ordinary weekly pay” and “average weekly earnings”

If working out annual leave is a hassle – get your payroll processed on time and keep your payroll information confidential from your employees with Smarts professional payroll service.

The general rule for public holidays is that they are taken on the day they fall.

There are four public holidays that are treated differently. These are Christmas Day, Boxing Day, New Year’s Day and 2nd of January.

When any of these four public holidays fall on a Saturday or Sunday the first step is to look at your employees’ work patterns. You need to determine if the public holiday falls on an employee’s Otherwise Working Day – in other words,  but for the day away from work being a public holiday the employee would have worked that day and therefore should be paid for it.

Sounds simple, but you’ll need to consider things like the industry you’re involved in, what the employment agreement says, and whether employees are permanent, casual, fixed term, flexible, rostered, full or part time. To make it easy here’s a great Department of Labour Tool:

Find out whether this would “otherwise be a working day” for the employee

What are the rules for Christmas and New Year public holidays this year?

This year Christmas Day and New Year’s Day fall on a Sunday and Boxing Day and the 2nd of January fall on a Monday.

There are no special rules for Boxing Day or the 2nd of January; these public holidays are observed on the days they fall. Special rules will apply to Christmas Day and New Year’s Day because they fall on a Sunday.

For employees who normally work on a Sunday, Christmas Day and New Year’s Day are observed on that day.

For employees who normally do not work on Sunday, Christmas Day and New Year’s Day are transferred to the following Tuesday (27 December 2011 and 3 January 2012).

Click here for more info

Then work out what to pay them

This Holidays Online Tool will  help you work out what to pay on public holidays. Make sure you have payroll information or a payslip handy when you use the tool.

Get your payroll processed on time and keep your payroll information confidential from your employees with Smarts professional payroll service.

All you have to do is check your timesheets and sign them off, then fax or email them to Smart. We’ll do the rest.

You can now make all online payments to IRD with a Visa or MasterCard credit or debit card – your income tax, GST, PAYE, etc.

Westpac New Zealand Ltd provide the services and charge a convenience fee of 1.42% per transaction. And you don’t have to be a Westpac customer to use this service.

The transaction will show as an item on your credit or debit card statement showing how much you’ve paid to Inland Revenue (displayed as ‘IRD Payment’).

Westpacs fee appears as a separate transaction on your card statement (displayed as ‘Westpac Convenience Fee’).

This gives you another option for how you pay your tax. 

So if cash flow is tight and you need to make a tax, GST or PAYE payment, consider using your credit card.  Take advantage of the interest free credit period on your credit card by making payment shortly after your credit card company sends your statement, before the due date. That way you’re likely to have a few weeks before you need to settle your credit card bill and you’ll buy yourself some time.

Check out Smarts bookkeeping and payroll services for help keeping on top of GST and PAYE.

Use this checklist to make sure you’re ready for the change:

• You use a payroll software package, and no longer rely on manual wagebooks or excel spreadsheets for payroll processing
• Your payroll software has been updated with the new PAYE rates. Click here to view the new PAYE rates
• Your payroll staff knows what to do
• You have a plan to let your employees know how the PAYE, superannuation and fringe benefit tax changes will affect their net pay after 1 October. Use this Calculator to help your employees find out how October 1 tax changes will affect them
• You make KiwiSaver or other superannuation contributions for employees and have viewed the new ESCT rates on Inland Revenue’s website (employer superannuation contribution tax rates are also changing on 1 October)
• You provide fringe benefits and have viewed the new FBT rates on Inland Revenue’s website (fringe benefit tax rates are also changing from 1 October)

Filing your PAYE Return:

When calculating PAYE you’ll need to apply the new rates from the first pay period that ends on, or after, 1 October 2010.

Sound complicated?

Get help - click here to enquire about Smart payroll & PAYE return services.

The Fringe and Beyond, a Havelock North hair salon, established a partnership with Smart to manage their payroll.

Louise Wilkinson was spending up to three hours each pay period doing payroll for her employees. “It was taking way too long, and basically I was using up my weekend doing it,” says the owner of the Fringe and Beyond. “Then I had to take it down to the bank as well!”

After Louise contracted Smart – an outside payroll service – to process payroll, PAYE and KiwiSaver payments, the time she spent on the job dropped to about 20 minutes, and freed up her time.

Every Tuesday morning she gives information about each employee’s hours to Smart. The payslips are returned around 3.00pm and payments are direct credited to her employees the next morning. “I just tell them the hours, and they take care of the rest,” says Louise.

Louise is a Havelock North local who has built the business from scratch over the last 13 years. She’s doubled the size of her team in the last two and half years, and now employs 11 people.  “With more staff I realised I needed a more comprehensive system to manage employee leave. KiwiSaver has added another complication, and I don’t want to be the one doing it.”

“Not doing the payroll myself means I don’t have to deal with queries like sick leave and holiday entitlements – the team ring Smart direct,” she says, “Smart have the facts at their fingertips, making it easier to plan ahead and manage staff leave and payments in my business.”

For business owners like Louise, using a payroll service takes a job she doesn’t like or want to do off her plate. “It allows me the opportunity,” she says, “to have better tracking and payroll records— Smart keeps them accurate and up-to-date.”

Outsourcing the payroll gives this business continuous cover, so that all staff are paid on time, creates simpler payroll and PAYE processes and provides access to expertise to ensure they comply with the latest tax regulations. This has also allowed the owner to shed some of the administrative duties so she can concentrate on her core business – hair.

Click here now to find out more about Smart payroll services

Complete range of payroll services.

Your payroll service provider has to be able to meet the payroll demands of your business. Choose someone experienced and familiar with your industry sector. Look for providers who offer practical solutions and people to answer your employees payroll related questions, as well as doing data entry into a software package. Payroll administration has become increasingly reliant on technology, but technology isn’t the only feature to look for. Evaluate each provider’s ability to remove as much of the payroll burden from your shoulders as possible.

Location, location, location.

You may prefer to use the services of a local payroll service. This isn’t essential. Wherever they’re located, the best payroll outsourcing services will always be on hand to offer the help your company needs should the unexpected arise and they will use a range of software packages to ensure  compatibility with your needs. They should be flexible to make your company’s life as easy as possible.

Your payroll provider must have a solid reputation.

The choice of who you outsource your payroll to is a crucial decision. Your payroll provider must have a solid reputation for providing top-notch service to businesses of similar size and scope. If your payroll gets bungled your employees will lose faith in your business and you could land in hot water with the IRD.

Choose a professional company that has a record of delivering outstanding payroll services that are cost effective and confidential. Smart is a 100% Kiwi owned franchise with multiple franchises operating around the country. The Smart group has a wealth of payroll experience.

Click here ot find out about outsourcing your payroll to Smart

Here’s a quick look at the main benefits that businesses gain by turning to payroll service providers.

Confidence - A good payroll service provider will know all the ins and outs of payroll-related legislation and IRD guidelines. They’ll keep up to date on the ever-changing tax regulations so you don’t have to. Letting experts deal with your payroll ensures that regulations are adhered to and filing deadlines are met. To achieve the same level of understanding in your employees will take a considerable investment from you in time, effort and cold hard dollars.

Affordable - Big corporations can afford payroll departments. For most businesses, however, running payroll in-house is a money burner. If your business has fewer than 20 employees, there’s a very good chance that you can save money by outsourcing your payroll. Do the maths. Reduce your ‘hidden’ costs of running payroll internally—software, updates, training, cheques, printing, etc. Figure out how many hours you and your employees are devoting to payroll-related activities – including processing, filing returns, answering employee queries and in interpreting employment law. Then compare this to a payroll-service provider like Smart. You’ll probably be surprised by the result.

Efficient - Payroll management is time-consuming. With this burden lifted off your shoulders, you and your employees can focus on doing more productive things, and you may even be able to trim your office staff size. And you won’t lack coverage when your payroll person takes annual or sick leave.

Worry Free - Payroll mistakes can be painful, angering employees and — more ominously — the IRD. A good payroll service provider is less likely to make a serious error than you or your in-house staff. If a big mistake is made, you can seek financial restitution from the provider — something you can’t do with your own employees. There’s a lot to be said for the peace of mind that outsourced payroll services can bring to a business owner or manager. No headaches, no hassles: You’re left to focus on running a profitable business.

Secure & Private- It can be embarrassing and detrimental to morale if the wrong eyes fall on the wrong payroll information. By outsourcing your payroll, sensitive and confidential employee and payroll data is calculated and kept off-site, so there’s no chance of a breach in confidentiality. By using an outsourced payroll service, you can be sure that your data is stored in a secure environment and is backed up off-site removing your risk of hardware or software failure.

Trust - Getting payroll done on time isn’t a luxury; it’s an expected part of running your business. If payrolls are delayed or mishandled, it’s the payroll service provider’s responsibility to fix things. If the provider can’t (or won’t) remedy the situation to your satisfaction, you can switch to another service provider in seven days. Try firing, hiring and training an in-house payroll staff in anything less than several weeks.

The choice of whether you outsource your payroll is a crucial decision. Click here to find out how Smart can help with your payroll

1. Make the most of existing staff by having them handle payroll processing and queries.
2. By keeping payroll in-house, it might be easier to make last minute changes or corrections before direct credits are completed.
3. You have total control over your data security and confidentiality.
4. You can access your payroll reports without the assistance of outsiders.
5. Who better to navigate the minefield of payroll legislation than your very own internal staff?

Top five reasons to outsource your payroll

1. Let a third party provider sweat those administrative headaches, while your team focuses on core business activities.
2. Enjoy immediate access to payroll specialists without having to foot the bill for their training.
3. Forget about having to stay up-to-date on ever-changing legislation and employment regulations.
4. Avoid making errors that may result in stiff penalties by placing the burden of accuracy in the hands of an outside payroll service provider.
5. Minimize your exposure to the loss of payroll knowledge with the absence or departure of key staff when they opt to take holidays, or leave your business. And avoid payroll information falling into the wrong hands by keeping sensitive employee information off-site.

If you’re going to outsource your payroll – consider Smart. Click here now to find out more about Smart payroll serivces.