Understanding Payroll Systems

Written by on October 1, 2008 | Accounting Best Practice

Canadian payroll is so simple!  You just need to know a few key rules and your set!  Five options as I see it-

1. Do it yourself- definitely the cheapest!  https://apps.cra-arc.gc.ca/ebci/rhpd/startLanguage.do?lang=English

Go to this site, fill out the online form, print out the paystub, grab your chequebook, fill out the cheque and the stub of course with the gross amount, the net pay, the CPP, the EI and to help your bookkeeper put a quick note and calculate the business expense portion which is the CPP + 1.4* the EI amount! example 2,500 pay.  If you are doing it yourself I recommend that you pay out the statutory 4% vacation.  Hit your EI and CPP maximum’s (http://www.payworks.ca/Info/Resources/Guide/CPPEI.asp) and you stop withholding them and stop paying the Company portion!  Pretty simple eh!  

Other hints- avoid group MSP- Medical Services plan as it complicates everything and doesn’t really end up helping employee out that much- just pay them more hourly/salary and let them pay their own!  Reiburse for cellphone use for work!  Definite early pre-tax expense!

You withhold the taxes and company CPP and EI each paycheque (this all goes into Payroll liabilities account) and then you pay it out by the 15th of the following month.  You should make sure that the payroll liabilities account is clearing out regularly.  Payroll remittance payments can be done using online banking (easiest!) but you need to process generally one day in advance of the due date- ie. process on the 14th.  If you miss this cut a cheque and drop at your bank or CRA office along with a copy of the PD7A.  

Example PD7A

Example PD7A

 

 

G/L best practices- don’t get insane with all the G/L line items -ie. EI expense, CPP Expense, EI withholdings, CPP witholdings, Tax withholdings is as bad is can get.  2 does the job!  Payroll tax expense (CPP & EI) and Payroll liabilities!  Just make sure the payroll liabilities are clearing out each month.  You can setup a Payroll tax expense for each Department.

2.  Use Quickbooks or Simply!  These are pretty easy to use applications and great if you’re doing the bookkeeping at the same time!  Ideally you have your bookkeeper crank out the payroll for you – plug for Tandem Accounting of course!  There are few tricks to help you get your payroll to flow into chart of accounts nicely by department and by employee for so really nice reporting capabilities.  You need to pay the annual fee for payroll tables.  These track payroll withholdings, CPP, EI nicely as well as vacation, taxable benefits, etc.  They print nice paycheques or paystubs!  I recommend www.hyperwallet.com for direct deposit even though they don’t advertise it and don’t count on much support.  It is dead simple and only 0.75/paycheque and clears in like 2 days if you process in morning.  If you use Telpay (the QB’s default) get ready for a serious learning curve and a GUI from hell!

3. Payworks

Slick and very cost effective.  Quickly has become our payroll provider of choice in Canada.   When you grow beyond super cash management you want to hook this up to simplify payroll process and year end T4’s.  You’ll still need QCDocs to help with hourly employees or vacation/sick day tracking.  Big issue with payroll providers is you’ve got to fund 100% of your payroll each payday… they make some money presumably on the remittance timing to the following mid month date!?

4. Ceridian- close second to Payworks.  Works well but a few extra hoops to jump through and marginally more expensive then Payworks.

5. ADP- Oh why, why can’t you be more like your big brother software from the USA!?  I was shocked to move back to Canada and immediately started using ADP assuming it would be the same as the US software- big mistake.  I’m not sure they’ve upgraded this application in 15 years?  I still don’t get it… see point 1!?

Where does QCDocs fit in- whatever payroll system you use you will distribute paystubs and archive payroll reports- QCDocs does just this.  Also hourly employees or billable hours need to be recorded by employees- QCDocs streamlines this right into accounting applications or aggregates it for entry into payroll system.  It also trackes vacation and sick days as well!

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Top 11 Compliance and Setup things to do for BC Startups

Written by on September 8, 2008 | Technology Startups

  1. Register your business here. Note: Most Lawyers don’t do trademark searches just Provincial name searches. Check US and Canadian Trademark sites to size things up or count on doing this process all over again in short order!
  2. Phone 1-800-959-5525 and Register for GST (if you’re going to be losing money initially) and Payroll (if you’re doing SR&ED work!). See top 10 GST lessons and top 10 SR&ED lessons!
  3. Setup a bookkeeping system (See QCDocs)- Expense reporting is key process at this stage. See Expense reporting top 10 list!
  4. Buy a shoebox, binder or file folder and stuff all your receipts, bank statements and CRA correspondence files in it or use QCDocs and have a virtual bookkeeper take care of it. See top 10 Manual Filing Systems
  5. Open a Bank Account as soon as possible to simplify separation of expenses between personal and business. See top 10 bank lessons. Get cheques with stubs and complete the stubs and don’t lose any- write void on voided cheques so they are accounted for! Business accounts return cleared cheques or copies of them- never, never lose them as there is no replacements (except copies (ie. Vancity and Coast Capital))
  6. Buy bookkeeping software- Quickbooks- no brainer, see my top 10 list why Quickbooks is better than Simply Accounting. Try out Clarity accounting as well… and tell me if it is good!? Looks good to me but haven’t tried it yet!
  7. Go online and register for WCB (the earlier the better so you can get “no claims” history for when you actually need to hire people.
  8. Continue to pay MSP (BC Medical Services Plan) personnally until you have at least 5 employees as it is a taxable benefit and will complicate your payroll.
  9. Sign up for VIPMD Personal Health Spending Account www.vipmd.ca. Pay for dental cleanings, prescriptions, contacts, massages with aftertax dollars!! Sign up for your “Risk Insurance” at the same time- see top 10 lessons about Canadian extended Benefits Plans!
  10. If you’re going to raise some financing from BC investors enroll here as an EBC. This will give your investors 30% tax refund for investing in your business- nice start!
  11. If you’re doing tech stuff call the NRC-IRAP to chat about helping you out. See top 10 lessons about Government funding

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