According to Maslow’s hierarchy of needs, a person will always be motivated when presented with a solution to address his or her desires. He made a diagram to illustrate the levels of needs a person has throughout a lifetime. For the first step of the pyramid illustration, physiological needs such as food, shelter, and clothing are prioritized.
The priority is attained or even purchased with money. To have money, people engage in businesses or work for salaries and wages. A person’s salary might be his only means of earning money. Thus, it must always be accurate and transparent. Thanks to what workers commonly refer to as “payroll,” they can identify their base pay, salary deductions, taxes, and net pay accurately. But what is the significance of having a clear and precise payroll service? Will it negatively affect the organization if fraud is detected? What will the consequences be?
People who come into your organization and commit their time into completing a task and achieving your business goals trust your organization to compensate them truthfully. Whatever it is that is stipulated into their respective contracts shall be the basis for the computation of their salaries or wages. If you’re not paying them what is due, you are outright stealing from your workers.
Financial Capabilities and Inconsistencies
Establishing an effective payroll system is usually a reflection of the capabilities of people in the finance and accounting department. A payroll system entails various bookkeeping processes that need to be accurately recorded right from the beginning of a transaction. An erroneous payroll record will reveal faults and flaws in your accounting system. This means that you might be producing financial reports that are erroneous as well.
Talk about a tax evasion case because you recorded an erroneous entry in your gross sales or income. Or imagine if financial institution requests a copy of your financial documents and upon audits, it was discovered that the total liabilities of your organization was overstated. Such erroneous data will affect the financial institution’s decision to lend you money to continue your operations.
In accounting, all of your sales and income (depending on what type of business are you engaged in) will be deducted with your expenditures. The difference of which shall serve as the basis for tax deductions and payments. Erroneous recordings will lead to an incorrect statement. If a tax audit comes in to inspect and determine if you have been paying what is rightfully due, a false declaration will eventually pile up with penalties and worse, a lawsuit.
People involved with establishing a precise payroll system should be keen to details, possesses the necessary skills and knowledge for the tasks and is quick to correct mistakes and adjust it in accordance to the accounting system that an organization follows. If you think your enterprise isn’t capable of doing so, that’s okay and acceptable. You can choose to outsource another organization that is dedicated to providing payroll services for various firms and businesses.