Don’t Put Off Year-End Until Year-End
Having worked in the payroll profession for many years, I struggled with the anxiety, dread, and even fear of approaching year-end. I have seen otherwise lovely people become surly and withdrawn, dramatic, and even hysterical during the last two months of the year. And the reason for the exaggerated behavior is simple—they are attempting to complete all updates, adjustments, and corrections for a 12-month period in a very finite timeframe that has no “wiggle” room. You cannot postpone December 31 (or your fiscal year-end date).
Payroll has often been described as boring, or plain, or at best “clear-cut.” But it is none of these, and the experience of year-end processes highlights this better than any other area of payroll could. There are many year-end challenges—all of which can be planned for and none of which can be fully controlled.
Recently, a payroll mentor enlightened me with this wisdom: Year-end does not have to start at the end of the year!
Where to Begin
Do not wait until year-end is upon you to start year-end activities. Year-end should be on your mind and included in your team’s tasks, all year round. If you wait until the last quarter of the year, or the last month of the year, to begin to process year-end adjustments, clean up errors, and finalize employee wage records, you have already handicapped yourself.
So first—identify what can be monitored, reviewed, and corrected throughout the year to reduce corrections at the end of the year. Also, identify any areas that can be automated to reduce errors and the need for corrections.
After every payroll, look for possible errors in the areas you have identified: missing deductions or social security numbers, incorrect tax set-ups, missing or inaccurate employee information, and untaken taxes. These are common clean-up items. Start the process to correct them immediately.
Another area that should be reviewed periodically instead of just at the end of the year is quarterly issues and adjustments. At the end of each quarter, look for state income tax (SIT) credits and state unemployment insurance (SUI) credits—many vendors supply reports for these items quarterly, so it is a simple matter of timely reviewing them. Identify payroll checks that need to be voided or voided and re-issued. Amend all of these items quarterly rather than having them pile up to create a daunting list at the end of the year.
Also think about the items that usually overload your team in the last month or two of the year and what can be done to minimize the physical amount of work in that timeframe. Identify items that can have earlier deadline submissions, from the field or from other departments, instead of having all year-end items due on the same date. Take advantage of the IRS’s special accounting rule for fringe benefits provided during November and December (see IRS Publication 15-B, Section 4). This can greatly reduce recording last-minute adjustments for taxable non-cash fringe benefits.
Your YE Plan Type
So, what type of plan is needed for a successful year-end each and every year?
While payroll departments vary in size, makeup, and even some functions, a few important aspects apply to all payroll departments:
- Identify items/areas that can be corrected continually or periodically throughout the year and schedule them to be reviewed and processed accordingly.
- Complete training/refresher training on year-end processes. While training new employees on your year-end processes is a “no-brainer,” remember to include refresher training for all employees who will perform year-end procedures. If you are a one-person office, review your year-end processes before it is time to perform them. Anyone performing a process that is done only once a year needs a refresher.
- Schedule communication points to the whole team in order to keep year-end at the forefront of the team’s mind all year long. Managers and supervisors will need to discuss and reiterate the reviews needed each pay period, month, and quarter in order to perform year-end tasks all year round. And, be sure to explain the reason that these steps are important, as the whole team needs to feel the urgency of making these a priority year-round.
- Communication—internal and external. Communication is always a key to success and is usually the area that is neglected. Besides communicating to your team when planning and carrying out a year-end task, communicate with other departments/stakeholders to get their buy-in for the importance of performing year-end reviews and completing needed tasks year-round. Communicating deadlines for adjustments and items that need to be included in the year’s payroll records is a vital task as well. Publishing a year-end calendar is the best solution for keeping everyone on the same page. This works well with all teams involved, even with any of your vendor partners that provide information for your year-end processes.
- Have well-planned, widely communicated (staggered) deadlines and stick to them! Meeting deadlines works only when all affected have been notified and when the deadlines are upheld. If you make exceptions every year, the deadlines will cease to have any meaning. And when you stagger deadlines, the earlier ones are going to be the hardest to adhere to—but you must remember that your plan will not work without those early submissions.
- Communicate any changes or delays to everyone involved. Do you see a pattern? Communication is a key factor in every aspect of year-end. Failure in this area will lead to a collapse of the whole plan as no one can prepare information or submit it before deadlines if they are not aware of them. Your team cannot perform the mandatory work if they are not well-informed, trained, and prepared.
- After each year-end, review and adjust your plan. Every year is different, and therefore every year-end will have different challenges, failures, and successes. However, by reviewing what worked and what didn’t, you can adjust your plan for the next year in order to improve the process. Be sure to include a variety of team members in the review as they will have valuable insights from their own viewpoints. Consider inviting members of other teams who work closely with you on specific areas to give their feedback as well—constructive criticism should always be welcomed.
- Have a back-up plan. Life has a way of surprising you, so you must be prepared for “plan B.” Whether you lose a key team member, have a system failure, or experience weather issues, you must have a back-up plan that is already in place and communicated to your team so that the plan can be put into action immediately. My team members all have laptop computers and can work remotely, thus keeping us up and running during any natural disaster. And we cross-train every position in our department so we are never caught without a resource. And finally, all of our data is cloud-based so we can all access it—removing the danger of one computer/server being the only source for data.
Use the lists below as guides—I keep these posted on my computer year round!
Vicki Gray, CPP, is Payroll Manager for Hyatt Shared Service Center and a member of the Board of Contributing Writers for PAYTECH.