By now you’ve heard the news: The Department of Labor issued revised overtime compensation guidelines earlier this summer. The decision will impact an estimated four million Americans and increase the salary threshold for overtime exemption from $23,660 to $47,476 annually.
As small business owners look ahead to December 1, the overtime compliance deadline, many know that they will have to make changes. The larger question facing small business owners, however, is how to implement necessary reforms. I’ve outlined a few tips below.
Tip #1: Take a lesson from millennials
Millennials are much decried by Gen Xers and Baby Boomers for their dependence on technology. While it can be frustrating to have your recent grad glued to their smartphone at the dinner table, when it comes to business, small business owners can learn a thing or two about the power of technology from millennials.
Start with the instant access technology provides. In today’s day and age, there is no reason that small business owners shouldn’t have real-time access to their business finances. Unfortunately, too many small business owners still rely on a shoebox full of receipts or, at best, an overly complicated Excel spreadsheet to track finances. Thus, when it comes time to make an important business decision—like whether you have enough cash flow to hire new employees—small business owners have to rummage through heaps of data and don’t have the instant information they need.
Moving to the cloud is the first meaningful step every small business owner should take to gain real-time business finance insight. Once you have a holistic understanding of your business finances, you can more effectively and efficiently think about payroll and overtime compensation.
Tip #2: Cut out excess waste
Small business owners are constantly on-the-go. In addition to being a business owner, many often perform odd jobs around the business when needed, from HR manager and front desk clerk to sales associate. The only true constant for small business owners? A dearth of time.
Fortunately, once operating in the cloud, small business owners have a suite of tools at their disposal that they can use to streamline the business of doing business. Payroll is no exception.
By leveraging a seamless online accounting platform that incorporates payroll, data flows uninterrupted. This means books and business financials are kept up-to-date and the amount of required data entry is reduced.
The cloud also drives collaboration, which means employees have the ability to enter their own timesheets electronically. This online record will be instrumental as employers look to comply with overtime compensation guidelines. As calculations are taken care of automatically in the cloud, small business owners can easily track employee hours, performance and whether they qualify for overtime. And when payday arrives, the cloud helps facilitates direct deposit and instant paychecks, making payroll that much easier. At the end of the day, a cloud-based payroll system means more time to focus on your passion: growing your business.
Tip #3: Talk with those who know
According to a recent Xero survey, the majority of small business owners (40%) only communicate with their accountant once or twice a year. When you ask accountants how often they recommend small business owners should communicate with them, 78 percent say at least monthly.
This communication mismatch poses a great risk for small business owners, especially in light of new overtime compensation guidelines. Small business owners went into business to pursue a passion, not to spend hours poring over the books and crunching numbers. If managing business finances isn’t complicated enough, coupled with new government regulations that include various nuances, it’s best to consult a trusted partner—your accountant.
Ask your accountant to start from the beginning. Have them do a business audit to ensure you are financially sound and have the available resources to comply with the new guideline. An open and frank conversation with your accountant will make the overtime compensation transition process easier. Once you have a plan in place, check-in with your accountant monthly to ensure your finances are in working order.
Mark your calendars
Rather than waiting until the last minute, use the next few months to implement business and financial management reforms in order to ensure you comply with new overtime compensation guidelines. From migrating to the cloud to meeting with your accountant regularly, there are simple and manageable, yet meaningful, steps you can take to make this transition. Come December 1, you’ll be glad you did so.