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How to Budget For New Hires

Oct 09, 2023

Hiring new employees is a significant milestone for small businesses. It represents growth, opportunities, and the potential for increased productivity. However, bringing new talent on board involves costs far beyond their salary. This blog post will explore how small business owners and their accountants can effectively budget for the interviewing process, onboarding, training, and the new hire.


Calculate Total Costs

Before you dive into the hiring process, getting a clear picture of the costs of bringing a new employee on board is essential. While the base salary is significant, remember to factor in other expenses such as benefits, taxes, office space, equipment, and software licenses. For instance, providing healthcare coverage, retirement plans, and other benefits can significantly impact your budget.


Plan for Recruitment Expenses

Recruiting the right talent involves expenses that can add up quickly. Budget for costs related to job postings, background checks, and even recruitment agency fees if you choose to use their services. To keep recruitment expenses manageable, consider cost-effective strategies like leveraging social media, employee referrals, and job boards to find potential candidates.


Streamline the Interview Process

The interview process can be time-consuming and costly if not managed efficiently. Establish a structured interview framework to streamline this process and consider implementing pre-employment assessments to identify the best-fit candidates; this saves time and helps ensure you're making informed hiring decisions.

Onboarding and Training Costs

Once you've found the right candidate and they've accepted the offer, it's time to consider onboarding and training costs. These expenses include materials, software licenses, and the time spent by trainers and mentors. To minimize these costs over time, invest in creating comprehensive training materials to reuse for future hires.


Recognize the Ramp-Up Period

It's essential to recognize that new hires may not immediately reach their full productivity level. There's often a ramp-up period during which their output may be lower than expected. Plan for this and ensure your business operations can accommodate this adjustment phase without causing significant disruptions.


Compliance and Legal Costs

Staying compliant with labor laws and regulations is crucial for any business, and small businesses are no exception. Budget for expenses related to compliance, such as legal and consulting fees, especially if you're navigating complex employment laws. Additionally, invest in training for your HR team or personnel responsible for compliance to avoid potential legal pitfalls.


Employee Benefits and Perks

Competitive benefits and perks can attract top talent but come at a cost. While offering these benefits can be a worthwhile investment, budgeting for them is essential. Consider flexible work arrangements, which can reduce overhead expenses associated with maintaining a physical office space.


Employee Retention Strategies

Employee turnover can be costly in terms of both time and resources. To mitigate turnover, implement effective retention strategies. These can include ongoing training and development opportunities, regular performance reviews, and fostering a positive work culture. Investing in your employees' growth and well-being can reduce the need for frequent hiring.


Working with Your Accountant

Collaborating closely with your accountant or financial advisor throughout the hiring process is crucial. They can provide valuable insights and help you create a realistic budget that aligns with your business's goals and resources. They can also assist in identifying cost-cutting opportunities and ensuring that your financial plans are well-balanced.

Work With N.E.W. Accounting

Hiring new employees is essential for small businesses looking to grow and thrive. Remember that while upfront expenses are associated with hiring, the long-term benefits, such as increased productivity and growth, can far outweigh these initial costs. With careful planning and a well-thought-out budget, you can set your small business up for success as you bring new talent.


Our team at N.E.W. Accounting meets all the above considerations and exceeds your expectations. We know that small to medium-sized business owners can feel bogged down by their company's numbers, and we want to work with you so that you can focus on the rest of your business. Contact us today to get started!

Embracing Change: The Impact of Technology on Small Business Accounting

09 May, 2024
Technological advancements have revolutionized traditional accounting processes, from cloud-based software solutions to automation tools, offering efficiency, accuracy, and accessibility like never before. In this blog post, we'll explore the profound impact of technology on small business accounting, highlighting key trends and innovations shaping the industry. The Rise of Cloud-Based Accounting Software Gone are the days of cumbersome spreadsheets and desktop software installations. Cloud-based accounting software has emerged as a game-changer for small businesses, providing access to financial data anytime, anywhere. Platforms like QuickBooks Online, Xero, and FreshBooks offer real-time collaboration, automated updates, and seamless integration with other business tools, streamlining accounting workflows and enhancing productivity. Automation and AI-Powered Solutions Automation is another significant trend revolutionizing small business accounting. Tasks that were once manual and time-consuming, such as data entry, invoice processing, and reconciliation, can now be automated with the help of AI-powered software. Machine learning algorithms can categorize expenses, detect anomalies, and even generate financial reports, freeing up valuable time for accountants to focus on strategic analysis and advisory services.

Financial Lessons to Learn From Successful Small Businesses

13 Apr, 2024
When business owners and mentors give advice, they usually look at multi-million or billion-dollar companies and their leadership for business lessons. While the world's most successful conglomerates can teach us much, they're not the only places to draw inspiration. Successful small business owners can teach any organization tips for running and growing their business, which are often more tangible than those of large companies. What financial steps do well-run small businesses take? Let's look at some of the lessons we can learn from successful small businesses. Budgeting and Forecasting Budgeting and forecasting serve as the foundation of financial planning for small businesses. By creating a detailed budget and regularly updating financial forecasts, companies can gain insights into their cash flow, allocate resources efficiently, and anticipate future expenses. A well-thought-out budget enables businesses to set realistic financial goals and track their progress toward achieving them. Moreover, forecasting helps identify potential challenges and opportunities, allowing companies to adapt and strategize accordingly. Investing in Technology In today's digital age, investing in the right technology is crucial for small businesses to stay competitive and efficient. Whether it's accounting software, customer relationship management (CRM) systems, or marketing automation tools, technology can streamline operations, improve productivity, and reduce costs. By embracing technology, businesses can automate repetitive tasks, streamline workflows, and enhance customer experiences, ultimately driving growth and profitability. Cost Control Controlling costs is essential for maintaining profitability and sustainability. Small businesses should regularly evaluate their expenses and identify areas to achieve cost savings. This evaluation might involve negotiating better supplier contracts, optimizing inventory levels, or reducing unnecessary expenses. By implementing cost-control measures, businesses can improve their bottom line and strengthen their financial position in the long run.

A Small Business Owner's Guide to Payroll

07 Mar, 2024
Running a small business comes with challenges, and managing payroll is undoubtedly one of them. As a small business owner, you must understand payroll and the necessary steps to ensure your employees are paid accurately and on time. Whether you're just starting or looking to improve your payroll knowledge, let's explore the essential information you need to streamline your payroll process and keep your employees happy. The Importance of Payroll for Small Businesses Payroll is calculating and distributing employee wages, benefits, and deductions. It plays a crucial role in the smooth functioning of any business, regardless of its size. Here are some key reasons why payroll is vital for small businesses: Compliance with Employment Laws : Payroll ensures your business complies with local, state, and federal employment laws. By accurately calculating and withholding taxes, you avoid penalties and legal issues. Employee Satisfaction : Timely and accurate payment is essential for employee satisfaction. A reliable payroll system helps build trust and fosters a positive work environment. Financial Management : Payroll provides crucial financial information, such as labor costs and tax liabilities. This data helps you make informed budgeting, forecasting, and resource allocation decisions. Tax Obligations : Payroll and tax obligations are closely related. Accurately calculating and reporting payroll taxes ensures you meet your tax obligations and avoid costly penalties. Understanding Payroll Basics Before diving into payroll specifics, it's important to understand some key terms and concepts. Here are a few essential payroll basics: Employee Classification : Understanding the distinction between employees and independent contractors is crucial. Employees are subject to different tax and benefit regulations compared to independent contractors. Pay Periods : Pay periods determine how often you pay your employees. Standard pay periods include weekly, bi-weekly, semi-monthly, and monthly. Choose a pay period that aligns with your business's financial capabilities and employee expectations. Gross vs. Net Pay : Gross pay refers to an employee's total earnings before deductions. Conversely, net pay is the amount an employee takes home after deductions such as taxes, benefits, and retirement contributions. Deductions : Deductions are amounts subtracted from an employee's gross pay. These include federal and state taxes, Social Security and Medicare contributions, health insurance premiums, retirement contributions, and other authorized deductions. Calculating Employee Wages and Deductions Accurately calculating employee wages and deductions is crucial to ensure that your employees receive the correct pay and that you comply with tax regulations. Here are the critical steps involved in calculating employee wages: Determine the Pay Period : Start by determining the length of the pay period; this could be weekly, bi-weekly, semi-monthly, or monthly. Calculate Regular Wages : For hourly employees, multiply the hours worked by the hourly rate. For salaried employees, divide the annual salary by the number of pay periods in a year. Account for Overtime : If employees have worked overtime, calculate the overtime hours and apply the appropriate overtime rate. This rate is typically 1.5 times the regular hourly rate. Include Bonuses and Commissions : If applicable, factor in any bonuses or commissions earned during the pay period. Deduct Taxes and Other Withholdings : Calculate and deduct federal, state, and local taxes based on the employee's filing status and income. Also, deduct Social Security and Medicare contributions, health insurance premiums, retirement contributions, and other authorized deductions.
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