Payroll is the most complex element of accounting. And it can be the most costly in numerous ways if it’s not done exactly right.
There’s no way to sugar-coat it: Processing your company’s payroll – even for just one employee – can be brutal. Setup is a complicated, time-intensive journey in itself. You have to establish pay rates. Schedule your paydays and calculate the requirements for sick and vacation pay. Make sure that you have current tax tables and determine what has to be deducted for payroll taxes and other withholding.
Do you offer bonuses and commissions? Health insurance? A retirement plan? All of those details will have to be tracked so that you take the right amount of money out of paychecks for them and forward it to benefits providers.
Accounting software is built to take some of the complexity out of bookkeeping tasks. Payroll-processing as a whole, though, can be an ongoing challenge.
And that’s just setup. Servicing your payroll on an ongoing basis requires the same amount of attention to detail.
If you’re already doing your own payroll – either manually or with software – you already know this. What you may not know is how outsourcing your payroll can benefit you.
Three Good Reasons
Outsourcing your payroll management to an accounting firm lets you leave the heavy lifting to professionals. It provides the best of both worlds. You still have to participate in setup, but you won’t be out there on your own. Your expert financial partner will keep you in the loop, so you always know where you stand. You’ll be supplying information to your accounting firm, things like hours worked and sick time taken and withholding changed, but you won’t have the responsibility of making sure that your payroll data is always up-to-date and compliant. Checks and direct deposits – as well as constant updating of your core files – will be on time and accurate.
Outsourcing payroll saves time and frustration, and may even help you save money. If you’re already doing your own payroll because you think outsourcing is too expensive, think about the resources you’re using and the other work that isn’t being done while you’re busy calculating vacation days and payroll taxes and commissions.
Your day is often interrupted regularly with questions from employees and benefits providers. Every time you’re interrupted, you lose your current train of thought, and it takes a while to get back on track. Factor that into your cost comparison.
Outsourcing payroll can protect your company from serious risks to its well-being. Calculate your payroll taxes incorrectly — or worse, forget to pay them — and the IRS is likely to assess fines and/or other penalties. Pay an employee the wrong amount, or miss payments to benefits providers, and you have – at the very least — unhappy employees who have lost confidence in your ability to manage. They may worry about your solvency. And they may leave.
Experience enough of these problems, and you’ll lose lose a lot of goodwill and financial standing. Your reputation may suffer publicly, thanks to social media, something that will be difficult to stop once it gets started.
Payroll is about more than meeting financial obligations to your employees and to taxing agencies. It reflects on your company’s strength. Outsourcing can help you maintain your position and pride.