Whether you own a small business or a multinational corporation, your payroll services costs should be managed and budgeted just the same as any other cost to your business. This is particularly true of a small business where these costs represent a significantly higher proportion of income than for larger businesses.
Even though you may employ very few people, the software system you use to manage your payroll does not cost you significantly less than that for a company of hundreds or even thousands of employees. Your wages bill will be less, certainly, but the payroll software and services will likely be similar priced - and therefore a higher proportion of a small business's gross profit.
The time will come when you have a difficult decision to make: whether to continue managing your payroll yourself or to outsource it. If you believe that you are spending too much time and money managing the paying of your employees and not enough actually managing them, then it is time you did something about it - and cost might not be your only problem!
Your business can sink fast if you mess up your employees' payroll. Nobody likes getting paid late because you were busy making sure this week's shipment got off in time. Do you ever feel you just cannot spare the time to run a payroll program, but know that you must if your employees' wages are going to be banked for them today? What about deductions and insurances and all the other financial aspects involved when your employees' weekly or monthly wage bills are being calculated?
It can all get a bit much, and if yours is a small business that employs a bookkeeper or accountant just to look after your taxes then you are likely trying to do it all yourself. It might be time to stop and consider outsourcing. You could employ a permanent wages clerk, but that's a bit over the top if you are only employing a few people. On average, the cost of outsourcing payroll services is about 50% of looking after it yourself.
Here are some things you should consider when seeking a firm to handle your payroll:
Cost: this is important, because in every business you must assess cost against benefit and decide whether the money you would be paying warrants the benefits gained. If the cost is not going to be a lot less than employing a part-time clerk or bookkeeper then the latter option might be preferred. Whether that is the case or not is a question only you can answer.
Reliability: Is the firm you intend to employ reputable? Do they have a good track record in handling payrolls for other businesses? Before outsourcing your payroll to any company make sure you have some decent references. Ask them for some company names they are dealing with and get on the telephone and ask if they are satisfied.
Services: Do they look after everything: most will offer a full service including wages, salaries, tax, insurances, health, pension and retirement payments and any other deductions from employees' wages. Make sure they will look after overtime payment calculations, pay bonuses to order, commissions and any other payments that are not standard, but can vary weekly or monthly. Check for extra charges for any of these services.
Reports: Most will make check payments where relevant, direct deposits, provide pay-stubs or pay-slips, W2 forms and management reports. Ask to make sure.
Here are some of the benefits to be gained by outsourcing your payroll processing in addition to cost savings:
Convenience: Outsourcing payroll services is more convenient. It's simply a matter of an email or phone call, providing hours for each employee, any deductions and hourly rates or fixed salary amounts. You may also be able to provide details online, or standard payments that you change by exception.
Compliance: Your payroll firm should comply with current tax laws, and comply with all state and federal laws regarding payrolls. With a third party dealing with compliance, you might also save on legal fees and a great deal of legal headache!
Before making your choice, you are advised to get a few quotes: get three at a minimum, and you should check online for reviews of any payroll company you decide to use. If any have given a poor service you might find some negative comments about them on the internet, so use their business name as a search term. Customer service is very important, so check that out as far as you can.
If any third party payroll providers offer free trials, then take them. Free offers are always worthwhile because that's another week or two you don't have to look after your own payroll -and who knows, they may do a great job for you and save you a lot of searching.
Irrespective of the number of employees you hire, even if it is just the one, outsourcing your payroll could save you both time and money, not to mention a great deal of hair-tearing and frustration. By paying your employees accurately and on time, they will be happier and work more effectively. There are many hidden savings in outsourcing payroll services - in addition to the obvious ones.
Michelle Jones is the Managing Partner of B & M Financial Management Services, LLC, a full services accounting and financial support firm, specializing in small business consulting, accounting services and financial support services. To learn more about outsourcing your payroll services or any other services visit us online at http://www.bmfms.com.