Everyone knows that time is money, but this holds especially true for small business owners. If you’re looking for one way to maximize your available time and innovate in the New Year, consider outsourcing your payroll. When you let someone else take over this clerical aspect of running your business, you exchange the frustration of accounting paperwork for more time to do what only you can.
Cut Payroll Costs
Large corporations can afford to have a whole department that processes payroll, but small and medium sized businesses usually can’t. If your business employs fewer than 30 employees, it most likely costs you less to outsource payroll than pay someone to do it in-house.
Find out how much you’re actually spending on payroll, and compare that to what it would cost to hire an outside firm. Add up time spent calculating, printing, signing and passing out checks each pay period. Add to that the time you spend researching appropriate software, then updating and maintaining computer systems. Don’t forget to include the hours spent training employees to use payroll packages, time spent on the phone with customer support, and every time you’ve had to research how new regulations affect your business.
At tax time, consider how long you spend preparing W-2s, digging up information on the employees you hired over the course of the year and creating financial reports for your in-house staff. Think about what it would cost you if the person who handles your payroll has a long-term illness or needs to go on maternity leave. When you add the cost of all the man hours you or one of your employees spends on payroll, and compare it to the cost of outsourcing, often you will find hiring an outside firm saves money.
Reduce Mistakes and Avoid Penalties
Bloomberg recently reported that 40 percent of small business owners don’t use an accountant for any financial tasks and, in recent years, they payed $6.8 million in penalties, the bulk of which related to payroll taxes. There are plenty of opportunities for business owners to make mistakes. The data entry involved in payroll includes these items and more.
- W-2 completion
- Employee or contractor classification
- Making tax deposits according to filing deadlines
- Wage payments for overtime
- Payroll garnishments
- Unemployment taxes
- Other taxable payroll items
With so many documents and calculations, it’s easy to make a mistake. If you miscalculate, leave out important numbers or file late, it can cost your business a huge sum in penalties and fees. While you’re an expert at what you do, you may not have the same level of insight when it comes to the changing environment of tax regulations. However, just because you aren’t aware of a change or mistake doesn’t mean the IRS won’t penalize you for an omission or miscalculation. Mistakes can signal to the government your business needs to be audited. Even if you don’t end up having to pay a penalty, the drain on your time will impact productivity.
Payroll service providers make it their business to stay up to date on changes. They’re much less likely to make mistakes than your regular employees. If you process payroll yourself, you do it with a million other tasks vying for your attention. A payroll provider makes it his or her sole focus. They have employees responsible for staying updated on industry-specific changes along with local, state and national modifications.
Processing payroll in-house increases your risk of identity theft. If you keep information on current and past employees in a filing cabinet, it’s easy to access and available for anyone who’s curious. They can view records to satisfy their curiosity or manipulate information to embezzle money.
Even if you store information in a locked location and rely on electronic copies and payroll software, it’s available for anyone with access to the system. If your network or server is accessible to cyber criminals, you could experience a data breach.
When you outsource your payroll, professional firms store information on state-of-the-art servers with advanced encryption. Data transfer is always protected and kept safe from hacking attempts. Most providers have systems that send alerts if there are attempts at payroll fraud, so it’s like having artificial intelligence continually guard over payroll security.
As technology improves, professional firms invest in new software and hardware, so you don’t have to. At Diversified Management Services, Inc., we take pride in building relationships and watching your business grow one year after another. Contact us to find out how we can make payroll easier for you today.