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Most people don't go into business to manage employee payroll, but doing it right is essential to your business. Just ask your employees how important it is to them to get paid on time.
As an employer, you're responsible for:
You can outsource your entire payroll process or do it yourself. For start-ups and small businesses, keeping payroll in-house offers both tangible and intangible benefits.
The Upside and the Down
Many small businesses choose to manage payroll internally using payroll software like QuickBooks, Paychex, Gusto or SurePayroll. These solutions are easy and cost-effective.
The downside to using these in-house tools is (1) the learning curve, especially if you don't know your FICA from your FUTA, and (2) the time involved, which takes you away from the real business of adding value to your enterprise.
On the upside, though, in-house payroll management gives you total control over the accuracy of the information and the cost. Doing it yourself, or having a skilled administrator or your CPA do it for you, is a low-cost proposition. It's also easier to track changes, and to quickly add things like new hires, new tax rates or increases in health-care benefits with no lag time.
Such tight internal controls also lessen the chance of embezzlement, unauthorized charges to the company credit card and other forms of employee fraud. You can keep an eye on your cash as it comes in and goes out.
If you aren't up to speed on how to manage your payroll, talk to your commercial bank rep. These business professionals are happy to show you how to use the various payroll software systems.
Using Your Company's Accountant
Even start-ups and small businesses use accounting services for tax preparation and to manage basic bookkeeping functions. These money pros know your business, and they know the tax codes. They're just phone call away.
When you are small, you don't need the services of a licensed CPA. A trained bookkeeper can manage payroll at a lower cost.
Still, there's risk in having a single individual manage all your company financials. Having one person handle receivables, payables, payroll and taxes leaves you vulnerable to a variety of scams. Even if the bookkeeper is a long-time employee, friend or family member, it's wise to avoid too much temptation.
Using your accounting firm to manage payroll delivers measureable dividends. These firms are set up to automate the payroll process. Your company accountant doubtless knows how to use the software and also can identify ways to cut your payroll costs, lower your tax liability and integrate everything from service delivery to reviewing the detailed statements provided by your commercial bank.
The cost of a bookkeeper or an accountant is often offset by the savings they can deliver in your daily business operations. Your accountant will work with you, your bank representative and the tax agencies to save you not just money, but also time.
Here are a few reasons to keep payroll functions in-house:
To help you decide, ask your bank rep or accountant to help you analyze what it is costing you to handle payroll management in-house vs. what outside companies are charging.
Be sure to include the time you or your employees spend:
Can you handle payroll in house? Absolutely!
Should you? That's a decision to make after consulting with your accountant, your bookkeeper, and the bank representative who can integrate and streamline many of your payroll functions, often at no cost.
Track the hours, crunch the numbers and decide for yourself if keeping payroll in-house is right for you.