Like most accounting processes, payroll can be a complicated affair. Whether your responsibilities lead you to an online provider, or a software program you can run from the office, you should be prepared to invest a certain amount of time and money into your payroll solution.
Dealing with employee deductions and tax implications effectively is an important consideration after all - especially since payroll errors often lead to penalties for almost one in three business owners.
How to Choose a Payroll Company
Outsourcing your payroll preparation to an external company comes with the potential to take a load off your mind. In fact, letting an expert deal with one of the thornier aspects of your business accounting not only saves time, it can free you and your staff to focus on tasks that generate income.
Bear in mind however, that hiring an external payroll company will typically cost your business more than if you were to deal with employee paychecks yourself. Outsourcing also means putting your trust in the expertise of another. So consider these points when screening payroll providers:
Confidentiality and Security
Protecting sensitive employee information alongside your payroll data is vital. Find out what security measures a payroll company takes in terms of online encryption, and investigate whether they’re bonded and carry appropriate insurance to cover the loss of personal or financial data.
Give some thought to which payroll services your company needs and whether they’re included in the package you’re quoted. Some of these services may include direct deposit, W-2 forms, and online time tracking or pay stubs.
Knowing what you need will allow you to shop for the best price. Watch out for companies that charge extra or hidden fees, and understand that the more features you want, the more you’re likely to pay. Read the fine print to verify that “full-service” includes remitting and filing all applicable state and federal taxes.
Got a payroll crisis? Check in advance that there’ll be someone to contact in a manner and timeframe that works for your business. Some payroll companies go the extra mile, and will get your system up and running with the help of a dedicated account representative.
It’s the goal of every small company to get bigger. Look for a payroll provider that has the potential to grow with you, as you scale your business and expand your workforce.
Other factors you may wish to explore when choosing a payroll company include service turnaround times, what reports you can expect to receive, and who’s liable in the event of a payroll error. Asking the right questions before you outsource will save your business time, money, and headaches down the road.
What You Should Know About In-House Solutions
Advances in software technology have increased the appeal of in-house payroll as a cost-effective solution for many small businesses. Some accounting software packages have payroll options built right in, so managing your own accounts with an in-house program can be a great way to save money.
Most leading cloud-based options like QuickBooks offer automated online services, and customized payroll reports that can be accessed at the click of a button. Here are some of the pros and cons you should think about when considering an in-house payroll solution:
- doing away with outsourcing costs usually makes taking care of payroll in-house less expensive
- integrating payroll applications into your company accounting software means less time spent entering data
- employee salary and tax information is available to you in real-time, with no need to contact an external company for answers to payroll questions
- working in the cloud means your business can access payroll data from anywhere there’s an internet connection
- a certain level of employee deduction and remittance expertise is crucial when operating payroll in-house
- the time and effort your business saves at the front end with DIY software may get lost out the back if a lack of knowledge leads to consistently tracking down and correcting errors
- learning to run any new payroll system can be challenging, so you’ll likely need to test drive a few trial versions before you’re ready to invest
Doing your due diligence and choosing the right payroll system will give your business greater control over its accounts.
A streamlined payroll process also means less time spent worrying about tax repercussions. But remember, today’s payroll software – as advanced as it is – is NOT a substitute for financial knowledge.
Your in-house system will run best when combined with professional accounting support.