A small business that has employees is one that’s reached a milestone in terms of growth. It also comes with the responsibility of properly processing payroll for your employees.
The small business payroll is easy when you have a handful of employees, but it becomes more time-consuming as you hire more people. One option to speed up the process is to use accounting or payroll software, but you’re still spending time entering payroll data. There comes a point where it makes sense to look into payroll services and get back that time you spend tracking payroll. Following is a look at the reasons why you should consider outsourcing payroll for your small business.
Reduce the Time and Money Spent on Processing Payroll
It’s a fact that payroll is part and parcel of running a business. It’s also a fact that it requires dedicating time to the task whether you do it by hand or use the best payroll software. As you’re doing the payroll, you have to keep in mind that you can’t make mistakes when you’re calculating hours worked and FICA taxes. The IRS does not look kindly upon mistakes no matter how innocent they are. You also have to take into consideration the fact that you’re the CEO of a business and your time is more valuable than ever. You could give the task of running payroll to an employee and make it part of their regular duties, but this can also become an issue in the form of taking an employee away from the work you hired them to perform. Hiring someone to take care of payroll in-house, even if they’re part-time, adds another expense to the business.
As you already know, operating your own a business is a time-consuming process. No longer are you working 40 hours a week for someone else; now you’re working seemingly endless hours to keep the doors open. Your time is more valuable than ever, and you need your focus to propel your business into the future. There comes a point where something has to give, even if that something is doing the payroll. Sending the work of doing the payroll to a payroll service for small businesses has the immediate effect of restoring time to your days, and saving you money in the form of accurately processed payroll.
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Why Running Your Own Payroll Gets Expensive
Most small businesses tend to have a few employees, but the act of cutting paychecks is the same no matter if you have five or 20. You can get away with using a small business online payroll website or cloud-connected software that has a tax database for federal, state, Social Security and Medicare deductions for a handful of people. Or you may prefer to process the checks by hand and refer to the tax tables if you only have a couple of employees. It’s a great way to learn the federal and state laws regarding payroll even though it can take a couple of hours out of your day. Once your business starts to scale up, and you need more employees, you’re going to spend more time making sure your employee’s checks are correct.
Ask yourself if you can afford to spare the time or train up an employee to take care of the payroll. You may find that it doesn’t always make sense to keep the payroll in-house once you run the numbers. Using the best payroll service you can find can save you money and free up time for everyone involved. Payroll companies are dedicated to the task of processing payroll using the information you provide, double-checking their numbers, making sure deductions such as FICA, health care, and retirement monies are made and payments remitted, then cutting checks for your employees or making direct deposits.
Are You Confident in Your Math and Tracking Skills?
The computer era transformed how businesses handled their payroll. Hours worked are now entered into payroll software and spreadsheets for tracking instead of being hand-written onto ledgers. Using the best payroll software is touted as being a time-saver and reduces the potential for errors, but errors are always possible. The truth is, everyone makes mistakes, not everyone is good at math, and tracking payroll information isn’t as straightforward as it seems. There is nothing worse than screwing up someone’s check, then going through the effort of fixing the mistake. Payroll software is only as good as the user.
The risk of mistakes is enough to make a small business owner want to pay their employees as 1099 contractors. The use of contractors for some operations is a good idea, but attracting good talent means offering benefits and financial security in the form of an hourly wage. There comes a point where utilizing payroll services for small business makes sense. Payroll providers take the information you supply them for each employee, and create an accurate payroll for each pay period.
The Benefits of Using Payroll Companies for Your Small Business Payroll Needs
The act of doing payroll goes beyond calculating hours and cutting checks. In reality, it’s more of an accounting function as it’s part of the financial side of the business. You, as the business owner, have to learn how to do the base payroll numbers, deduct taxes and retirement monies, deposit them into their correct accounts in order to maintain compliance with the IRS and fund retirement accounts, then deliver the final check to the employee with all deductions itemized.
At the heart of the issue is the fact that the employee has earned the money and has ownership of all deductions. Your legal responsibility as the employer is to ensure that you pay those taxes and remit funds for any other benefits that you have agreed to provide your employee. Turning over the work to payroll services for small businesses eliminates the stress that comes with the need to be accurate and make sure that payments reach the right accounts in a timely fashion.
You still have to put in some effort when sending the payroll to online payroll services or in-person payroll providers. Payroll services for small business need information that includes the employee’s W-2, the hours they’ve worked, the deductions they’ve taken on their W-4, retirement accounts and health insurance payments. Most of this information is only needed once, however, and you’ll eventually spend less time submitting information each pay period to the payroll service.
Payroll providers have a vested interest in generating a payroll that’s accurate to the last cent. This works in your favor and results in employees that are satisfied that they received the correct pay amounts, their retirement accounts are paid into, their income taxes are reported accurately, and you’re paying your contributions on their behalf. In turn, you have more time to run your business and have more money freed up in the pursuit of growth. Your employees benefit from the knowledge that you care enough to pay them properly and can feel confident in your leadership.
