Outsourcing payroll allows small business owners to quickly transform their business. These owners are always hard pressed for time. They do not have the luxury to run their business without a formal payroll process. Even hiring a bookkeeper or using payroll software has its share of problems. By outsourcing payroll, owners can make better use of their time. They can use this time for taking care of the other demands of their business.
Here are 10 reasons why outsourcing payroll can improve the bottom line:
1. Improved Security
Payroll processing is not easy. It also has a risky downside.
Here are some potential security risks a company faces if they do their own payroll:
- a. The possibility of Identity theft.
- b. The possibility of funds getting embezzled.
- c. The possibility of have personal records tampered with.
These risks can occur even if the bookkeeper is a trusted employee. They may behave unethically if faced with a personal financial crisis. Additionally, someone can strong arm them into doing unethical things. And even an honest bookkeeper has no control over theft. Sometimes thieves can steal in an indirect way. They might access the payroll information on the server or network. A serious data breach can ruin a business.
These issues do not arise when outsourcing payroll processing to another party. Their service includes many theft prevention measures. They even use server locations and redundant backups. All this is part of the guarantee and reassurance they must provide clients.
It takes a lot of knowledge and expertise to do payroll properly. Professional payroll providers hire people who understand all the complexities of payroll processing. These people know how to follow government regulations. Again, it’s all part of the guaranteed service they offer clients.
3. Saving Time
Unless a bookkeeper is using the latest software, they may spend a lot of time figuring things out. Worse still, they may be doing a lot of payroll processing manually.
4. Reducing Costs
It costs more to hire a bookkeeper, than to outsource the work. Besides the salary an employer has other expenses. They have to provide the best software, ensure IT security, and offer continual education.
5. Avoiding Fines and Penalties
Payroll processing can be even more expensive if the bookkeeper makes mistakes. The IRS, for example, charges $485 a year for things like late filings or errors. When outsourcing, the payroll provider takes full responsibility for any delays or errors.
According to ADP Employment Tax & Compliance Services, “You face a significant challenge to ensure timely, accurate calculation and filing of employment taxes across an ever-changing landscape of tax rules and business structure changes. The time and resource impact across multiple stakeholders can dilute your ability to focus on more strategic business objectives such as scale and growth, and it can create risk of penalties due to late or inaccurate deposits.”
6. Eliminating Tedium
Small business owners who do their own payroll usually lack the patience to do it well. They usually have an entrepreneurial mindset. This includes a visionary approach blended with a proactive attitude. The slow, methodical, and detailed pace of payroll processing can cause a headache. Things are particularly tedious with manual payroll processing. Technical problems can also be frustrating.
7. Removing Dependency
Business owners who hire someone to do their payroll have to treat them with kid gloves. Should the bookkeeper or controller get upset and quit, the business is in trouble. Problems can also arise if they should walk out for a better job. When they leave, they leave with critical knowledge about how things work. It will take some time for the new hire to figure things out.
8. Making employees happier
One way to keep employees happy is to offer them direct deposit. This saves them the time and hassle of going to the bank and standing in line to deposit their checks. It is not easy for a small company doing its own internal payroll processing to get direct deposit. Banks prefer to work with a professional payroll company. Such companies understand how the banking system works.
9. Using the latest software
Payroll processing software is always changing. Like most software, new versions keep rolling out. By using an older version, a business is more likely to make expensive mistakes. For instance, it may use an outdated tax table and get in trouble with the IRS. By outsourcing, payroll is always processed on the most up-to-date software.
10. Getting off the education treadmill
Just as payroll software is not static, neither is payroll expertise. Someone who does payroll has to keep on top of the latest information. Government forms are often improved and withholding rates are sometimes changed. In fact, many rules and regulations are subject to unexpected revisions.