For any first-time entrepreneur getting your business up and running can be daunting, and once you get right into the middle of laying out your business operations, you’d be surprised how much of your valuable time is spent doing work on the payroll process. These tasks often include signing checks, printing payroll reports and salary stubs, quarterly tax forms and year-end tax forms.
That’s where most entrepreneurs realize that their small start-up may require something more than a simple payroll solution. Not every salary process can be done in-house by one hardworking person, though it’s possible, it still is quite time-consuming and energy depleting especially for an entrepreneur who may have his attention elsewhere in the business.
Don’t get me wrong, establishing your company’s payroll system is very important and should not be overlooked. It’s vital for any business to pay its employees on time and precisely to the last cent. No worker wants to see a confusing tally of his salary particularly if they put in extra man hours for the month. As an employer, you don’t want to be inundated with payroll complaints and you don’t want to underpay or overpay either, both payroll scenarios are just bad for business. But to get your payroll process done right takes a great deal of effort. But how do you know it’s more reasonable for you to let a professional take care of your company’s payroll account? Here are some things you should consider:
Payroll Tax Requirements. Do you have the Patience to be a Total Tax Expert? And stay constantly updated with IRS tables and state tax laws? If you look at the manual payroll process, it may seem rather simple. First, compute for an employee’s gross pay then deduct the mandatory tax deductions under state and federal laws, and what’s left of that, should be your employee’s net pay check. Now repeat the process for the next 30, 60 or hundred employees or so. Do note that not every employee has the same kind of tax deductions, there are other things you should check out like the number of hours clocked in (lates and absences included), and the tax bracket your employee’s salary is set in plus other taxes withheld which may include disability, retirement and other withholding allowances. And if you miss out on a tax deadline, do expect to be sanctioned with tax penalties. It’s a tedious process, mind you, that’s better left to people naturally incline at numbers or a local accountant who knows the tax laws of your area.
Your Time is Better Spent Making Money. Not counting money earned by your employees on a monthly basis. If your payroll duties are disrupting your work as a manager and interfering with your business priorities, then obviously this set up will not work well for you in the long run. By doing so, you are giving yourself more time to focus on big entrepreneurial decisions, a move that will help you keep up or even stay ahead of your company’s competition.
Your Time is Spent Learning a Challenging Software. There are tons of accounting and tax softwares available in the market today. These softwares guarantee to get the job done, but not at a click of a button and not for a low price tag either. Most tax softwares come with a steep learning curve ( No, it’s not as simple as doing numbers on an MS Excel spreadsheet) though tax softwares are quite handy in tracking your expenditures, they will require some time to learn before you can put your customized payroll process into play.
Mistakes can be Made. Ask yourself this- can you actually go back at the books and rectify the process? You can get you in trouble with the IRS if your payroll and books are not properly accounted for. According to Entrepreneur.com, 1 of 3 business owners are charged for payroll omissions, once you’re fined with high tax penalties this can quickly throw your company in debt. Yes, issuing those pay checks incorrectly can be a headache.
Cost vs. Loss. The cost of hiring a freelance accountant, taxman or a reputable outsourcing payroll company usually outweighs the disadvantages of doing the company payroll in-house. Consider the overall fees of an outsourced payroll service for a year versus possible losses due to payroll errors and late tax filings. Most payroll solution services even have contingencies to resolve payroll data mistakes on time to prevent any grievances with the IRS.
Keep in mind that a good outsource payroll service should be able to successfully manage your payroll process while keeping you in the loop on big payroll decisions. They should have an excellent track record in making payroll processes simplified for companies, and a trustworthy reputation that they will keep your numbers confidential.
The Author is an outsource consultant in the UK. Modina has made his life doing payroll work rather easy.