Payroll is sucking time out of your important schedule, so it’s no surprise that its one of the first things to be mentioned as an outsourced item. There are several companies that handle it — Automatic Data Processing Paychex, etc. They love cutting checks for your business and they are relatively affordable.
But many small businesses are really tiny and need to figure out if they can handle payroll in-house through dedicated payroll software. Otherwise they might need to bite the bullet and outsource the function. Technology is pretty solid today, making this decision more difficult for small business owners.
According to a National Small Business Association survey, 54 percent of small business owners who outsource payroll spend between one and five hours per month on internal payroll issues, costing up to $500 per month. About 16 percent spend upward to $1,000 per month.
Let’s look at pros and cons for both options.
Outsourcing payroll
Clearly, this is an easy choice because you (technically) don’t have to worry about anything. Once up and running, your employees use the third-party’s server to input their time, take days off, etc., and then receive their checks. You write a check at the end of each month to pay for the service and that’s it. Of course, there’s still some work on your end, but not as much as if you were putting that information in manually.
Outsourcing not only frees up your time, it also reduces your costs. Having an employee handle payroll full time can be expensive. It can also cause mistakes, such as IRS penalties. Why hire a full-time employee and pay that person benefits when you can have a third-party handle it for a nominal fee?
You don’t need to have a strong payroll knowledge, you can leverage all that outside expertise you need and you might be able to offer additional features to your employees. Transitioning to a digital-first approach in managing business operations, the importance of reliable payroll systems cannot be overstated. For businesses looking to streamline their payroll processes, International Payroll offers a solution that combines ease of use with robust functionality. This move not only optimizes financial management but also enhances overall operational efficiency.
Those are the pros. Outsourcing isn’t perfect, though.
It’s always a safety risk. You’re handing over sensitive employee information to a stranger, albeit a proven stranger. That can be a little rattling for some company owners.
It’s not completely work-free. Even though someone is handling payroll for your company, you still need to submit information to them and ensure that everything is adding up. If you had someone doing that locally, it would be easier because a lot of these big payroll outsourcers handle several businesses and clients.
Payroll software
As mentioned, software has made huge inroads lately. Software like Xero offers integrated payroll software along with its accounting suite, allowing everything to sync up nicely. Xero also integrates with great apps like ZenPayroll, allowing employees to get paid and have that reflected in the business’ general ledger every payday.
Because of this great technology, there’s a strong chance you could train an employee to handle payroll as part of their existing job description. If someone can handle multiple functions, it’s well worth the money spent on them.
Payroll software gives you that instant access to your data, which is important, and is usually much cheaper. If you need to hire someone, it can typically be handled on a part-time basis.
And since you’re already doing some of the work to send to your outsourced payroll company, you might as well just finish the job. Software is like having the outsourcer in your office.
Crunch the numbers, but if you’re a lean, small business, accounting software could be the right route for you.
