{"id":2254,"date":"2015-11-15T05:23:10","date_gmt":"2015-11-15T13:23:10","guid":{"rendered":"http:\/\/evergreensmallbusiness.com\/?p=2254"},"modified":"2017-10-13T12:05:08","modified_gmt":"2017-10-13T19:05:08","slug":"why-small-businesses-should-outsource-payroll","status":"publish","type":"post","link":"https:\/\/evergreensmallbusiness.com\/why-small-businesses-should-outsource-payroll\/","title":{"rendered":"Why Small Businesses Should Outsource Payroll"},"content":{"rendered":"
\"Picture<\/a>
Winston Churchill Commemorative Crown (1965), England, UK, Western Europe.<\/figcaption><\/figure>\n

Winston Churchill, apparently quoting<\/a> some unknown earlier writer, once said, \u201cDemoc\u00adracy is the worst form of Gov\u00adern\u00adment except for all those other forms\u2026\u201d<\/p>\n

And I\u2019ve been thinking about this statement and sentiment as I ponder the question, why should a small business outsource payroll processing, because my assessment of outside payroll services, in a way, mirrors Churchill\u2019s assessment of democracy.<\/p>\n

Why? Outside payroll services superficially seem too expensive for a small or new business. (Expect to pay between $1,000 and $2,000 a year even if you\u2019ve only got a few employees.)<\/p>\n

Furthermore, outside payroll services seem to create inflexibility. When you outsource payroll, you get forced to use the outside vendor\u2019s schedule, system, and procedures.<\/p>\n

But here\u2019s the thing: Like democracy, an outside payroll service only seems<\/em> like the worst option (because of the expense say)\u00a0 until you compare it to the other option you have\u2014going the do-it-yourself route.<\/p>\n

Because new business owners often don\u2019t understand why do-it-yourself is worse, I want to briefly identify the three big hidden costs of going commando with your payroll.<\/p>\n

Mrs. Peabody\u2019s Midyear Raise<\/h2>\n

I\u2019ve been talking about the fictitious yet troublesome Mrs. Peabody in various editions of my QuickBooks for Dummies<\/cite> book for years. So I\u2019m not going to repeat that entire story here.<\/p>\n

But in a nutshell, one of the problems with doing payroll in house is that your staff will learn more about what their co-workers earn. And that learning will mean that you have more people disgruntled because they make less than someone else. Or that you have more people disgruntled because some joker or slacker in your business makes more than he or she should.<\/p>\n

Note:<\/b> In my extended discussion in QuickBooks for Dummies<\/cite> of Mrs. Peabody\u2019s angst, I explain that both problems cause disgruntlement for Mrs. Peabody. She\u2019s in tears because she learns she makes quite a bit less than the very talented Mrs. Raleigh. She\u2019s outraged that she doesn\u2019t make that much more than Wayne, the idiot who works in the warehouse.<\/p>\n

If you want more detail, you can refer to Chapter 1 of QuickBooks for Dummies<\/cite>. But do take away the principal point: A lack of payroll data privacy may cost you real money.<\/p>\n

Compliance Failure Penalties<\/h2>\n

Another issue with do-it-yourself payroll: Penalties.<\/p>\n

And here\u2019s what you ought to know about payroll penalties. While processing payroll isn\u2019t that hard to do, if you\u2019re only doing quarterly payroll forms a few times a year, you will make mistakes. Sorry, but that\u2019s the reality.<\/p>\n

And here\u2019s the problem with these mistakes. Usually these mistakes will cause the government to assess penalties that easily add up to hundreds of dollars (and occasionally add up to thousands of dollars).<\/p>\n

A good payroll service, in comparison, will almost never make mistakes that trigger penalties. And when they do make that once-in-a-blue-moon mistake\u2014remember they are doing payroll for hordes of small businesses\u2014they will know how to fix the mistake quickly and economically.<\/p>\n

Probably, as a public relations and product warranty thing, they\u2019ll also often pay the penalties, though you want to check with the vendor you choose.<\/p>\n

In any case, you will basically eliminate the penalty problem if you outsource payroll. And that represents another savings\u2014and a hassle-reduction factor too.<\/p>\n

Easier In-house Bookkeeping<\/h2>\n

Let me mention a final economic reason for outsourcing.<\/p>\n

In many businesses, payroll becomes the trigger for you outsourcing all your accounting, or the trigger for you needing to hire more expensive (and more competent) bookkeeping or general accounting help.<\/p>\n

If you can outsource just the payroll piece, however, you may be able to easily retain the remaining accounting in-house. You may even be able to do pretty much everything else yourself. And these sorts of things should save you money.<\/p>\n

Which Service Should You Use?<\/h2>\n

I would not focus too much on cost here. No, really. I would focus on quality of the service and convenience.<\/p>\n

The big players are Paychex and ADP\u2014both good, solid choices.<\/p>\n

Gusto Payroll might be another option to consider. So would the payroll offerings from Intuit, the maker of QuickBooks. But I will point out that to me, both the Gusto Payroll and QuickBooks Payroll offerings mean you\u2019re doing more of the work yourself as compared to Paychex and ADP. Or at least that\u2019s my experience.<\/p>\n

By the way, you might also be able to work with a local payroll service. Your tax accountant might also provide the service. (We really don\u2019t, by the way, except in unusual circumstances\u2026 just so you know.) And a local provider should represent another solid option.<\/p>\n

A Final Payroll Option for Specialty Situations<\/h2>\n

While I\u2019m on the subject of payroll, let me say that in one situation it\u2019s probably okay to do payroll yourself: The situation where you, the owner, are the only employee in the business and can set your salary to some \u201cstandard amount.\u201d For example, you\u2019re a shareholder-employee in an S corporation with a single employer.<\/p>\n

We\u2019ve got an economical e-book, Five Minute Payroll<\/em>,\u00a0that describes how you can do this. Note that we will provide a complimentary copy of the e-book to any clients of our CPA firm. For others, we charge a modest fee for this instantly downloadable resource. (We also offer a money-back guarantee, just so you know\u2026)<\/p>\n

\"mattrd39_04\"<\/a>Here are more details…<\/p>\n

Our Five Minute Payroll<\/cite> e-book (2017 version) explains how to do simple cookie-cutter payroll for most one-employee situations using base salary amounts of $10,000 a quarter or $16,000 a quarter. (These amounts should work for just about everyone.) The e-book includes sample and nearly-complete IRS forms which you can copy to get payroll tax returns done in a few minutes. And the e-book provides some common-sense tips you can use to set a reasonable salary for yourself or a family member you employ.<\/p>\n

Interested in\u00a0our $20 e-book? Use this button:<\/p>\n