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Managing a business is a massive task, made up of many little ones that consume your time. With so many moving parts, it’s easy for the to-do list to fall out of control, and the constant stress of trying to keep up can increase mistakes and catalyze burnout. It may be time to consider outsourcing some of your responsibilities. While only 12 percent of companies outsourced their payroll as of 2019, that number is expected to grow over the coming years. When deciding whether your business could gain from doing the same, consider the following –
8 Benefits of Outsourcing Payroll
#1. Saves Time
Processing payroll in-house can be time-consuming. Between calculating hours worked and wages paid, ensuring withholding taxes were properly withheld, and preparing and filing quarterly tax returns, there are a lot of moving parts. And if you make a mistake, it can be costly – in terms of both time and money.
Outsourcing payroll will take a good deal of the burden off your plate. If you choose to employ a payroll provider, you can offload these time-consuming chores and free up your time to focus on more important (and lucrative) tasks, like building relationships with your customers and implementing new revenue streams.
#2. Reduces Costs
In-house payroll can also be expensive. Not only do you have to purchase software, but unless you’re crunching the numbers yourself, you’re paying an employee to handle it for you. When you outsource payroll, you can eliminate these costs and likely end up saving money in the long run.
Additionally, a good payroll provider will stay up to date on the latest tax laws and regulations and will be able to identify additional ways to save you money. An example of this is the Employee Retention Credit (“ERC”), which you may have read about in our recent article. The Employee Retention Credit is a tax credit offered by the Federal government to eligible employers who continued to pay their employees during the pandemic. While this credit may still be filed for retroactively, the ERC allowed businesses to reduce their payroll withholding during eligible quarters in 2020 and 2021, keeping much-needed funds in business bank accounts. A knowledgeable payroll provider would have brought this opportunity to your attention, potentially saving you up to $5,000 per employee in 2020 and up to $21,000 per employee, and up to an additional $100,000 for Recovery Startup Businesses, in 2021. If your payroll provider is a CPA, he or she may also be able to calculate and file for the credit for you, saving you from the hassle of gathering and providing payroll-related documentation.
#3. Tracks Hours
When you outsource payroll, you can take advantage of the latest technology to track your employees’ time. This means saying goodbye to the paper time cards you’ve been trying to find new creative places to store around the office. Online payroll programs will allow for employees or their managers to enter their hours electronically, reducing the paper clutter and allowing you to quickly and easily go back and view your employees’ hours over the course of any time period you wish. They will also allow you to export various reports, which can be helpful for decision-making or for providing to various parties, such as your CPA.
#4. Automates Payments
With so many moving parts, it’s easy to make a mistake when calculating payroll. But when you outsource this process, you can automate payments to your employees. The result? Your employees will get paid on time, every time—without you having to lift a finger.
Online payroll processing saves you time not only by reducing the need to correct errors, but it also eliminates the hassle of writing and issuing checks. And because automated payments are typically made electronically, they’re more secure than paper checks.
#5. Improves Tax Compliance
Taxes are complex, and they’re constantly changing. If you’re not up to date on the latest tax laws, you could end up making costly mistakes resulting in penalties and interest. Even worse, you could end up in jail.
By outsourcing payroll, you can get help with tax compliance. A good payroll provider, particularly CPA’s, will stay up to date on the latest tax laws and regulations and will likely be able to file certain forms, such as W-2’s and 941’s, on your behalf. This way, you can be confident that your payroll is being handled correctly—and that you’re not overpaying in taxes or putting yourself at risk for costly mistakes.
#6. Improves Security
As a business owner, you’re responsible for protecting your employees’ personal information. Addresses, social security numbers, and bank account numbers are all sensitive data that must be kept safe. Payroll providers use modern security measures, such as encryption and two-factor authentication, to protect your employees’ data. They will also likely store backups of your information in a cloud server, protecting from data loss and providing you with additional peace of mind.
#7. Offers Flexibility
When selecting a payroll provider, you’re able to pick one that gives you the flexibility to choose the services you need. Beyond processing payments, you could add on services such as tax form filings and tax payments. Many companies also offer more advanced services, such as Human Resources consultancy. This option gives you access to an HR expert who will provide you guidance based on your state’s employment laws, job description drafting and job postings, employment contract templates and much more.
This level of customization is necessary because it allows you to create a solution that fits your specific needs. And as your business grows, you can add or remove services as needed.
#8. Access to Expert Knowledge
Never underestimate the power of expertise. You don’t have to be an expert in everything, but it’s crucial to have experts on your team. This is especially true when it comes to payroll.
When you outsource payroll, you get access to a team of experts that can help you every step of the way and answer any questions that you may have, and that benefit alone is hard to put a price on.
The bottom line?
Outsourcing payroll comes with a host of benefits. While obvious improvements may include those we’ve discussed, when considering the impact of all the above, it is easy to see how they can result in overall increased efficiency and productivity. These are important qualities that every business owner is looking to ameliorate, and that contribute to the maturity of any successful company. Consider whether outsourcing your payroll may be of benefit to you, and whether working with a CPA firm may offer the best solution. Contact us to schedule a free consultation.