If you’re like most business owners, managing payroll probably isn’t your favorite part of being the boss. It’s time consuming and stressful, but essential to running the company. Mistakes can be costly and attract attention from government regulators. Many small businesses don’t have the cash to hire a dedicated payroll employee. Luckily, there are several options to choose from when managing payroll.Tweet This Each method can have an effect on important considerations such as time, cost, and accuracy. Selecting the right approach for your business will depend upon your own abilities, resources, and preferences. In the end, the goal is to effectively manage payroll with the least amount of headaches for you. Here are three common options for dealing with payroll.
Handling Payroll Yourself
Managing the books yourself is an obvious option. Business owners who handle payroll certainly save money over hiring an outside service for help. They also enjoy full transparency, since they’re making calculations each pay period. However, these advantages often come at the expense of time. It’s not unusual for a business owner to work outside regular hours in order to finish processing payroll. Depending upon the size of your company, there may be quite a bit to keep track of, including vacation balances, tax payments, and changing rules or regulations. Finally, you’ll also assume all liability for mistakes. If a business’s payroll is not processed in accordance with local, state, and federal regulations, it could face penalties and fines. If you have any doubts about your abilities in this department, it may be a better idea to seek assistance.
Many small businesses hire a third party to process their payroll. This might be a payroll company or simply an accountant who provides the service. People who primarily handle payroll are often well-versed in relevant regulations and policies. This can be a huge advantage for a business owner who isn’t comfortable doing the books himself, and doesn’t have the time to stay current on regulatory changes. Depending upon the terms of your contract with the payroll service, it may assume liability for mistakes. Routine payroll reports are typically provided to the business so that management can stay in the loop on staffing costs.
By outsourcing payroll, the business owner usually saves time. However, there’s a trade-off: payroll companies and third-party services are often quite costly. For this reason, it’s a good idea to comparison shop if you’re thinking about outsourcing payroll responsibilities.
Using Payroll Software
Payroll software offers something of a happy medium between outsourcing and keeping the books yourself. Payroll software can calculate taxes, remind you about filing deadlines, and keep information organized for future reference. An advanced application may reduce the risk of errors being introduced by humans performing complicated manual calculations. Some software publishers even offer an accuracy guarantee in the event of a mistake. These programs are often delivered on a subscription plan, and prices vary. Business owners have to spend some time learning the software and inputting data, but many entrepreneurs find payroll software to be a helpful addition to their management toolkit.
Photo Credit: CallMeBeardman, Twenty20