When you first start a business, processing payroll seems to be the easiest task that you will have to perform. Trying to do payroll on your own can take up a lot of mental bandwidth. So, if you feel as though you are ready to outsource your payroll, the following are some signs that now may be the time to hire an outsourced payroll service provider to manage it for you.
1. You are adding multiple employees
Even with just a single employee, they depend on you to provide them with consistent paychecks. As a business owner, you are very busy, going from one place to the next trying to grow your business.
2. Running payroll late
Many of your employees don’t have much wiggle room when it comes to their personal finances. For example, the Federal Reserve recently found that 40% of US households can’t afford to pay for an unexpected $400 expense.
When you’re late on a pay run, that can mean really messing with the lives of your employees (not to mention the trust you’ve built with them). So if payroll ever slips off your radar — or if bank holidays regularly throw off your timing — you might want to consider a payroll service that actively reminds you to get payroll done (or does all of it for you).
3. Missing tax deadlines.
In most states, a typical small business has at least eight separate payroll-related tax filings to make each year: Quarterly filings of IRS Form 941, plus analogous state filings. Getting these filings processed on time is yet another burden that can sneak up on small business owners. And making late filings or late deposits can be costly.
Most outsourced payroll services make these filings for you. Note that some will charge an extra fee for these regular filings, so make sure you understand all the costs that are included before you pick a provider. See more tips here.
4. You feel your payroll is becoming risky, complex, and time-consuming
When you first started your business you didn’t need to be an expert in calculating, paying and filing payroll taxes. But as your company has grown it has become more difficult to keep up with the ever-changing regulations. Outsourced payroll services will take the problem of payroll off your mind and free up time to grow your business. Your provider will calculate the taxes, make the deposits, and even file the forms and returns.
5. Your employees want direct deposit
Most employees in today’s market expect to have direct deposit for their paychecks. They are like you, they hate spending the time going to the bank to deposit their checks. Direct deposit allows for your employees to have their money available on payday. An outsourced payroll service provider will make it easy to pay your employees, there will be no more time spent handwriting or printing paychecks and stubs.
6. Cash Flow Problems
Even small businesses that are successful can occasionally experience cash flow problems. If your business goes through seasonal cycles of ebbs and flows, or you have a major one-time expense, your budget may be destroyed. Whatever your specific problem is, a bookkeeping or payroll service can help you manage your cash flow in several ways such as:
- Withholding the taxes for payroll so you do not have to come up with the money at once
- Paying your employees through direct deposit
- Providing you with accurate payroll data so you are able to make better projections for cash flow
7. Struggling with deductions for benefits and garnishments
If you offer benefits, you’ll have the added complication of deducting and withholding the contributions employees make.
From time to time, you’re also likely to get notice of a court judgment (like alimony or child support) or tax levy against one of your employees. When that happens, you’ll be responsible for deducting and remitting a portion of their income to the appropriate party each pay period. It’s another little thing most small business owners would rather not deal with.
Whether you’re deducting benefits or wage garnishments, payroll outsourcing services usually make it easy to automate the process. It’ll be one less thing for you to think about (and potentially mess up).
8. If you bill hourly for professional services
Taking time to run payroll means you have to stop working on something else. If you bill hourly for the amount of time you work or the number of clients you see (like doctors, lawyers, designers, architects, or other professionals might), it means there’s a very real cost to running payroll. For example, if you make $100 an hour and you spend four hours a month on payroll, you’re essentially giving up $400 in earnings. The math varies depending on what your billing rate is, but it should be easy to do the cost-benefit analysis by looking at how much payroll services costs.
The Bottom Line
Every business has its own needs, so don’t feel like there is any right or wrong way to do this. You just have to decide how much time you want to spend on payroll, how much money you want to spend, and how much hand-holding you need. Your goal should be to find the solution that frees you up to do your best work. Whether that means hunkering down with a calculator and a notepad or going with a payroll outsourcing solution.
Limitless Investment and Capital Outsourced Payroll Services
Are you worried about the negative consequences of a financial mistake? Eliminate the risks of calculating and filing your own payroll taxes by having professionals do it for you. Federal, state and local payroll tax laws are frequently changing and becoming more complex. How much time do you want to spend learning all the rules and keeping your information up to date? Contact our experts TODAY!