“It’s not rocket science.”
That’s what I frequently hear from business owners after asking, “Why in the world are you preparing your own payroll?”
It turns out there’s a disconnect: between how simple a task may be, and how appropriate it is to do it yourself.
Is It Time for “The Talk”?
I often advise business owners to outsource their payroll. Many push back with this rationalization. “It’s easy to go online, learn which forms need to be filed, how to fill them out, and when they need to be filed.”
After I finish rolling my eyes, here’s the speech I give them:
- Preparing payroll isn’t rocket science for a smart person like you. But it’s a briar patch of compliance. Too many “t”s to cross and “i”s to dot. (And don’t get me started if you have employees in more than one state.) Don’t you have better ways to spend your time than reading about filing deadlines, liability requirements, and form instructions? Go snag a new client, and you’ve probably covered a year’s worth of payroll fees.
- All mistakes – no matter the dollar size – take the same amount of time and energy to fix. What you don’t think about is the loss of focus and aggravation they cost you.
- Some payroll errors – for example, underpaying or paying withholding taxes late – can be very expensive.
- The payroll preparation industry has a lot of competition and many excellent providers. As a result, it’s highly price competitive. You will get good value for your dollar.
The ADPs, Paychex and Heartlands of the world, plus their many competitors, offer a valuable service. These companies typically take your payroll information and produce paychecks. They also make your withholding tax deposits, file your quarterly reports, and prepare the year-end W2s. It makes sense to leverage their knowledge and systems while reducing your risks and freeing up your time.
How to Get Started
Because the fourth quarter is a great time to buy payroll services, here are my tips for choosing the right provider for you:
- Make the change at the end of any quarter. This provides the cleanest break between the old and new. The end of the fourth quarter is especially attractive, because many of the payroll providers offer year-end price incentives.
- While the major providers are all good at what they do, find out what each one does best. It’s sort of like going to the ice cream store. They all sell ice cream, but what flavor do you like? Some have great online platforms that best suit owners who want to submit payroll data at midnight and hope never talk to anyone. Other companies provide a dedicated team to serve your account that wants you to call with questions. Some have an easy and automated way to record your payroll in QuickBooks. Figure out which features suit you and your business.
- Get quotes from three or more providers. If your preferred choice doesn’t offer the lowest price, ask if they will match their competitor’s bid.
- Ensure they have an easy way for bookkeepers and accountants to access your payroll reports online. Most do – but check.
- Is job labor costing important to your financial picture? Then consider Intuit (makers of QuickBooks), which provides a payroll service. Its ability to transform employee hours into wages by job/project is pretty hard to beat. And it’s generally price competitive.
- Know many payroll providers will try to sell you HR compliance and consulting services. This can make it 1) pricey and 2) difficult to compare your options on an apples-to-apples basis.
Start Being a Rocket Scientist
There are plenty of responsibilities you shouldn’t offload. But you add no value to the payroll process. In fact, this probably is stealing more from you and your business than you think.
Don’t believe me? Start paying attention to the amount of time you spend doing this for a month (particularly at year end). Then consider the opportunity cost of in-house payroll processing – because you’re skipping more important business-building actions to handle it.
I hope this has convinced you it’s time to make a change. Feel free to pick my brain on the best ways to handle this transition.
Rocket scientists would choose to work with payroll providers. Then they get to do what they love, rather than having to design, build and fly the spaceship themselves.
Wishing you lots of positive cash flow.
What Can I Learn Today to Improve Our Financial Performance?
You can hear when an engine is running smoothly—or racing or sputtering. The same is true for the financial drivers of your business.
You just need to know what to listen for. The good news is that your numbers are talking all the time!
Here are the best ideas we can find on how to ask your business for the information you need, to understand what it says, and take action on what you learn.