Why Outsource Your Small Business Payroll Activities

Ralf Heyer

July 20, 2015

Many small business owners, in the initial years, process payroll themselves with the help of manual in-house bookkeeping staff. They consider in-house processing cost-effective and think their wage information would be safe. While you can do it yourself, processing payroll without proper knowledge of the procedure can result in mistakes, which in turn can be devastating for your small business.

Today, increasing number of small business owners are considering professionals to take care of their payroll processing. In fact, it is the first function many small business owners are outsourcing. Here's a quick look at the reasons why you need to consider payroll-services.

Frees Up Your Time
Manual payroll processing is a boring, repetitive and time-consuming process that requires a great deal of attention to detail. Outsourcing this function can immediately free up your precious which you can spend to pursue more productive, value-added and revenue-generating activities.

Reduce Costs
For small businesses, payroll services offer a valuable and affordable alternative to in-house processing. By outsourcing your payroll services, you can pay your employees, file taxes, and be compliant with the state and federal laws at a cost many times lesser than the direct costs of processing payroll.

Unlike big businesses that can afford big payroll departments, having an in-house payroll team for small businesses can be a money burner. A small business can surely save money by outsourcing their payroll operations. You can do simple math and know yourself. Calculate the number of hours your employees will be working on the payroll activities, the money you spend on printing and distributing the checks and creating tax documents. Compare it with the fee of an online payroll service provider. I am sure you will be surprised to know how cost effective it is to hire a payroll service.

Avoid IRS Penalties
One of the important reasons to opt for a payroll services is to avoid penalty for late or incorrect filings and payments. You may not be an expert in ever changing world of government tax regulations. You tend to make mistakes that may lead to audits and penalties. In general, payroll companies take responsibility for the penalties if they fail to accurately report employment taxes to state and federal agencies.

Mistakes in payroll can be costly – IRS penalties, employee frustration and more. An expert payroll service provider is very unlikely to make mistakes as this is their area of expertise. Even if they make any mistake, they will be ready to make financial restitution—something you cannot expect from your in-house team.

Direct Deposit
Employees expect you to deposit money directly into their bank account. Providing direct deposit can be a difficult task for small business owners. For this, you need to handle error-prone paper work and reconcile individual payroll checks every month including regular trips to bank.

Leverage Payroll Expertise
By outsourcing your payroll services, you can take advantage of the expertise which is otherwise available only to big companies. A good payroll-services provider will know payroll process in and out. They are aware of all the complexities related to compliance with state and federal government regulations. Your in-house team could try to achieve the same level of expertise, but it would take significant investment of time and effort.

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