Category: Accounting

What is the benefits of payroll outsourcing services?

Outsourcing your payroll to a third party provides a number of benefits to all kinds of businesses. Outsourcing puts your payroll in the hands of the experts, allowing you to focus better on your business, while taking advantage of technology and expertise you may not be able to afford in-house.

Payroll is one of those processes that is essential, but not critical to sales and business growth. This is why payroll can feel like a drain on work hours and resources – resources that could better spent in making money. Payroll is complex and payruns need to be made on a regular basis, so this function doesn’t just go away once it’s done. By outsourcing your payroll, you can alleviate those burdens and channel more of your time, energy and resources into your core business functions.

The cost savings of payroll outsourcing are proving highly beneficial. In the current economic climate, businesses are looking for more ways to keep costs down, improve their efficiency, and gain a competitive advantage.

Outsourcing your payroll also gives you access to payroll knowledge and processes that you don’t have internally. This means that you can rest assured that your payroll is securely and accurately taken care of every month. So as well as saving money on setting up payroll internally, you avoid costly payroll errors too.

Putting time back into your business operations

Performing payroll in-house is an administrative task that scales as your business grows and is not a business function that is directly tied to any profit centre. Processing payroll, ensuring compliance against Modern Awards, Timesheets and Pay Conditions along with handling employee queries and preparing reports are all functions of payroll that take time away from other business operations.

By outsourcing your payroll you not only free up administrative time for your staff but gain the additional benefit of having payroll services experts efficiently handling employee queries ensuring your staff are focused on business operations and not payroll.

Realising the cost benefits of engaging a payroll services company

Processing payroll in-house has a direct business cost attributed to the financing of a payroll team for payroll processing, maintaining payroll software and managing employee queries and pay conditions which can, in most cases, be greatly reduced by outsourcing to a payroll service provider.

Typically measured in a ‘per payslip’ cost, this can be simply calculated by adding up how many headcount hours are dedicated to payroll activities (processing payslips, maintaining software, managing queries), multiplying that by the salary cost and dividing by the number of payslips processed in any period.

Save Money 

Outsourcing payroll is often an attractive alternative to performing this job in-house because it can help you save money. Taking care of payroll internally is not always the most cost-effective approach. First, you must invest in additional resources to get started, such as:

• Computer equipment
• Manual or electronic accounting programs 
• Training to use the program correctly across your HR and finance departments

Additionally, employers must stay up to date on changes in tax rules, personnel, and accounting deadlines. Missing these important changes can be very costly and expose the business to additional liability. 

Good times to outsource payroll are when your employees work varying amounts of hours, you have to pay payroll taxes for multiple regions, you are losing money by manual timekeeping, or you have a high turnover rate. In these situations, outsourcing payroll can save both time and money.

Enhance Security & Reduce Risks

Payroll processing is a complex and potentially risky business operation. Even with trusted employees, there is always a risk of identity theft or embezzlement of funds for personal gain. There’s also an ever-present risk when using in-house payroll software: How safe and secure is payroll data on the company’s server or network? This nagging question can consume a business owner’s energy and attention as well.

By contrast, payroll outsourcing providers offer a “safe haven” for your confidential payroll data. In addition to redundant backup and multiple server locations, a quality payroll provider invests in state-of-the-art systems for storing and protecting data, simply because it is part of the service provided to clients. Being able to ensure the privacy of your data therefore requires constant monitoring to ensure operational continuity and data protection.

Compliance with Government Regulations

With laws that govern provident fund to calculation of taxes, employee benefit programs and incentives provided to staffers, it becomes challenging for organizations to process the exact reimbursements and salary for each employee.

Better efficiency

Payroll outsourcing means sending your payroll off to be done by professionals. Typically speaking, this means that your payroll will be processed more efficiently and with fewer mistakes. Even at first glance, this ought to make sense – while your company’s payroll department is a larger part of a rather different business, the company to which you have outsourced your payroll concentrates only on payroll matters. This is a situation where outsourcing to experts really does help.

More hiring flexibility

Outsourcing payroll allows you a greater degree of flexibility in hiring new employees. Instead of having to continually staff your payroll department as your business gets larger, you can shift that part of your workforce over to the parts of your business that will actually make you money. This can be a perfect choice for those businesses that are in a growth cycle but who still can’t spare employees for those aspects of the business that are not considered part of their core competency. If you need to do the most with a limited number of employees, you need the flexibility that comes with outsourcing your payroll department.

PAYCHEX PAYROLL SOFTWARE REVIEW

Payroll specialists like Paychex not only help you pay your employees but also take care of ongoing payroll taxes and year-end tax forms.

Paychex is a highly scalable payroll service designed for growing businesses. Because of its level of sophistication, the software tends to be more expensive than other payroll services. That said, with a custom pricing model, Paychex is able to accommodate businesses of all sizes.

PROS

As far as customer service goes, Paychex offers 24/7 phone, email. and chat support — which is pretty much as good as it gets. Plus, if you purchase the Paychex Flex package, you’ll be assigned an implementation specialist to help guide you through the setup process.

As mentioned, their payroll infrastructure is designed to be highly scalable to accommodate growing businesses.

Paychex includes helpful personal portals for both employers and employees, allowing them to access their own records and make requests within the platform itself.

Their small-business funding program actually provides loans for growing businesses, a service no other payroll provider offers.

CONS

The Paychex platform can be somewhat difficult to navigate.

They charge per pay period, which makes them significantly more expensive if you pay employees more than once a month.

They don’t bundle all of their services. For instance, if you want check printing or tax form processing, you’ll have to pay an additional fee for each.

Paychex is more difficult to set up than other payroll programs.

Pricing

Paychex makes pricing available upon request. Once you request a quote, they will determine a package based on your business’ size and requested features. They charge per pay period, so while they might be a good deal for businesses paying employees monthly, costs will rack up if you have multiple paydays a month.

Worst Payroll Mistakes

As a business’s success grows and more and more money starts to come in, business owners may start to feel good about how things are going. The customers and clients are happy, and the employees are showing up for work with smiles on their faces, so it may seem as if nothing can go wrong. Even though it is possible for a business to run smoothly and face very few setbacks, something going wrong can happen fairly easily.

Some businesses may experience bumps due to difficult clients or a lack of business, but there are others that have suffered due to issues regarding their payroll systems. With this being an important aspect of the business, this is why business owners want to ensure that the person who is in charge of this does not do anything to put the business at risk. It is not everyday, but there have been many who have made some of the worst payroll mistakes that can be made, and as a result had to pay fines or have even lost employees.

Improper setup and maintenance

Failure to setup and maintain payroll properly can lead to a company having to pay fines and face penalties. Not setting up state, federal and local taxes, registering the business and checking wage calculations are often what leads to these fines. They can easily be avoided, but people have to pay close to what they are doing and what the laws are pertaining to paying employees.

Missing or failing to meet deadlines, submit deposits and run payroll

All businesses have to report and deposit their payroll taxes. There is going to be certain times that this will need to be done, so figuring out when this information should be submitted and submitting it on time is crucial. Not only can this lead to businesses being charged interest, but they can lose employees as well because they may not want to work for an employer who doesn’t pay them in a timely manner.

Improper record keeping

Employers should always have record of paychecks, bonuses, timesheets, W-4 forms and cancelled checks. Failing to keep record can lead to books being unbalanced and cause other things to be in disarray, which means businesses will have to spend time sorting through things and regaining order.

Things You Need to Start a Payroll Company

Payroll processing is a massive industry, predicted to reach $45 billion by 2020. Payroll is a service for employers—and that makes it a natural complement to other employer services businesses: merchant services (credit card processing), group health insurance, banking and such.

Processing software

Processing software automates the task of running payroll. There are many choices of payroll processing engines, each with its own advantages and quirks. A trusted consultant in the payroll space can help you choose one. The Ephor Group has also published quality reports on processing platforms.

Processing team

It’s not hard to find reliable, detail-oriented people to operate your payroll processing software, as long as you’re willing to train them. Plan on supporting approximately $250,000 revenue per employee (maybe more, maybe less).

Sales engine

Your sales engine should include basic contact management (CRM), pricing, proposals, and customer onboarding. You can connect standalone systems and customize them to your needs, but that can get expensive.

Referral Sources

Done right, this will give you a free sales team of CPAs, benefits brokers, bankers and other centers of influence. They’ll help you scale fast exchange for referral commissions. Commissions can range from 25% to 50% or more, depending on how much sales effort the referral source provides.

In-House Payroll vs. Outsourcing Payroll Services

Payroll is arguably one of the most important HR responsibilities for an employer, especially if you were to ask the employees. But, for companies that may not have a designated payroll professional on staff, the task of payroll processing can be frustrating and time-consuming for the employer to manage. That’s one of the reasons many employers seek to utilize payroll outsourcing and processing services.

Payroll outsourcing and processing services offer several benefits to small businesses and employers. Not only can it save time and energy, but employers can rest assured that payroll outsourcing providers will keep all processes and procedures in compliance with the latest payroll laws and regulations, avoiding any potential penalties for even the smallest mistake.

If you’ve been on the fence about utilizing payroll outsourcing and processing services, here are a few things to consider.

Company Resources—Something every employer must consider when deciding between in-house payroll processing or choosing a payroll service provider is company resources. If an employer doesn’t have the proper technology, professionally-trained staff, or ability to maintain payroll records, it is probably a good sign that outsourcing payroll duties is the best way to go.

Data Security—Employers must take every step to ensure employee data is kept safe and secure at all times. One of the biggest concerns for small businesses when it comes to outsourcing payroll and processing is data security. Knowing that a high level of sensitive data is within its care, payroll providers go the extra mile to keep client information safe and secure from cyber-attacks. Every payroll outsourcing company should be equipped with the proper tools and tactics to protect sensitive employee data.

Tax Compliance—Knowing how to properly manage tax deductions and meet the federally-mandated taxes for Social Security and Medicare is one of the biggest factors in productive payroll management. A payroll outsourcing company can properly ensure the filing of federal, state, and local tax returns, while also processing payment for all payroll tax liabilities. Employers can also benefit from a payroll outsourcing agency’s on-time responses to tax agency inquiries.

Employee Self-Service—Establishing a process that makes it easy for employees to manage their payroll needs is a valuable way to make payroll processing more efficient. Most payroll outsourcing companies offer employees online self-service capabilities. This technology provides convenience for employees who need quick and easy access to their personal pay information. Many of these companies also offer employers time-clock interface tools and apps to make for a more user-friendly experience for employees.

While payroll outsourcing has become a growing practice, there are also a few common misconceptions about the advantages involved with enlisting a payroll provider. Here are four misconceptions that warrant some clarity.

Outsourcing payroll is a complicated process. False. Most payroll providers have simple, user-friendly onboarding systems in place to get you easily set up and in motion. A trusted payroll provider like LBMC EP will help you prepare, collecting all information they need in advance, leading to a smooth transition to your new payroll system.

Outsourcing payroll is costly. Wrong. For many companies, handling payroll in-house can be more expensive than outsourcing. With the amount of time and people it can take to handle payroll tasks, many companies have found that outsourcing payroll has been a better way to steward company resources. Professional payroll providers can also save companies from costly penalties related to tax and compliance.

Outsourcing payroll is not secure. Not the case. A professional payroll provider will have taken extra precautions to defend against potential data breaches. Knowing that a high level of sensitive data is within its care, payroll providers go the extra mile to keep client information safe and secure from cyberattacks.

Outsourcing payroll relinquishes control. On the contrary. While a payroll provider will take the lead with payroll processes and record-keeping, employers can benefit from viewing a payroll provider relationship as more of a partnership rather than a service. Maintaining regular communications with your payroll provider will not only provide you with peace of mind, but also will allow you access to any information or reports you need.

Why Payroll is One of the First Things You Should Outsource

The quality of your staff is the foundation of a successful business. If you have skilled employees and contractors, then you can rest assured to know that things will get done and the business will keep moving forward. On the other hand, unmotivated employees can quickly bring down a company because of the poor customer service that is reflected.

As an employer, you need to be sure that you are proactively working to improve company culture. Happy employees will treat your customers right, helping you to increase sales and productivity. Payroll is an important aspect of employee satisfaction because your team needs to know that they will receive a correct paycheck in a timely manner. When payroll problems happen, it starts a domino effect that negatively impacts attitude and culture in your business.

Mistakes of Do-It-Yourself Payroll

If you are just getting started with your small business, then it makes sense that you are carrying many responsibilities. It is common for small business owners to carry the bulk of the responsibility, instead of handing some of these things off to employees and contractors. Not only are you looking for ways to cut overhead costs, but you also want to maintain control over the business.

Even though it might seem like a simple solution to handle the payroll by yourself, be aware that you could be causing potential problems for your company. Too often, small business owners don’t have the experience or knowledge to manage the business financial details. As a result, things slip through the cracks and mistakes are made.

Is Payroll Software a Good Idea?

Using a reputable software program is a great place to start, but the software won’t overcome the human mistakes. The computer is only as good as the information that is entered into the software. So, you need to be sure that you are using accurate information when setting up the payroll details for your employees.