Payroll processing is not as simple as multiplying the hours worked by the hourly rate and cutting a check.
Processing your own payroll might be a snap if you have a background in accounting, taxes, or payroll. But if that’s not your background, chances are you have a huge, time consuming headache on your hands.
All of the following things need your attention to avoid penalties and interest charges from the IRS at the end of the year.
WHAT’S INVOLVED IN ‘DIY’ PAYROLL PROCESSING?
- Filing quarterly reports
- Withholding employee taxes
- Paying withholdings to government agencies
- Issuing W-2 forms at year’s end
- Making summary filings at the state level
- Managing employees’ health and pension plan contributions
- Handling state disability, unemployment and family leave assessments
- Notifying the government when employees are hired or leave the company
When taking care of payroll processing in-house, usually you’ll spend an average of 5 hours each pay period calculating payroll. Multiply those hours by your employee’s hourly rate and by the frequency of your pay period. Add to that the fact that almost half of small businesses incur close to $1,000 in IRS penalties annually for mistakes, and you’re probably paying a lot more for payroll processing than you imagined.
When you outsource your payroll processing, it only takes minutes to input data. Your payroll is compliant and there are experts to help should you run into any problems. All for a price lower than what you were paying to do it yourself.
A study done by Actionable Research in 2009 found that 75 percent of the CPAs who assist small businesses felt that their clients did not have the necessary expertise to handle the demands of payroll processing, and 68 percent also suggested their clients’ time would be better spent working on the many other demands of their businesses.
This does more than save time and money. It also enhances security, ensures compliance with government regulations, and gives you professional expertise at your fingertips.
There are many companies that can handle this for you. At Agents of Efficiency, we often partner with Justworks. It’s worth hiring one of these companies because there are only two ways to increase profits: grow sales or reduce costs. Most small businesses focus on growing sales. Smart ones focus on both.
By Justin E. Crawford