Payroll management is one of the least favorite tasks of business owners or managers. A hair-pulling difficult and complex task that takes time away from what they should be doing, managing the business. And this is where outsourcing their payroll services comes in. However, from a strictly financial perspective, one could wonder when does it really make sense to outsource payroll operations?
Here are some reasons why outsourcing payroll services may be a great solution for your small business:
-Cost. Outsourcing payroll services is one way for businesses, especially SMEs, to dramatically reduce their payroll processing costs. This removes the need in keeping a part time or full time employee dedicated to the task. There is also no longer a need to invest in the payroll software, training, and maintenance required to do payroll in-house, although big businesses can afford to maintain big payroll departments. However, an in-house payroll service is a money burner for small businesses.
The total cost of operating and maintaining an in-house payroll processing service can be considerable, even for a small business. The cost to outsource your payroll operations to a service should not even come close to the cost of an employee, giving you a very good chance of saving money. At the most basic level, consider what you are spending and do the math. Figure out how many hours your employees are devoting to payroll-related activities, calculate how much this is going to cost you in terms of wages and benefit costs and compare the amount to the plans offered by several payroll-services providers. Also, don't forget to factor in the labor cost your business spends on tasks like preparing, printing and distributing checks; creating tax documents, filing tax payments and the like as well as related printer costs and the space itself where the payroll professional works. The result will probably surprise you.
-Accuracy. Errors in payroll can be painful and costly, angering employees and, more worryingly, the government. In fact, nearly half of all small businesses incur IRS fines because of inaccurate or late filings. Because outsourced payroll providers have more sophisticated systems in place as well as have the expertise and training, they are far less likely to make serious errors or even avoid them. Also, as they may offer protection against large IRS penalties, if a big mistake is made, financial restitution can be sought from the service provider, which is something you can't do with your own employees. So, make sure to check the agreement to see if they offer this protection.
-Reliability. With a payroll service, payroll gets done on time without excuses. Output speed, timeliness and payroll quality are not affected by vacations and illnesses. Also, outside processors have systems put in place to prevent errors or catch them if they occur. These eliminate the need to explain to employees why their payroll checks aren't ready on time or have errors.
-Productivity. Payroll management is time-consuming. With the removal of this burden, your employees will now be more focused on doing more productive things, and you may even be given the opportunity to trim your staff's size.
Outsourcing your payroll service is really a cost effective and efficient solution in running the administrative part of your business, not only enabling you to have more time to manage your business but also is cost-effective and more productive.
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