When it comes to very low value and potentially high risk business activities, doing your own payroll ranks right near the top.
Unfortunately, over the last twenty-five years I have witnessed many small business disasters that have resulted from making the fateful decision to do payroll in-house.
BUT IT'S EASY TO WRITE THE PAYCHECKS!
This is one of the main comments I hear from business owners when talking about payroll. Or said another way, "gee, how hard can it be to write the paychecks to the employees"?
Of all the pieces that go into a business payroll system, I would very much agree that creating the paychecks is by far the easiest part of the puzzle.
YOUR PAIN COMES WITH THE DEPOSITS AND FILINGS
Do you have a payroll expert on staff? (the answer is likely no).
If not, who is going to keep you updated on the massive amount of payroll laws and timetables you need to keep track of? How do you know you are filing the right forms at the right times and with the right people?
Just for giggles, sit down and figure out just what the schedule should be to make your federal tax deposits. Oh, and by the way, are flexible spending accounts taxable for state or local tax purposes? Might as well review the rules on those too. Got a migraine yet? (no fair asking your neighbor in the business suite down the hall - they very likely have most or all of wrong...)
You see, the real pain of doing payroll yourself is normally felt one to three years AFTER the payroll was processed. This pain becomes intense when you get the letter from the tax agency that indicates you were either late in filing or didn't deposit enough. Or worse, both of them! Get out the checkbook - it may likely be time to pay up (though the IRS isn't always right either...)
Just one of these notices will more than likely wash away the "savings" you thought were automatic by doing your own payroll.
PUT THE STAFF ON VALUE-ADDED ACTIVITIES INSTEAD
In addition to the "it's easy to write paychecks" argument I hear, the next most popular sentiment is "well, I'm already paying my staff to be here - might as well have them do the payroll".
If that's the case, maybe they should perform your next cavity filling or oil change too!
All kidding aside...
If you are paying the staff, put them to work on projects that add value to the business. Some quick examples:
- Following-up on overdue customer accounts
- Helping put together your next customer mailing
- Connecting with customers and prospects via social media or e-mail tools
Don't let your business fall into the non-value added trap of doing payroll in-house! There should be plenty of other things for your staff to work on that have a much higher value.
WHO DO I USE TO PROCESS THE PAYROLL?
There are a plethora of businesses that can take care of your payroll. National firms such as Paychex, SurePayroll, QuickBooks as well as local payroll specialists have you covered on this issue. Get a few quotes - you will quickly find that it isn't as expensive as you think it might be.
Even better - the sooner you hand off payroll to an outside processor, the sooner you relieve the potential burden you face for late filings, undeposited taxes, underdeposited taxes and other payroll nightmares!