If you run a business, it’s all too easy to get lost in the details of your finances without making any real progress. From keeping a handle on bookkeeping to working on detailed long-term forecasts, there are many important financial tasks that can take up a significant chunk of your time.
One of those tasks is managing your business’s payroll. There’s no question that payroll is crucial to your business. After all, without a working payroll function, you wouldn’t have any employees. While undoubtedly crucial, payroll is also a time-consuming task that requires the oversight of experienced professionals.
Effectively managing your business’s payroll obligations involves much more than making sure employees’ checks get mailed out on time. There’s a wide range of tasks that go into running an accurate, timely payroll process, and it’s challenging for Small and Midsize Businesses (SMBs) to manage these alone.
Given this level of complexity, many businesses outsource their payroll to an external vendor. This is often included in the scope of a wider outsourced accounting engagement, where a company might outsource tasks including bookkeeping, accounting, and even strategic-level CFO work.
But what exactly does it mean to outsource your business’s payroll, and why should business leaders consider doing so? Today, we’re exploring those questions and more. Read on to discover if working with an outsourced payroll provider is a good fit for your business.
Strothman+Co is a full-service CPA firm that specializes in providing a suite of outsourced accounting services to closely held entrepreneurial businesses in Kentucky, Indiana, and beyond. To learn more about how we can support your business, contact us today.
What Does It Mean to Outsource Your Payroll?
When most people think of payroll, they think of one thing: their paycheck hitting their bank account every couple of weeks or month.
But the process for that to happen has a lot of steps. Employers are responsible for accurately calculating the wages that should be paid to employees, ensuring that appropriate employer and employee taxes are withheld, and much more.
In fact, many tasks are included in the wider payroll process. Here are some of the most important:
- Setting up payroll accounts, technologies, and delivery mechanisms
- Tracking time worked by employees and calculating wages owed
- Monitoring employee sick pay, vacation time, and other paid leave
- Withholding and remitting payroll taxes, as well as federal and state income taxes
- Ensuring the business remains compliant with all relevant regulations
- Managing payroll deductions, such as health insurance or retirement plans
- Submitting filings at year-end, as well as when employees are hired or dismissed
As you can see, there’s a lot of work that goes into running payroll. For that reason, many large businesses staff their own internal payroll departments. But for SMBs and even mid-market businesses, that’s often not feasible.
For these types of businesses, outsourcing payroll to a third-party provider can represent a major win.
Six Reasons Businesses Should Outsource Payroll
Payroll is a complex, but entirely necessary, business function. It’s an area that’s particularly well-suited to being outsourced to an external provider. There are several reasons why businesses should consider outsourcing their payroll. Let’s explore some of the most impactful:
1. Time Savings
The payroll tasks outlined above can represent a real time suck for businesses. Whether you, as the entrepreneur, are running payroll yourself or are moving your accounting and finance team away from other tasks to handle payroll, you’re losing time that could be better spent growing the business.
2. Reduced Costs
Some businesses opt to have a full-time payroll specialist on staff, a position that pays an average of around $52,000 per year, per Glassdoor data.
For many small businesses, that’s money that could be better spent elsewhere: on marketing initiatives to help your firm grow or on investments in new product development. Outsourcing to a specialized payroll provider enables businesses to make significant savings on the operational costs associated with managing payroll.
3. Address Resource Gaps
While running payroll seems simple, ensuring accuracy demands oversight from professionals experienced in various areas of payroll. Whereas larger organizations have payroll accountants, clerks, and specialists, smaller businesses often lack the resources to hire these teams.
Outsourcing enables businesses to benefit from this expertise, particularly when they use an outsourced payroll service managed by a CPA firm.
4. Improved Accuracy
Without investments in the right technologies and business processes, running payroll can be a manual, labor-intensive task that leaves room for human error. By partnering with an outsourced payroll provider, businesses can benefit from automated processes that both minimize errors and use fail-safes to catch any mistakes that might occur during manual data entry.
5. Heightened Security
Your business’s payroll system is a prime target for cybercriminals, containing highly sensitive data including your employees’ social security numbers, banking information, and addresses. All good outsourced payroll vendors invest in sophisticated security systems that ensure your data remains private.
6. Ensure Compliance with Tax Obligations
Making the required tax filings is a fundamental part of running payroll. But with tax regulations constantly changing, it can be a challenge for businesses to keep up. The right outsourced payroll provider will prepare and make all required filings on your behalf, ensuring your business meets all its legal obligations.
Outsource Payroll to Strothman+Co: A Leading Kentucky and Indiana CPA Firm
It’s clear that payroll, what seems like a relatively simple business function at first glance, can quickly become very complex. If businesses have employees in multiple states or a mix of salaried and hourly employees, payroll can quickly become an almost indecipherable task for individuals without the required experience.
Fortunately, outsourced payroll providers hold the answer. When it comes to selecting an outsourced payroll provider, businesses aren’t short of options. They may choose to go with a payroll processing company that provides additional services, but more often, working with a full-service outsourced accounting firm is a more attractive option.
An outsourced accounting firm has the capacity to handle all of your business’s accounting and finance needs, not just payroll. This ensures an integrated approach that maximizes efficiency, avoids confusion between service providers, and enables your business to benefit from the support of experienced accounting professionals.
At Strothman+Co, we’re proud to provide a range of outsourced accounting services to our clients, including outsourced payroll services. When you work with us, your outsourced accounting engagement is tailored to the unique needs of your business. That means you’ll never pay for any additional services your business does not require but will get everything you need to benefit from a firm financial footing.
Interested in learning more about outsourcing your payroll or wider accounting needs to Strothman+Co? Contact us today.
