Payroll processing can be a job that is complicated and eats up a lot of time. Large companies may have multiple people dedicated to taking care of payroll processing, but small to medium-size companies may find it more efficient and cost-effective to use an outside payroll processing company.
Using a Payroll Processing Company for Your Business Can Save You Time and Money
If you use a third-party company for your payroll processing, it will free up a lot of time for your accounting staff, allowing them to focus on other tasks. If you are the owner of a very small company, your “accounting department” might consist of just one or two people. Because payroll processing can take so much time, outsourcing that to a third-party company gives your accounting person time to take care of bookkeeping, Accounts Payable, Accounts Receivable, and other things that need to be done on a regular basis.
Using an outside payroll processing company for your business may also save you quite a bit of money. If you add up the number of hours it takes for your accounting person to take care of payroll processing and multiply that by the amount of money you pay them per hour, you might be surprised at how much money you could save if you were to outsource your payroll processing. Some companies are able to reduce their payroll costs by 50% simply by outsourcing it to a third-party.
Hiring an outside company to take care of your payroll processing is also very convenient. All you need to do is make a phone call to the company that will be taking care of payroll for you, give them information such as the salary of your employees, the hours they worked, deductions, etc. and the payroll processing company will take it from there.
Avoid IRS Penalties and Potential Legal Problems
The IRS has stated that 40% of small businesses pay penalties averaging $845 every year due to incorrect or past due filings and payments. A good payroll processing service will provide you with a tax guarantee which effectively eliminates this risk for your company. If a company provides you with a tax guarantee and they file or make payments late, they will be responsible for covering the cost of the penalties. Sometimes, that alone is enough to make hiring a payroll processing company cost effective.
Payroll processing is very complicated and you must adhere to a number of state and federal laws. A third-party company that specializes in payroll processing will be familiar with all of the rules and regulations and eliminate any possible legal problems for your company.
Quality Work with Less Risk
At this point, you can probably appreciate some of the many benefits that using an outside payroll processing company can offer your company. These companies have people that do nothing but payroll processing all day, every day. They are experts at payroll and therefore they will make fewer mistakes, which is one of the reasons they are usually less expensive than taking care of payroll processing in-house. Fewer mistakes also mean fewer potential problems that your company has to deal with.
If you were to have someone in your company take care of payroll processing, you also run the risk of that person finding another job and leaving your company. If that were to happen, all of that knowledge and experience leaves with them. This leaves you scrambling for a solution. This is a potential problem that you won’t have to worry about if you’re using a payroll processing company. The company you choose to use will have plenty of employees that are all experts when it comes to payroll and you will always have access to the services of these knowledgeable and experienced individuals.