Payroll: You'd Rather Not Tackle It Alone
Payroll isn't just a practice - it's a profession. Cutting a check demands acute knowledge of accounting, tax law, federal and state law, health insurance policies, union laws and so forth. Not surprisingly, payroll demands the dedicated attention of a specialist.
This raises a problem for small companies that cannot afford to keep a payroll accountant, or any kind of accountant, on full-time staff. However, if you fail to follow the law in cutting one check, you risk civil lawsuits and other legal penalties. For example, the state of California will fine a business $750 if it can't make accurate payroll records available to an employee on short notice. The IRS also will fine businesses anywhere from a few hundred to a few thousand dollars in the event of inaccurate submissions.
Hiring a payroll professional may prove more economical for your business than tackling it yourself.
The Outsourcing Payroll Solution
The solution is to outsource payroll to a third party. The benefit of business process outsourcing is that you pay only for what you need.
Fortunately, there are plenty of credible payroll business process outsourcing providers ready to serve your company. Googling "outsource payroll" will return a list of dozens of possible payroll partners.
How to Choose a Payroll Outsourcing Partner
Your challenge is to find the right partner who can competently assume the hassle of managing payroll deductions and the payroll processes. Here, in order of importance, are the criteria for choosing the right specialist:
1. Reputation. There are plenty of fly-by-night BPO companies out there. Always ensure that a vendor has existing clients who will act as references and can recommend the vendor's services.
2. Cost. Companies that handle payroll for large enterprises charge more than many small businesses can afford. Fortunately, other payroll vendors are priced for the small- and medium-sized business segment.
3. Portfolio. Remember, payroll has a lot of moving parts. Make certain your payroll vendor can offer the range of services you need. Does the vendor offer a direct deposit service for your employees? Does the vendor offer a payroll card? Does the vendor offer a reporting interface so that you can track and analyze your own payroll?
4. Responsiveness to small business. Payroll outsourcing is often a volume game, with the big vendors making a lot of money by supporting thousands of employee accounts on behalf of an employer. However, some vendors are better tailored to suit small businesses. This is the subset of BPO providers you'll need to explore.
The Bookkeeping Solution
Maybe your business is too small to warrant the attention of a payroll specialist. In that case, another option is to hire a bookkeeper who specializes in payroll accounting.
If you go this route, your first step is to locate a certified public account. Try the CPA Directory, an online resource that lets you find CPAs by state, city and specialty. Once you get to this site, enter your location and choose "Payroll & Sales Tax" from the "Services Provided" drop-down box.
After you identify accountants equipped to handle payroll for you, get in touch with them and explain that you need a limited set of services. Explore the option of paying by the hour.
Going Your Own Way
If you love numbers and have a passion for accounting, you may be one of the few small-business owners who are willing and able to handle their own payroll process, including payroll deductions. In this case, you'd be best served by reading recent textbooks on payroll accounting books to get you going.