From the December 2000 issue of Startups

Have you considered switching from paper checks to electronic transfers? It could mean lower costs and improved tax and payroll operations for businesses with employees. Yet among businesses with fewer than 20 workers, only 17 percent have opted for direct deposits, according to a recent International Communications Research survey. In contrast, 99 percent of employees in Japan and about 90 percent of Europe's work force have their pay deposited directly into their bank accounts.

The survey, conducted for Intuit, also found that 40 percent of entrepreneurs spend at least 50 hours a year doing payroll taxes. (Perhaps not co-incidentally, that same percentage reported hav-ing been penalized an average of $845 by the IRS for late or inaccurate payroll tax filings.) That's more than a full week each year to manage a twice-monthly payroll, fill out quarterly tax forms, prepare pay-period tax deposits and print W-2s. So if your time is worth $100 an hour, then you're spending $5,000 a year on payroll-not to mention the 8.5 to 24 hours per year that employees take out of their work days to visit the bank and deposit their paychecks, according to National Automated Clearing House Association estimates.

Aside from the time factors, though, direct deposit and payroll services just make good sense when you consider the nominal costs-beginning at less than $20 a month-and the range of services offered. For example, Intuit's QuickBooks Deluxe Payroll Service (www.intuit.com/quickbooks/products/payroll) manages federal and state payroll tax filings; automates federal and state tax deposits; calculates, prints and mails W-2s; tracks changes in law; and reconciles. The service starts at $32 per month, and an optional direct deposit service is available for $1.50 per paycheck per pay period.

Pay Up

You have lots of options when it comes to direct deposit and electronic payroll services. Here are a few:
Paycor Inc. (800-381-0053, www.paycor.com)
Payroll Depot (800-393-1953, www.payrolldepot.com)
QuickBooks (800-332-4844, www.quickbooks.com)
U.S. Payroll Services (800-343-8925, www.uspayrollservice.com)
Virtual Payroll Inc. (888-531-5300, www.virtualpayroll.com)

Paul DeCeglie , a freelance business writer based in Los Angeles, is a former reporter for American Banker and Journal of Commerce.