Entrepreneurs Find Hiring a Payroll Service Brings Perks It's natural to want to keep costs low but a payroll service is worth the cost.
Opinions expressed by Entrepreneur contributors are their own.
Small business owners want their business to grow, and this often includes hiring employees. Adding staff to an enterprise frees up time for an owner to focus on strategy and long-term projects and step out of day-to-day tasks, such as ringing up customers at the cash register or making sales calls. A TD Bank survey of small businesses in 2015 found that 43 percent of businesses have at least one employee, and the Small Business Administration (SBA) reports that small businesses account for 66 percent of net new jobs, putting these companies on track for additional revenue growth.
Running a small business is complicated, and often the CEO has job descriptions ranging from chief bottle washer to chief financial officer. Just 23 percent of businesses with employees in the TD survey reported having a financial professional such as a bookkeeper or accountant who handles financial records. In a similar study in 2014, 46 percent of small business owners named bookkeeping among their most hated tasks in running a firm.
One way for business owners to find relief is to work with a payroll service. Such a service will provide basic services such as calculating pay, tax withholdings and generating direct deposit or checks each pay period. Others offer perks such as online check stubs, time off tracking and apps for employees to view pay information.
Gene Marks, CPA and owner of The Marks Group, said that relying on outside help for tasks outside of their immediate expertise, such as payroll and payment processing is a winning strategy for business owners. "Small business owners who succeed act like executives. They don't ask when something will get done, but who will do it. Business owners who do payroll on their own will never grow. Whether you have one employee or 100, the issues of being an employer are the same and you need a smarter mindset to grow your company."
Contracting with a payroll company isn't only about time savings; employers need to consider compliance issues as well.
"As soon as you hire that first employee, you gain issues you probably aren't aware exist," said Jamie Griffiths, vice president of bank partnerships at Paycor, a strategic partner of TD Bank. "There are nearly 10,000 tax jurisdictions in the U.S., and the constantly changing regulations make it impossible for a small business owner to keep up. A payroll company will alleviate some of that tax and compliance burden."
Small business owners need to be aware of cash management and control expenses, but outsourcing such a time-consuming and burdensome task often outweighs any cost. Having staff is vital for an owner who wants to sell their business in the future to either enhance retirement income or provide liquidity to invest in other ventures. The key is to balance the entrepreneur cost-controlling mindset with paying for appropriate resources that can propel growth or free up critical hours in the week.
"A payroll service adds intangible value to a company," Marks said. "Buyers or investors are looking to acquire companies with policies and procedures in place."
"Outsourcing payroll is an easy thing, but it can make a small business look like a large company," Griffiths added. "This is attractive to bankers and investors, and to potential hires who are weighing the benefits of working for a corporation versus a small business."
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What does this really mean for small business owners? Those who want to grow need to invest in their infrastructure now. Current employees experience myriad benefits, from having a professional determine accurate tax and benefit withholdings to ensuring paychecks are deposited on time, while a business owner profits through work hours cleared to invest in company strategy. Payroll is one area of running a small business where it doesn't make sense to nickel and dime. Paying for help will reap far more in the future for a smart business owner.