Payroll Options for Small Business Clients

Like many business processes, managing payroll has changed because of technology. And small business owners now have a choice of simple, cost-effective options for processing their payroll.

September 10, 2007
Sponsored by ADP Small Business Services

There are many reasons why entrepreneurs start their own businesses, but managing payroll is probably not one of them. Like many business processes, managing payroll has changed because of technology. And small business owners now have a choice of simple, cost-effective options for processing their payroll.

Typically, a small business owner is not aware of the different types of solutions available to them or what makes one solution better for them than the others. Entrepreneurs often turn to their CPA to advise them on this as well as many other decision points associated with starting and running a business. So it’s important that today’s accountant understands the different types of payroll options available to their small business clients and what solution will make the accountant’s job easier.

Regardless of payroll-processing method, small business owners and their accountants need to know that the payroll is accurate, on-time and in compliance with federal, state and local regulations. Every business needs payroll, and regardless of all the advancements in technology, payroll remains a complicated task. Federal and state tax laws are consistently changing and the penalties associated with mistakes in payroll can be high. When choosing a payroll solution, small business owners and their accountants should decide how involved they want to be in the process.

Outsourcing Payroll

With the payroll outsourcing option, business owners can direct their time to running the business, while the responsibility for payroll is given to an accountant, bookkeeper or third-party service provider. The owner simply submits employee hours to the provider who then calculates the payroll, including deductions and withholdings. Paychecks, pay vouchers, year-end documents and reports are delivered to help save time, reduce effort and save on internal costs.

Processing Payroll In-house

ADP found that, among companies with 20 employees or more, business owners spend more than half a day per pay-period processing payroll in-house. That means for those who process payroll weekly, payroll requires two full days each month.

While processing the payroll in-house may be perceived as the least-costly way of managing payroll, it’s common that the business owner will spend time outside of the normal business day calculating payroll. For businesses where there is no dedicated administrative staff, evenings and weekends can be taken up with administrative duties. And in the case of payroll, handling it alone could be time-consuming and error-prone. It can also be risky given government regulatory compliance requirements and tax-filing penalties.

Software Solutions for Do-It-Yourselfers

Technology has made the payroll software solution a viable alternative for small business owners. For those requiring full control over payroll processing and tax filing, using this solution can improve speed and accuracy when compared with the manual process. Convenience is another attractive feature for small business owners who may need to access the software 24/7.

Benefits to the Accountant

An overlooked area of payroll when advising clients on which option to choose is how this decision will impact the accountant’s workload. In today’s world, accountants having shared access to payroll reports and records are common, allowing them to avoid the shoebox full of records they may be accustomed to. Electronic data export enables accountants to transfer payroll data into their spreadsheet software so the data can be combined with other financial services such as workers’ compensation audits and expense projections. Also, with automatic general ledger interface functionality, payroll data can be imported into accounting software, saving time on mapping payroll and general ledger entries.

New technology also means that accountants can offer payroll services to their clients much easier and more efficiently than in the past. This can give the accountant a new and consistent link to their clients and a new source of revenue.

Evaluating All of the Options

In most cases, small business owners will look to their accountants for advice on payroll method. With so many options, the right advice can be critical. So when they evaluate their preferences, small business owners need to focus on the time, costs and requirements of payroll processing. Many find that the successful payroll choice depends on the expertise of the partner and the alignment of business goals and values. Partnering with a national payroll service provider, the accountant or reliable software solution provider will free up time and give the business owner confidence that payroll is handled right every time.

For more information on your payroll needs, visit ADP.