Many business owners are not accounting experts and do not have the training or experience to manage their own payroll. Payroll management can be complex and confusing for small business owners. Payroll management can also be challenging; as incorrect entries can result in penalties from the IRS. That’s why many small business owners outsource their payroll, manage it in-house (also known as traditional payroll) or outsource it to professionals.

1. Payroll outsourcing is cost-effective

If the company’s management outsources the payroll to a Certified Public Accountant (CPA), the cost ranges from $260 to $480 per pay slip. These costs are incurred each time the payroll is run, not on a monthly basis.

If you are doing payroll in-house, using a CPA is the best way to do payroll correctly, as CPAs are specially trained in accounting and payroll. However, a CPA can cost anywhere from $65 to $120 per hour, which can be a lot of money when you consider that it takes about four hours to manage payroll. For companies that run payroll every two to four weeks, that amount can double or quadruple. Everyone knows that the lower the costs, the faster and more profitable an entrepreneur can become, even if they have no business experience.

Outsourced payroll management offers the same benefits and accuracy as payroll management by a CPA, but at a lower cost. It combines simplicity, accuracy and cost effectiveness. By outsourcing your payroll, you can save thousands of dollars a year.

So how much can you really save? Let’s compare what it would cost a small business to pay four employees once a month. We conservatively estimate the cost of traditional in-house payroll management at $65 per hour. This is the minimum hourly rate for a CPA.

Payroll Outsourcing

Base price $44.95/payroll + $1.85/employee = $52.35.

[$44.95 + ($1.85 x 4)]

Traditional in-house payroll

4 hours at $65 per hour = $260

Outsourcing payroll saved Small Business Inc. $207.65 per month.

2. Outsourcing payroll can help small businesses avoid IRS penalties.

So what if you can’t afford a CPA and want to manage your small business payroll, payments and bookkeeping yourself? Payroll laws are complex and constantly changing, so it’s easy to make mistakes.

Every year, about 40% of small businesses are penalized by the tax authorities for not paying or reporting their payroll correctly. This is a fairly high percentage, coupled with a penalty of about $850 per year, so it may not be cost-effective for SMEs to do their own payroll versus hiring a payroll professional. Payroll, payroll payments and payroll tax returns are automatically done on their behalf. This automated process prevents delays and missed payments and tax returns.

3. Outsourcing payroll management is simple.

Outsourcing payroll for small businesses is simple. Setting up employees takes a few minutes, but the actual payroll process only takes a few minutes.

Simply log into the secure online portal of the outsourced payroll service and enter the hours worked by each employee during the pay period. Once you have entered the employee’s hours, review the information and click “Submit” and the payroll is now complete.

4. Outsourcing payroll for W-2 and 1099 forms

At the end of the year, small businesses must provide their employees with a W-2 or 1099 form by January 31 of the following year: The W-2 is a document that lets employees know how much they earned during the year and how much federal, state, and local taxes were withheld; the 1099 is for independent contractors who work for $600 or more for independent contractors who received $600 or more during the year.

In addition to issuing these forms for employees and independent contractors, you must also file certain forms with the IRS. Again, if you don’t know what you’re doing, you could be penalized by the tax authorities.

Outsourced payroll companies collect this information and submit it on your behalf. Paperless companies like Online Business Payroll allow small businesses to print W-2 and 1099 forms for their employees on the spot. With Online Business Payroll, you can print W-2 and 1099 forms directly for your employees. Small businesses can send tax forms to their employees faster because they can print these forms for their employees instead of waiting for them to be mailed to them.

5. Outsourcing payroll management allows you to stay in control.

Most payroll outsourcing services allow you to keep control of your payroll, but perform complex payroll tax calculations in the background. Payroll outsourcing is attractive not only because it is tax compliant, but also because it allows you to focus on your business rather than trying to become a payroll expert.

Online payroll data entry allows you to control the payroll process and avoid double entries and typing errors that often occur when payroll data is submitted by phone or fax. You have control over your small business payroll at all times, including entry, verification and approval.

6. First month free

The advantage of using an outsourced payroll service is that many companies can test its services for free. You have nothing to lose, so why not try outsourcing?

Author Bio

Tina J. Wagner Phillips is a 31-year-old She enjoys Accounting, working on Payroll Pay Stub, and bookkeeping. She has a degree in accounting, politics, and economics, obsessed with films and tank tops.