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Payroll – It’s Not Just About Paying Yourself



by Steven Byler

When a company falls behind in paying payroll taxes, workers’ compensation insurance, or jurisdiction selection, there is often a snowball effect. The resulting paperwork, penalties and fees is enough to bury many small business owners. We find that over 50% of our new payroll business isn’t driven by price, but by the fact that companies have been trying to do payroll internally for months, or even years. The first time they receive a late payroll tax reminder, they don’t think much of it because they get a “pass”, but the second and third time, the penalties start adding up. Any savings on carrying costs, or avoiding a service provider, is wiped out by penalties and regulatory audits.

For small businesses, a payroll service provider may seem expensive, so owners often try to save money by figuring it out internally. They do payroll on their own, or calculate payroll in their accounting software, and then pay themselves and their employees. All too often, these companies cut the paychecks, but forget to pay the taxes, even though they may have been calculated correctly!

Even if the payroll taxes were properly calculated and paid, a business owner cannot forget about workers’ compensation insurance, or federal and state regulatory filings. Accounting and bookkeeping professionals know that outsourcing payroll can be one of the greatest returns on investment for small business owners, and is an efficient step in growing and focusing on your business.

With new small business clients, we see a range of challenges they face regarding payroll processing. These five tend to be the most common challenges:

Tracking Time and Paying Staff – It’s not as easy as just printing the checks. The process needs to start with a time management and capture system.

Paying Taxes and Filing Forms – Many internal systems are used to process payroll and calculate the required taxes, but do not process the payment or file the forms needed, leaving a company vulnerable to non-compliance.

Direct Deposit – Employees like to be paid promptly. Companies often have a distributed workforce making it difficult to hand a check to the employee. Direct deposit solves this, but many companies are intimidated by handling employee banking info.

Domain Expertise – Entrepreneurs are stellar at what they do and don’t need to be payroll experts. When navigating the logistics of payroll, it’s helpful to have support when something goes wrong.

Workers’ Compensation – Too many small businesses think that workers’ compensation insurance is part of payroll. In truth, if you have payroll, you need workers compensation; however it needs to be sourced separately.

We have heard these issues from many small businesses. Clearly, payroll is complicated and can cost a small business if it’s not done correctly. Outsourcing payroll can be a smart move and has many advantages, including:

  1. It lets you focus on the business you love, and not worry about payroll.
  2. It dramatically reduces your likelihood of incurring penalties and unnecessary fees.
  3. It ensures that you’re paying your employees on time… all the time!
  4. It gives you a resource to turn to that has payroll expertise.

So what do you need to get started? Call your CPA or bookkeeper! We are here to help and it is never too late to get your payroll organized. If you currently do payroll in-house, rest assure that providers are aware of many of the problems faced by small businesses, and will be able to help you navigate through the seemingly complex payroll system. They may also be able to help you with other practices, such as payroll coding, reconciliation, and expense tracking. These aren’t only critical in financial management, but also for preparation of potential future audits. In our experience, we have rarely found a business that has not been able to improve their efficiencies by having an expert by their side.


Steven Byler

Steven is COO and Co-Founder of GrowthLab LLC., a financial partner and adviser for small to medium size business and startups across New England. Steven also serves clients through GrowthLab’s affiliate, Grinnell Bookkeeping Inc., which provides outsourced accounting and payroll services to small businesses and the startup community. Steven has over 10 years’ experience working with startups across industries; partnering with founders to develop business strategy, finance that strategy, and then drive business growth.

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