Payroll processing — every business is accountable for it, yet few realize just how much of a time and financial burden internal payroll management can be. What’s more, as a cost center (does not generate revenue yet still incurs costs), payroll can significantly limit a small business’s ability to scale and grow.
- 1 5 Ways Outsourcing Payroll Services
- 1.1 1.Reduced overhead costs
- 1.2 2. Increased productivity
- 1.3 3. Access to industry experts
- 1.4 4. Enhanced security of payroll data
- 1.5 4. Support for business scalability
- 1.6 5 Qualities of a Reputable Payroll Provider
5 Ways Outsourcing Payroll Services
To solve this challenge, more and more small businesses are outsourcing payroll services. Payroll outsourcing firms enable small businesses to prioritize profit centers (activities that generate revenue) and make sufficient reinvestments back into the business.
Looking to realize better long-term savings for your business? Here are five reasons why your small business needs to begin outsourcing its most tedious back-office task.
1.Reduced overhead costs
Payroll processing functions come with several direct costs (specifically, staffing overhead and software expenses). Other associated costs include the risk of employee fraud and payroll or tax errors. All of these financial penalties can be crippling, particularly to a new startup.
While large enterprises can absorb the costs of a robust payroll department, small- and medium-sized enterprises will find that an internally managed payroll department can be a significant drain on its financial and management resources, both of which can be redeployed more profitably.
Outsourcing payroll operations eliminates any unnecessary overhead costs and helps your business discover any unnecessary costs, saving on penalties, fees, and any potential financial fraud that may occur.
2. Increased productivity
Because many small businesses have limited resources, business owners must manage many tasks and responsibilities. Depending on the industry, these can include:
- Business planning
- Marketing and sales
- Customer service
- Human resources
- Finance and accounting
- Compliance and legal responsibilities
Payroll management is time-consuming. Payroll operations require a series of checks and balances to ensure no payroll errors are committed, which cost even more time and money.
Organizations that work with a fully managed payroll provider frees up their time and internal resources. Allowing professionals to manage the payroll burden means the employer (and employees) can focus on more value-added activities like sales and marketing.
3. Access to industry experts
Financial regulations are constantly changing. Also, keeping up with labour legislation and data requirements can be overwhelming, particularly when day-to-day operations demand a lot of attention.
Outsourcing payroll to industry professionals ensures someone is always keeping a close eye on the ever-changing rules and regulations relating to labour and employment matters. This is especially useful if you operate a business across different states or countries.
Having access to the service of payroll and accounting experts means you get access to their ongoing advisory support, ensuring you stay on the right side of legislation and compliance.
4. Enhanced security of payroll data
Data breaches are a nightmarish scenario for any business. For small businesses, a data breach can threaten their very survival.
As reports indicate, nearly 50 percent of cyberattacks target small businesses. On average, getting attacked by a data breach costs $200,000. And 60 percent of small businesses that have been victimized by a cyberattack typically go out of business in under six months.
A third-party payroll provider lessens your vulnerability to such attacks.
As auditing, payroll and accounting service providers must prioritize security to remain compliant, they have access to some of the latest software and technology. This allows them to employ best practices to counter data-theft and other cyber threats.
Aside from eliminating this vulnerability, an added benefit of working with a payroll partner is that you also get access to this helpful technology. This will allow you to gain insight into business data that will help you make more informed financial decisions in real-time.
4. Support for business scalability
As your business grows, so do the challenges. New opportunities will often require new approaches and demand different solutions. Increased competition, market changes, and cash flow management are common pitfalls that can impact the sustainable growth of your business.
Quality outsourced payroll services assist businesses with the latter.
They understand the common pitfalls of scaling financial management and have the resources and services in place to scale alongside your business. Their use of cloud-based technology ensures you always have the capacity you need to meet the financial demands of an expanding operation.
Plus, when you welcome a payroll service provider onboard, you gain valuable time and resources to focus on critical ongoing functions and profit centers that support your growth.
5 Qualities of a Reputable Payroll Provider
Now that you’ve seen the benefits of outsourcing payroll functions, you may be looking to employ a payroll service provider. To ensure you partner with the right third-party provider, here are the five qualities you need to look for.
1. Customer service
The payroll process is complex and can be difficult to navigate. Undoubtedly, you’ll have many questions for your payroll service provider. Be sure you have a single point of contact within the firm that you can reach directly when you need help.
The last thing you want to have to do is to jump through hoops just to talk to someone about your financial issues.
2. Accessible technology
The software your payroll provider uses should not only be easy to use but should also be cloud-based so you always have access to your payroll data. When evaluating payroll providers, ask how they secure confidential data.
3. Compliance expertise
While every payroll firm will efficiently manage your payroll, not all provide advisory expertise that ensures your business is compliant with legislative changes. Only work with a payroll vendor that has assurance professionals on their team.
They should also have an established reputation based on industry expertise and deep knowledge of compliance requirements.
4. Financial stability
When assessing payroll vendors, consider their financial stability. If they are unable to deliver on expectations and timelines, your business can be hit with costly payroll errors. This can severely damage your business reputation and relationships with your customers and suppliers.
Avoid this scenario by analyzing a potential vendor’s track record with clients, product and market performance, and financial reports and credit history.
5. Price transparency
When evaluating potential vendors, don’t be afraid to solicit quotes. The request for quote (RFQ) process will provide you with concrete details on what services you’ll be provided at what costs. Be cautious with a vendor that’s not upfront with the true costs of their services.
This means you’ll be hit with hidden fees further down the line, negatively impacting your profitability.
As any small business owner can attest, the path to scalability is dependent on profitability. Outsourcing payroll allows your business to potentially establish new profit centers and effectively manage the impact of cost centers.
By working with the right outsourcing payroll firm, your business is able to focus on what it does best.
HussaiN is a full-time professional blogger from India. He is passionate about content writing, Tech enthusiast & computer technologies. Apart from content writing on the internet, he likes reading various tech magazines and several other blogs on the internet.