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  • 4 Reasons Not To Do Your Own Payroll

    Posted by Natalie Paris on May 20, 2022 at 10:10 am

    One of the biggest and most consistent challenges that my clients face is payroll. All bookkeeping is repetitive, but payroll seems to come up more frequently and present more challenges, especially for smaller companies. One of the first things that I recommend to all my clients when I start helping them with their books is to take payroll off of their plates. Here are the four reasons why.

    Withholding Taxes Is Tricky

    If you are an employer and you aren’t using independent contractors, then you are required to collect withholding taxes on behalf of your employees. Calculating the correct amount to withhold and including the right amounts that include taxable fringe benefits is easy to mess up. Having your bookkeeper manage your payroll and manage those withholdings is far easier and less messy for you and your business.

    Misclassifying Employees

    Another area that affects taxes is how you classify your employees. If you fail to classify your employees correctly, you could end up on the hook for a tax bill for failing to collect and pay the appropriate taxes. Expensive mistakes like these are easy to avoid if you are using a bookkeeper to manage your payroll. Bookkeepers know exactly how to classify your employees so that your business is collecting and withholding taxes appropriately.

    Mistakes in Hours and Data Entry

    Far too often the mistakes made in payroll get overlooked. When you have 20 people to pay, you have to spend time reviewing their hours, and a small error can go unnoticed. Especially if you are busy trying to run your business. These little mistakes add up over time and can cause big errors. And if you try to fix them, you will lose hours checking over your data. A bookkeeper that double-checks every entry and is careful in calculating hours using bookkeeping software is better equipped to avoid most errors and fix any errors that slip through.

    Time Wasted

    While you may think of the time you spend taking care of payroll as just the time it takes, handling payroll yourself costs you more than you may realize. Not only are you spending time managing your payroll, you are also not spending time doing what you really need to do- running your business. How many clients did you not help because you were looking for an error in your numbers? How much more money could you have made using those same hours in another area of your business? Time is your most valuable resource as a business owner. Don’t waste it by trying to save money instead of making money.

    Doing payroll yourself might seem like a great way to save money, but more often than not it ends up costing more in the long run in terms of time and money. It’s always easier and better to have a service or a bookkeeper help you manage your payroll.

    J. Larry Bloodworth replied 2 months, 3 weeks ago 3 Members · 2 Replies
  • 2 Replies
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  • Randy Lucyk

    May 26, 2022 at 11:03 am

    A word of caution when it comes to payroll companies. Very Very few, if any, take responsibility for making sure the way you pay your people is consistent with federal, state and local labor laws. Don’t get me wrong, I use one of the biggest and have interviewed many more. They are the way to go in my opinion, but they are not labor law attorneys, nor do they claim to be, and in my case at least, you have to specifically hold them harmless in labor law disputes. It’s in the agreement

    If you have a typical, novel or unusual productivity pay plan, bonus plan, spiff, ect. It is up to you to be sure the information you are entering into their portal, is consistent with the laws. There job is to calculate your employees pay using the data you provide. This statement includes pretty much any and every pay plan that is not hourly with overtime.

    It’s all fine and dandy, until the DOL comes knocking

  • J. Larry Bloodworth

    May 26, 2022 at 11:39 am

    I agree a business should not do its own payroll. We used Intuit’s payroll service and it was great. We used QuickBooks Desktop Pro. We did, however, calculate our own payroll and print our own checks. Intuit would make our 941 deposits and do our quarterlies by logging into our system and running all the reports. My wife is an accountant and has a degree in economics, so this may not work for everyone, but it worked for us.