The only thing more conventional than “keeping the books” is screwing them up.
In fact, the two typically go hand-in-hand, as the IRS penalizes about one out of every three business owners for payroll errors.
Even if mistakes weren’t so commonplace, doing your own payroll can still cost you. The valuable time and energy you spend figuring out how much money you have to give away could be spent actually making money. That’s why so many businesses are turning to outsourced payroll services.
A good payroll service will, at the very least, get checks to both the IRS and your employees on time, taking most of the weight off your shoulders — but not all of it. The paychecks themselves may be out of your hands, but this is still sensitive information that’s immensely important to your company, so it’s critical that you pick the right service for your small business.
This guide will help you ask the right questions so you’ll know which service to choose.
How to Choose a Payroll Service: Where to Look
A simple Google search of “payroll service” yields about 485,000 results, and with so many options to choose from, narrowing down those results can be just as difficult as crunching numbers yourself.
You might try getting references from other similar businesses in your area.
Ask yourself questions like how much you plan on growing, how many full-time, part-time and contract employees you’ll have on your payroll throughout the year, and if anyone is due for a raise or bonus. Decide whether or not you’ll need a company that can handle different state and federal taxes. Do you need human resources services in addition to payroll? How much can you afford to pay the service? Will you be offering employees 401(k)s and other deductions? How often do you want to issue paychecks?
Make sure you go with a service that has dealt with union rules before. If you run a restaurant, where servers receive tips, your payroll service needs to know how to file taxes accordingly. As you narrow down your options, look through client lists. Sometimes it’s crucial that a service is familiar with your line of work.
How to Choose a Payroll Service: Questions to Ask
The following is a list of questions you should use as a basic checklist for those interviews:
• How fast is turnaround?
• If the service makes a mistake, who is liable for those mistakes?
• How long does it take to fix a mistake?
• Are there additional charges for adding or changing employee payroll?
• Will the annual fees change or increase after one year?
• How often will you receive reports from the service?
• Do they offer retirement plans?
• Can they integrate with your accounting software?
• What back-office technology does the service use?
• What are the hours and means of customer service availability?
• Will you be assigned a rep or will you always be directed to someone new?
• Is there an additional cost to file taxes in multiple states?
• If data is re-entered, will I be able to review it before it goes through to payroll?
• How often will I hear from you?
Finally, if it turns out your service is not meeting your expectations, the best time to switch is either at the beginning of the year when your pay cycle starts with a clean state or at the end of every quarter when your quarterly reports are already in order from your last payroll service.