Should your small business take payroll processing in-house? This is a question that we at Fragnoli & Company, CPAs jfragnolicpa.com have been encountering more frequently in recent months. For decades the answer to this questions was simple, no. The cost of payroll services versus the complexity and cost of payroll software, alternative use of employee time and the liability risk involved in performing payroll processing in-house made it worth using an outside payroll service. However, I believe that the tide has turned on this question. I have a small business client who was telling me how happy he was that he had paid off his truck which meant that his company’s cash flow was going to improve by $450 per month. He was now looking for another $1,000 or so to accompany that cash flow improvement but did not know where to look for savings. He hired a very solid office manager in recent months who can easily handle the payroll processing so I told him to look into taking his payroll services in house. An eight person payroll with ADP is running his company nearly $100 bi-weekly. That is $200, and sometimes $300 per month. Plus they pay for year end payroll return processing and other expenses. The annual cost is nearly $3,000. They accumulate the time information and input all the activity in to ADP’s site. Accordingly, what they are paying for is the production of the paychecks, the making of the payroll tax deposits and the processing of the quarterly and annual payroll tax returns. With today’s software and the eletronic federal tax payment system (EFTPS) and the state equivalent, this is now very simple. The payroll software in today’s market is very easy to use, accurate and efficient.
Quickbooks offers payroll software integrated with Quickbooks Pro, total package is $250. You can purchase just payroll for $100. There is an online software, which I have written about previously, Wave Accounting, which provides full payroll service for about $20 per month https://www.waveapps.com/ . These are significantly less than the outsourcing costs incurred with services like ADP and Paychex. If your small business has a solid office or accounting manager, or you as a small business owner have a few minutes in your day on paydays to perform payroll processing, your small business can save a nice amount of money annually by taking payroll processing in-house. Of course, you must have a back-up in case the responsible person for payroll processing is not available on payroll processing day. What we at Fragnoli & Company, CPAs do for our clients is act as the emergency processor in the event the responsible person and/ or the back-up is not available. This is the primary advantage of an outsourced service and by cross traning and having your CPA as your emergency back-up, the company has now overcome that issue. In this economy when a company can save a couple of thousand dollars a year annually they need to consider the option.
Do not be afraid to take payroll processing in house. In today’s technilogical age this is a service that no longer must be outsourced. In fact, it is probably just as easy to do in-house and there are significant savings by doing so. Contact your CPA and ask about doing this and seek the training. It will be worth it. If your current accountant cannot train you on this process please consider calling Fragnoli & Company, CPAs at (615)377-0705 to discuss the cost of implementing an in-house payroll processing system.