Why CPAs are Outsourcing Their Payroll Services
Business heads have always been inclined towards outsourcing non-core functions.
By non-core functions, I mean ones that are not profitable, where you don’t make profits. A non-core service may be necessary, but it doesn’t set up apart from your competitors
In most businesses, Payroll is as much of a non-core function as administrative and back office work is. This makes it more viable for outsourcing.
However, CPA firms and solo practitioners have always posed the bigger question: what do you gain from outsourcing payroll? Is it worth your time and effort?
Here are three benefits to evaluate its importance and necessity:
1. Do what you do best: Focus on core business
Payroll is one of those essential tasks that may not have a direct effect on the increase in sales. When carried out poorly, it can place your business in a world of hurt.
The IRS has reported that 40% of small businesses pay an average of $845.00 per year for late or incorrect filings & payments. Mistakes lead to audits & penalties – situations no company wants or needs.
A payroll outsourcing provider can certify that calculations and taxes are accurate from one pay period to the next. Additionally, taxes are settled to meet governmental agencies on time, mitigating the risk of assessed penalties. This could save your firm’s time in offering more-profitable, value-added services to your clients and become their trusted and reliable service provider.
2. Be Assured of Security and Data Access
As a firm, if you handle a client’s payroll, you will need to invest a lot of time in handling, backing up payroll data, and ensuring the data received is safe. Impermeable security is of the utmost importance when you have sensitive data at disposal. Hence, a respectable payroll outsourcing firm can offer a much-advanced level of security than any other firms and businesses.
After all, In-house payroll comes with its own risk. The chances of identity theft shoot up when it comes to processing payroll in-house. Employee records can be easily viewed by those who handle payroll. Employees can meddle with data for personal gain, and there's also the risk of fraud.
Not only this, but you also need to think about considering the security of the software you use. With technological advancement, your software may be relatively secure, but are you educated enough to figure out the threat on the server you store your data on?
Comparatively, outsourcing firms have innovative encryption technology, along with redundant data backups, with skilled staff working on it. Bring the same tech and people to your firm can cost you a fortune. It is thus advisable to outsource payroll for data security and tech-efficiency.
3. Your Compliance in Place
"As an employer, you also need to understand wage and hour laws," said Andy Childs, a vice president of Paychex. "For example, you need to know when you are required to pay overtime."
Here’s the catch: the government doesn’t care if you are an expert in tax regulation or not. If you miss, the onus is on you.
The accounting outsourcing providers understand the tax law better than any layman. It’s their job to keep up with the ever-changing rules and regulations and changes in tax laws. Outsourced accountants are efficient and skilled at it. They can identify errors and resolve in no-time. Hence they guarantee accuracy and compliance. The turn-around time is faster than in-house accountants since the offshore staff is more tech-savvy and skilled.
Look Out for These While Choosing an Outsource Provider
If you ever wish to outsource your payroll, here’s what you should be looking in for a when choosing a provider:
Security and Reliability of the Provider
You are practically giving them your business. Needless to say, they have access to sensitive data of employees such as names, addresses, social security numbers, and bank account numbers of your employees.
Find a partner with stable finances and excellent control over work. If you don’t choose wisely, you can find your company in a bind, like the South Carolina firms did after a small family-run payroll provider was charged with stealing $11 million from clients.
Service provider should have served the clientele of your fraternity
It is important the outsourced firms have served in the same similar industry and have a robust track record of attending businesses your size.
Governing Compliance Competences
Laws change every fortnight. It is vital that your outsourcing partner keeps up with the changing laws and regulations around employment, healthcare and taxes. The outsourced firm should also be equipped with skilled-staff who can overview and manage your work
They are tech-equipped
Assess the payroll company’s technology, as well as its mobile promptness. Is the payroll company advancing in new technology?
In a nutshell: Outsourcing is a good option for payrolls services. It gives you the client base and also helps you in focusing on the core business. You and your staff can concentrate on expanding the firm’s footprint while an outsourcing partner takes care of the minutiae of the details. It's almost like having an extended team across the globe.