You may have been like many small-business owners when you started your business. Managing your payroll was an easy task. You probably kept a simple ledger and paid only yourself and a few others.
This means that there was a time when payroll didn’t consume too much of your time, and you could concentrate on growing your business.
Your business grew, and you had more employees. Payroll management was a hassle and time-consuming task.
How to find the balance for managing your payroll effectively.
Your time spent growing your business has paid off. You now see that not only are your sales increasing, but also your staff has increased to meet the growing demands of your business. Your once-simple payroll process has seen a lot of growth.
How can you develop a successful plan to uphold accuracy, punctuality, and compliance without devoting all of your time to it or hiring additional payroll staff?
There are numerous choices, but not all of them. Although adding more staff may solve the problem, you know that it comes at a price. Although investing in more powerful payroll software can be a good option, it can also prove costly and require ongoing support.
Realizing the Law of Diminishing returns
From experience, you know that managing your payroll can be costly for a business owner. The Law of Diminishing Returns is what this is known as.
According to this law, profits and benefits equal the investment amount. This means that you reach a point when your resources are too limited, and your business growth slows down.
Additionally, the more time spent on payroll and correcting mistakes and oversights, the less time you have to do the things that help the company grow.
Although you can hire more employees to manage your payroll, it may be costly and not the best use of your money. Training costs, employee turnover and additional expenses associated with hiring employees who may need to be a better fit for your company may also increase.
Outsourcing your Payroll Management is a Business Strategy
There are many strategic reasons to outsource your payroll. Although you might want to keep some general accounting functions like managing your receivables and accounts payable, outsourcing payroll is always a better option.
Although it may seem more cost-efficient to have all your payroll functions done in-house, many businesses, large and small, find that this can lead to significant cost savings. Other benefits can be just as feasible and valuable, even though they are not easily quantified in dollars.
The demands are overwhelming as HR managers become increasingly overwhelmed by regulatory responsibilities and an ever-changing payroll landscape. A payroll department or HR department can be overwhelmed by the complexity of department interactions and the increasing demands from federal, state, and local agencies.
Outsourcing allows you to delegate some of the more difficult processes to a trusted vendor. This can be a cost-effective and safe move.
There are three benefits to outsourcing your payroll management.
There are many other benefits, such as improved security and compliance. These three strategic benefits are, however, the most important.
Cost Savings
Although conducting an in-depth cost analysis is important, almost every company can make significant savings in real dollars by outsourcing the function. Outsourcing can help you save both overhead costs and training, support, and compliance costs.
Management Savings
Although it may seem counterintuitive, relieving your management team from the repetitive work of maintaining payroll can increase their productivity. Your HR staff can spend more time on other tasks that will bring long-term benefits to your company by outsourcing payroll. It can greatly increase compliance, security, and accuracy by removing the payroll processing and reporting burdens from overworked employees.
Time Savings
This can be viewed as another aspect of cost saving. Time is truly money. One survey found that the average time spent on payroll processing for 50 employees was 18% per month. This is equivalent to one person processing payroll for every 250 employees. This does not include payroll administration, processing payroll changes, and other payroll accounting tasks.
Know When to Outsource Payroll Management
It is a strategic, operational decision to outsource any business function. It must be about something other than saving money. Saving money is a good incentive. However, other indicators can help you determine when it’s time for your payroll processing to be outsourced.
- Your staff struggles to maintain accuracy and compliance
- Your software cannot handle your
- You are adding employees
- Payroll staff are being added
It becomes increasingly clear that outsourcing your payroll accounting to better strategic move.
Increase your Return on Payroll Management
After you have reached a certain number of employees, dealing with the complicated aspects of payroll management is not worth your time. Payroll errors, lateness, and inaccuracy can put your company at serious risk.
Many business owners need more time or resources to attend classes or keep up with ever-changing laws regarding employee payroll. You don’t give your business a second thought as you grow.
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