Outsourcing Payroll Management: A Strategic Trade-Off

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If you are like most entrepreneurs, when you first started your business, handling your own payroll management was a fairly simple task. You kept a ledger, paid yourself and maybe just a few employees. The payroll process didn't eat up your valuable time so you could spend that time growing your business.

The Trade-off of In-House Payroll Management Versus Outsourcing

Once the time spent growing your business has paid off you may find that not only have your sales increased, your staff has also increased to meet the demands of your growing business. And the once-simple payroll management process has ballooned and - along with it - your time spent on it has also increased.

Acknowledging the Law of Diminishing Returns

There comes a point where the benefits of handling your own payroll start to diminish.

"The Law of Diminishing Returns" states, "there is a level where profits and benefits gained is less than the amount of money or energy invested." There comes a point where you can spread you and your support personnel too thin and your business growth starts to plateau.

Of course, you can hire more people to handle your payroll, but in this day in age of employee turnover, investing in training, and added expenses of hiring an employee that you are not sure is a fit for your company, this may not be the best use of your money and resources.

There are a number of good reasons to consider outsourcing your payroll to a professional payroll management services company. While you may want to retain some of your general accounting operations such as accounts payable and managing your receivables, payroll is a great candidate for outsourcing.

Although it is understandable to think that it is still more cost-effective to keep all of your payroll functions in-house, the truth is that many companies large and small find that the cost-savings can be substantial. In addition, there are other benefits that are not easily measured in dollars and cents, but that are just as viable and valuable.

Your Business Can Benefit From Outsourcing Your Payroll Management Services

HR managers are becoming increasingly overwhelmed with added responsibilities, growing regulatory obligations, and a continually changing HR landscape. Managing the complex interactions between departments and the relentless demands of federal, state and local agencies can take its toll.

So being able to safely and cost-effectively delegate one of the more onerous processes to an outside vendor can be a smart move on a number of levels.

Three Benefits of Outsourcing Your Payroll Management

A more comprehensive list would probably mention such things as enhanced security and improved compliance. And, no doubt, this can be a much longer list, but regardless of who asks the question, these three advantages are always cited as the major benefits:

1. Cost Savings

While you should always conduct and in-depth cost analysis, most every business - large and small - can realize significant savings in real dollars by outsourcing this function. In addition to the overhead costs reduction, your company can save on software costs, training and support costs, as well as compliance related expenditures. All this can be had by simply outsourcing payroll accounting to a reliable, professional outside firm.

2. Management Savings

This may seem like an unusual way of putting it, but sparing your management team the tedious work of ongoing payroll functions can improve their overall productivity. Outsourcing payroll essentially adds a substantial number of hours for HR staff to engage in other tasks with more long term benefits to the company. Removing the burden of payroll processing and reporting functions from often overworked staff can help to ensure greater accuracy, security and compliance.

3. Time Savings

This can be seen as another facet of cost savings. Every business owner and every manager knows that the old maxim, "Time is money" is most definitely true. According to one survey, the average time spent processing payroll for approximately 50 people was about 18% each month. That's equivalent to having one full-time person process payroll for every 250 employees. This doesn’t include processing changes in payroll, administrating benefits, or any other tasks associated with payroll accounting.

Knowing When to Outsource Your Payroll Management

Outsourcing any function in your business should be a strategic and operational decision, one based on more than simply hoping to save money. And while saving money is indeed a major incentive, there are other indicators that can help you know when it's time to move your payroll processing to an outside firm:

You are adding employees
Your payroll process exceeds your software's capabilities
You are adding payroll staff
Your employees want to have direct deposit options
Your staff is struggling to maintain compliance and accuracy

At a certain point it becomes increasingly apparent that delegating your payroll accounting process to a vendor such as Accuchex is the better move strategically.

Increase Your Return by Outsourcing Payroll Management

Once you reach a certain volume of employees, spending your time on the complexities of payroll management is no longer worthwhile. In fact, you put your company at risk if you are not up to date on employment law.

Most business owners do not have the time to go to classes and stay abreast of ever changing laws when it comes to employee payroll. As your company grows, you do not give it a second thought when it comes to investing in equipment or technology to better manage the business.

Therefore, it only makes sense to use your time to grow your business while using the expertise of payroll professionals to manage your payroll.

When considering a payroll management company, make sure you find a company that becomes a partner in your success. For a complimentary consultation to discuss the pros and cons of payroll outsourcing, please contact Accuchex at (415) 883-7733.

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