When starting your small business, you’ll need every element of your business to work well and efficiently from the beginning — with minimum input and oversight from you as necessary. Why?
Your time is valuable. Business efforts that can be streamlined, delegated, or automated will help maximize your time’s value.
A third-party provider for payroll services can be one of your most valuable assets as a small business owner. Payroll providers streamline and automate the payroll process. They cover a range of payroll features, such as automatic payroll runs, direct deposit, and payroll tax administration. But they can do so much more than process paychecks for your employees.
Payroll service providers offer additional features and can help across a spectrum of business functions. Investing in payroll services early ensures your business operations are robust and prepared to troubleshoot potential challenges.
Payroll Services Help You Overcome Common Business Challenges
Even the best-run small businesses encounter challenges. That’s part of the territory. But an efficient small business will plan for these challenges to prevent them from becoming problems.
Payroll services can play a powerful role in handling some of the most common challenges reported by small business owners in our 2022 Small Business Trends report.
Over 20 percent of small business owners cited payroll and administrative work as a top challenge. Running payroll includes choosing methods, such as cutting checks or direct deposit, and assuring that appropriate local, State, and Federal taxes are taken out of employee paychecks.
These tasks aren’t always easy and can also take up a significant amount of time for busy business owners. Plus, hiring and supervising personnel to take care of these tasks can be less time- and cost-effective than working with a third-party provider offering turnkey business payroll solutions.
Time management is another challenging skill for many small business owners. Fourteen percent of small business owners reported time management as a top challenge in 2020. When you attempt to process payroll alone or hire and supervise personnel to do so, you’re adding more time-consuming tasks to manage.
Doing payroll by yourself is a huge undertaking — and it takes more time than you think, especially if you’re a new small business owner. Small business owners spend nearly five hours each pay period calculating, filing, and remitting taxes while processing payroll.
In a 2020 Intuit Inc. survey, 64 percent of business owners said they would rather outsource payroll — with 80 percent of respondents considering themselves qualified to manage their company’s finances. Additionally, 38 percent of business owners said they could spend more time focusing on the business if payroll was outsourced to a third party. And 31 percent said an outside payroll processor would give them peace of mind.
By outsourcing your business payroll services, you’ll give yourself more security and time to focus on growing your business. After all, figuring out the complicated payroll system alone takes a lot of extra time and energy.
Full-service payroll can also offer a wide range of human resources and risk management services that can help you create recruitment plans and retain employees. Recruiting and retention are one of the top three challenges for small businesses. When asked about the difficulty in our 2022 Small Business Trends survey, over 70 percent of respondents described recruitment as somewhat or very difficult compared to previous years.
In summary, payroll services can help you overcome three common small business challenges: payroll and administration work, time management, and recruitment. But you can also streamline your business more through these services.
Payroll Services Manage and Streamline Rules, Regulations, and Services
Payroll and Human Resources Departments often have complex rules and regulations for payroll withholding and coverage. A payroll provider can manage all these rules, regulations, and services.
In most states, for example, workers’ compensation insurance is required. One requirement of the Federal Insurance Contributions Act (FICA), which covers Social Security, Medicare, and state unemployment insurance, must be managed carefully. Otherwise, your business could be subject to government action and fines.
Not only do various regulations apply to required coverage and withholding, but they also apply to employee benefits.
If you provide your employees with retirement benefits, such as a 401(k) plan, errors can cost you. For example, you must deposit employee salary deferrals into each employee account within seven days of payroll. If your company misses this by just a day, the Internal Revenue Service (IRS) may audit your 401(k) plan. Payroll service providers, however, will always make these deposits on time — saving you from a potential audit and the fees that come with one.
Payroll Providers Can Save You Fines and Fees
Benefit errors aren’t the only potential causes of a tax audit. As most business owners know, the risk of an IRS audit is relatively low at under 2 percent. But that’s not to say that tax penalties don’t exist.
In 2018, the IRS levied $6.4 billion in penalties alone on business income and another $4.8 billion on employment taxes. And with the 2022 Inflation Reduction Act bringing in an $80 billion increase to the IRS, audits may be more likely within the next few years.
These fines can kick in for infractions such as failing to pay business income tax, FICA, and late tax payments or underpayment.
If your business is a corporation or a limited liability corporation adhering to corporate tax structure, these taxes apply — even if you’re the only employee of your business. Fees and fines can also compound over time, potentially strapping your company of needed cash flow.
The good news? You can easily avoid these fines by outsourcing your payroll. A payroll service provides automatic payroll tax administration to ensure your payroll business taxes are paid correctly and on time – saving you on penalties, fees, and fines.
Guidant is Here to Help
Especially in the startup and early stages of a small business, you may think your company is too small to benefit from a payroll provider. But for all the reasons above, partnering with an industry expert is one of the smartest moves you can make for your business.
Guidant offers comprehensive payroll solutions for small businesses with affordable plan options. Plus, our higher-tier plan even throws in free HR On-Demand for your first three months.
Schedule time to chat about what you need or call us at 888.472.4455 ext. 3338.