The most important thing we’ve learned about payroll as a business function related to hiring:
Don’t try it at home.
They say the golden rule of personal finance is pay yourself first. There should be a golden rule of small business finance. Pay a payroll services provider. You probably didn’t hear it here first. But we hope here is where you begin to take it to heart.
The payroll function is described uniformly as thankless, constant, detailed work that is laden with risk. Mistakes are costly. Big mistakes are game changers that could completely sideline a small business. And we can’t have our nation’s small businesses sidelined – we’re pinning our hope on small businesses creating jobs to keep the economy somewhat healthy during this anemic recovery.
Arch Wallace of Checkright, a payroll services provider in Richmond, Va., near Snagajob headquarters, questions small business owners on the complex, numerous, changing-as-we-speak payroll tax schedules, forms and due dates. “Did you know…?” When he gets an affirmative answer, as often he does, he fires back “Why?”
And that’s because he believes small business owners are much better served, therefore so are their employees and customers, by not knowing all of the intricacies of payroll software and tax compliance – and especially by not having mastery of the process of printing, error checking, signing, folding, stuffing and delivering paychecks – time spent that has no proven business value.
Wallace says he leads more like a quest than a business. His is a quest to save small business owners intent on keeping payroll in-house from themselves.
“They don’t know what they don’t know,” said Wallace. “You’d be surprised how many don’t know, for instance, that they have just days to fax a new hire report to the state. If that fax isn’t sent, and the employee becomes delinquent on something like child support payments, the government collects from the business, not from the dead-beat parent.”
Wallace gave a serious wake-up call recently to an owner of a local contracting firm who had never submitted a new hire report. If just one employee had been delinquent on child support payments at any point, it would have sunk him.
Then there’s tax naivety. Small business owners who are doing their own payroll typically are fined about $840 per year for non-compliance.
And a large percentage of them aren’t coming even close to maximizing tax credits, which could be used to offset hiring costs. Estimates are that Uncle Sam is pocketing the $12,000 that each small business owner who’s not wise to this tax credit could be collecting.
So if you’re intent on growing your business – and you’ve got a whole nation hoping you are – outsourcing payroll is a solid first step. And with an extra $12,000 in your pocket every year, maybe it would be more like a leap.