Like all small business owners, Raj Bhandari has dozens of things to worry about every day. But payroll is no longer one of them.
The owner of Silk Threads, a Dallas store specializing in Indian and Pakistani fashion apparel, Bhandari used to spend hours each pay period holed up in his back office, where he’d perform arcane tax calculations, fill out government forms, and write checks to his 12 full-time and part-time employees. “I’d have rather spent that time growing my business,” he says.
Bhandari knew there had to be a better way. He was already doing much of his banking online, so when his bank rolled out a new online payroll system, he was one of the first to sign up. Now with just a few clicks, he’s paying employees, cutting checks, and completing tax forms. “I’m doing it all in about 30 minutes each month,” he says.
Small businesses have long struggled with managing the payroll process, but business owners like Bhandari are discovering that online payroll systems can save them time and money and reduce the chance of human error.
Less Mistakes and Less Headaches
Many business owners aren’t equipped with the knowledge to do payroll on their own and wind up making mistakes that cost them money. After all, staying on top of ever-changing local, state, and federal payroll regulations is almost a full-time job in itself. According to the IRS, each year a quarter of all businesses end up paying penalties for late or miscalculated payroll taxes — at an average of $845 per penalized business.
“In most cases, the cost of hiring and retaining the talent necessary to adequately perform payroll duties and payroll tax administration far exceeds the cost of outsourcing, which makes online payroll an ideal choice for small businesses,” says Cara Sharp, marketing manager at Accord Human Resources, an outsourcer in Oklahoma City.
Today there are a number of online payroll providers that take the headache out of payday. Top vendors include Intuit Online Payroll, SurePayroll, Bank of America Payroll, ADP Small Business Payroll, and Paychex Online Payroll.
These systems are designed exclusively for small business. They offer online demos that walk business owners through the ins and outs of online payroll and, for the most part, these systems allow customers to get up and running in a matter of minutes.
Business owners don’t need to know anything about tax codes or payroll regulations to get started. These online services typically ask a series of tax questions and then automatically answer them for you. For example, if you don’t know your tax rate, the payroll system will recommend default values for your state unemployment rate and other schedules based on the zip code your business is in.
When it comes to paying employees, online systems do all the necessary calculations and heavy lifting. Wayne Sanford, founder of New Start Financial, a credit counseling service in Allen, Texas, uses SurePayroll for his two full-time employees. “It really is as easy as advertised,” he says.
He logs in each pay period and enters employees’ hours, and the system does the rest. It cuts the checks, stores an electronic record of transactions, and deposits funds directly into employees’ bank accounts. Employees, for their part, can view their pay stubs online.
When it comes time to file quarterly tax reports, the system sends out a reminder that payments and forms are due. It can also make payments to federal, state, and local authorities electronically on behalf of a business owner. “I have to wear 15 different hats as a business owner,” says Sanford. “This is one I’m happy to be rid of.”
Sanford is paying about $43 per month for SurePayroll, which he says is a bargain. He estimates it would cost him at least triple that if he hired a contract bookkeeper to do payroll for him.
Meanwhile, Bhandari’s Bank of America payroll service is free because it comes bundled with his online banking package. The service is offered for free if all employees have their paychecks deposited directly into Bank of America accounts, otherwise there’s a monthly fee of $5 per employee, up to a maximum of $15 per month.
Eric Zuckerman, co-owner of Pac Team America, a maker of point-of-purchase displays in Paramus, New Jersey, does have a few concerns about online payroll services. “Anytime you have a third-party accessing your company’s money, there is a certain level of concern,” he says. “You’re also relying on them to ensure you’re complying with all state and federal labor and tax regulations.”
To forestall those possibilities, Zuckerman, who uses Paychex Online Payroll, personally reviews payroll reports and questions anything that doesn’t seem to add up.
On the plus side, he says his service has greatly reduced his overall administrative workload. And because Paychex, like other online payroll services, will foot any penalties associated with filing mistakes, his liability has been reduced as well. Paychex will even represent customers before the IRS if trouble arises.
An online payroll system can be the key to helping your business meet its ever-changing needs. It can help you save time, money, and reduce the risk of human error when it comes to navigating confusing tax regulations, forms, and calculations. It can keep you on track and ensure that deadlines are never missed. As a business owner, your time is precious. Online payroll is one way to free up your time to concentrate on the more important things, like growing your business.