Whether you do payroll in-house or use an outsourced payroll service, you may be experiencing unnecessary costs. And these costs pile up payroll after payroll, month after month. Here are a few of the worst offenders.

#1 – Processing Fees

Let’s start with the obvious. Chances are your payroll service is charging you per payroll. If you run a weekly payroll, those fees can really add up. If you pay $50 per payroll and you run at least 4 payrolls per month, that’s $200 per month. Look for a service that charges a flat monthly rate.

#2 – Time

Does your payroll service integrate with your bookkeeping software? Or do you have to manually enter a journal entry to record each payroll and payroll tax payment? If it’s the latter, you could be wasting time – possibly paying a bookkeeper to do unnecessary work, or simply wasting staff resources. Look for a payroll service that can be integrated directly into your bookkeeping system or that can import payroll activity directly into your books.

#3 – Errors and Fraud

We have a lot of respect for the “do-it-yourselfers” who want to save money by doing things themselves. Payroll is just not one of those things that generally pays off. Too often we’ve been called in to straighten out messes due to incorrectly filed payroll tax returns or returns that were not filed altogether. Payroll taxes, if not paid accurately and on time, can result in substantial penalties, not to mention fees for professional time to fix everything. We have even seen businesses forced to close as a result of payroll tax misappropriations. The lesson here is hire a professional who will guarantee their work!

#4 – Lack of Good Information

If you are entering payroll using a journal entry, you are not getting the detail of each paycheck into your books. This makes it harder to assign payroll to grants (see #2-Time above) and to code payroll in ways that support better transparency and management reporting.

#5 – No 1099 Vendor Support

Processing 1099-MISC forms for independent contractors in January is always more work than you think. Seems like no matter how hard you try to get all the information before you pay vendors, come January someone is always missing a tax id number or other necessary information. And you have costs to e-file or buy paper forms to send by mail. A nice solution is to process your 1099 vendor payments along with your payroll and have the payroll service send the 1099s. See also our earlier blog post 1099-MISC in a Nutshell.

In Conclusion

Don’t let hidden payroll costs eat up your organization’s resources!

While January 1 is arguably the best time of year to start with a new payroll service, you can make the switch any time. If not January 1, the next best time is the start of a new quarter. And any time of year is a good time to evaluate your payroll system and plan for a future change.

What are good alternatives to consider? Intuit Full Service Payroll can help with the issues outlined above. If you have another payroll service company that you like, email us at info@careaccountingservices.com and let us know!