This year, my blog will focus on the questions I get asked about the most. Questions like: What type of accounting software do you use or have used? What type of payroll service? Why? Where can I get information about new regulations? The list goes on and on. Well, I am here to answer these questions as they relate to small business. First up is my answer to the question: How do you choose a payroll service for your company?
One of the biggest expenses for a company is money spent on wages and salaries. It makes sense then to make sure you have a payroll service to track these costs properly – and to make sure you are compliant with various governmental agencies during the process.
Processing fees for a payroll service are fairly inexpensive today and it doesn’t make any sense to do payroll in-house. Of course, there will be those businesses who believe the interest they receive on the “float” is reason enough to a bypass a payroll services company. If you elect to do this, please be very careful. All you have to do is be late on one tax deposit and it can wipe out any interest you may have earned on your “float.”
I have also come across several businesses that use a hybrid model for payroll. They use a service for processing payroll checks and completing the required tax forms, however, they are responsible for paying taxes separately at a later date in addition to signing paper checks and signing and filing payroll tax returns. Now, if we look at a breakdown of costs for all of the manual work the employer has taken on to save money on this so-called hybrid model, it just doesn’t make sense when compared to the cost of a full-cycle payroll service.
For those businesses that opt for the traditional route on using a payroll service, the two largest providers for payroll processing services are Paychex and ADP. For the record, I have used Paychex Online, ADP Online, and ADP Pay eXpert for payroll. And for purposes of this discussion, I will focus on the online versions only since ADP Pay eXpert is used primarily for larger businesses. There are other players in the market, however, why would I want to use a provider other than one of the top two? Sure, you could switch later on, but I have yet to meet anyone who hasn’t encountered a problem when changing providers down the road. And, changing providers isn’t without costs to the company, even if it’s problem-free during the conversion. Cost comparisons for Paychex and ADP online versions are pretty close, and the savings isn’t enough for me to pick one over the other. On the other hand, the employer interface and ease of use, along with the reporting feature, is enough for me to pick Paychex over ADP hands down.
Both Paychex and ADP also have the “human resource” option along with 401k and workers’ compensation insurance. I have used both providers for these options and do not have a preference of one over the other. If you have workers’ compensation insurance now (and you should) through a broker, you can a change this at the end of your policy year to be included through your payroll service provider if they offer it. And, yes, Paychex offers their big business version of Pay eXpert if you need it.
That about covers the payroll stuff – my next blog will focus on small business accounting software.