4 Reasons Small Businesses Should Outsource Payroll

4 Reasons Small Businesses 

Should Outsource Payroll

Feb 13, 2017 by Shubhomita Bose, Small Business Trends: Small Business Operations

As a small business owner, you may wish there was an easier way to manage your finances. A big part of this may be managing your payroll. It involves employees’ salaries, deductions, wages, bonuses and net pay. It’s also an area many businesses tend to struggle.

According to a TD Bank survey, 43 percent of small businesses have at least one employee. So business owners need to focus more on improving their payroll management. A simple way to do this may be by outsourcing.

Comply with Regulations

Tax regulations are complex and sometimes even a small change may have a big impact on your business. “There are nearly 10,000 tax jurisdictions in the U.S. which are changing constantly,” says Jamie Griffiths, vice president of bank partnerships at Paycor, a strategic partner of TD Bank.


“It’s very difficult for one person to manage a business and also stay up to date on these laws. Hiring an expert can remove that burden,” Griffiths tells Small Business Trends. A well-designed payroll infrastructure can make your life easier by ensuring you comply with regulations.

Jay DesMarteau, Head of Small Business Banking at TD Bank tells Small Business Trends, “Payroll services ensure that the business complies with complex regulations and that it stays up-to-date with the latest laws. This takes a lot of weight off of a small business owner’s shoulders for a relatively small expense.”

Recruit and Retain Employees

When it comes to matters related to their pay, employees want to know everything. That includes how you’re calculating their wages, deducting taxes and even calculating bonuses. Companies that have a proper payroll infrastructure in place attract the attention of potential employees.

DesMarteau says, “An outsourced payroll service can also make the business more attractive to potential employees. These services can provide added perks such as online check stubs, time tracking and apps where employees can view pay information.”


But it’s not just about recruiting new people. A systematic payroll management system can also play a role in retaining employees who are satisfied with the infrastructure.

Make Business More Attractive

A payroll management infrastructure ensures you comply with regulations and keep employees happy. From a long-term perspective, it secures your business and makes it more attractive for investors.

“While a payroll service is an additional budget line item, business owners need to think of it as a long-term investment that can make the business more attractive to potential investors, buyers and banks,” says DesMarteau.

Plan Business Growth

When you don’t have to spend time and resources on payroll management, you get more time to focus on other things such as business growth. By freeing up your internal resources, you can look for other areas that can support and sustain that growth.

DesMarteau explains, “With someone else worrying about pay stubs and direct deposits, an owner can better focus on long-term growth and the business at hand.”

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Last Minute Money Saving Tax Moves

Now that we’re really down to the wire, it’s time to start crunching those numbers!  You’ve have a little bit longer this year, Individual Tax Returns are due on April 18th, but you may want to take the weekend to make sure you’re taking advantage of all the deductions available to you.  Lower your tax liability and avoid IRS scrutiny with some of these last minute tips.

1. Did you know you could deduct the cost of your 2015 Startup?

As long as your costs fall below the $50,000 mark, you could deduct up to $10,000 of your taxable income.  Up to $5,000 for research, development and creation of your business and $5,000 for the implementation costs such as incorporating, patenting, and legal fees.  Research costs spent improving your product or service are considered eligible expenses as well.

What doesn’t count:

-Advertising

-Promotions

-Quality control testing

-Consumer Surveys

2. Did you know that the threshold for big company purchases has been raised?

If you’ve purchased expensive equipment last year for your business, this year you can deduct up to $500,000 as long as your total eligible property costs are less than $2 million.  This can include big items like a new walk-in refrigerator for restaurants, or furniture for your office space, even computer programs.

What doesn’t count:

- Improvements on rental properties

- Air conditioning or heating units

- Any property used outside of the U.S. 

Did you know that in addition to mileage you can deduct auto loan interest?

Everyone’s favorite year end deduction— mileage, now includes any interest you’ve paid on auto loans!

What doesn’t count:

- Your daily commuting miles don't count as business miles

3. Did you know that the Home-Office deduction equation has simplified?

It has! Up to 300 square feet at $5 per square foot for a whopping total of $1,500. There is still the old method available for filing, it may be worth looking into which one saves you more.

What doesn’t count:

- Multi-Use Space; a playroom/office doesn’t count. Neither does your living room where you occasionally check emails.

It’s not too late!

Contribute to a Health Savings Plan (HSA), a Retirement Savings Plan like a traditional or Roth IRA and a percentage will be deductible.  However, each one has a cap A Roth IRA cannot except $5,500, or $6,500 if you’re over 50.  HSAs max out at $3,350 for individual and $6,650 for families.

Take these extra few days to scrutinize your account statements.  An extra couple hundred in tax liability is nothing to scoff at! 

Self-Employment: Time is Money

     What do they say about knowledge, time and money? Time is money, power is knowledge.  This is a guiding principle for many of the small business owners I know and work for.  As such a hands-on entity and resource for your own growing business, you know the pressure of time and often can’t find enough of it in a day.  Which is why when it comes to tax time, many of you go into a frenzy.  Why?  Because you feel powerless because you don’t know what you should do or should’ve done to prepare for the inevitable April 15 deadline and you know you’ll lose money because you don’t have the time to research all of the credits and exemptions your business qualifies for.  

     Saving you thousands of dollars from the tax man is what I do for a living, which means your business has the best growth it possibly can.  By keeping you organized, I know the ins and outs of what you can qualify for, as well as advise you on the best times to make certain investments back into your company.  What’s the best part?  My fee can be a write-off for you.  I save you money by saving you time and I give you the power to navigate the tricky tax waters through my knowledge of all things tax-related. 

 To use industry lingo—  the bottom-line is, if you’re a small business owner, finding an accountant is one of the smartest business moves you can make this year!