Choosing A Payroll Service Provider: Pros And Cons

The Most Important Business Decision You’ll Make This Year

Choosing a payroll service provider for your business can seem deceptively simple. They all get the job done, right?

Not so fast. Choosing wisely when it comes to selecting a payroll service provider can mean the difference between success and failure, big wins and missed opportunities, particularly in the early years of business when margins are tight. Why? Balancing control, flexibility, options, efficiency, cost, and a big-picture outlook is critical to managing time and money–two of your company’s most important resources, hands down.

What are your options when it comes to choosing a payroll service provider? What benefits and drawbacks does each option provide? What administrative features should you automate no matter what? Keep reading!

The Lone Ranger: Managing Payroll Yourself

Pros: You’ll have all the control over when and how payroll runs, and the actual cost is next to nothing

Cons: It’s time consuming, painstaking, the margin for error is high, and it’s difficult to gain a big-picture outlook with limited tools

Many small business owners go this route initially, by keeping track of payroll costs using paper time cards and Excel spreadsheets. While this option is low cost and gives you plenty of control over the numbers you’re crunching, it can be time intensive and less than efficient. It also doesn’t allow for many options when it comes to add-on features that could benefit your employees (e.g., options for pay format, an online hub that gives employees access to payroll information, 401k, etc).

The combination of manual entry, novice training and limited resources means that managing your own payroll isn’t for the faint of heart. Expect to spend a good amount of time and energy calculating and entering numbers. Running payroll yourself, manually, also means that payroll ends up being siloed in your business–rather than integrated as part of a big picture view of overall company health, missed opportunities, and areas to cut and increase costs. Consider the cost-benefit of the analysis: The hours you’re spending running payroll (including late-night and weekend hours) are hours you’re not spending recharging or working on big-picture action items for your business.

Pro Tip

If you’re going to run your own payroll, we strongly recommend you automate three key processes to save yourself headaches and error, specifically time tracking, invoicing, and expense tracking (we’ll go into more detail below!)

The Ally: Managing Payroll with a Bookkeeper

Pros: You’ll keep the pros of control, flexibility and low cost while also adding new benefits of efficiency and big-picture outlook

Cons: As your business grows, it makes sense to increase your options with app technology and integrations

Employing the help of a skilled professional can make a world of difference for small startups that have been running payroll themselves as novices. Sole proprietors or small bookkeeping firms are cost effective, give you a high level of visibility to what’s happening with your payroll, and take a significant burden of time and energy off your plate. Employing a skilled bookkeeper in a small shop gives you access to a professional who will become intimately acquainted with your books, your patterns, and can help you holistically in identifying missed opportunities to grow, save money, or expand. A bookkeeper can also handle your taxes, expense reports, and invoicing if you choose. Options for add-ons are low with this option, but with a small shop or very few employees the benefits in cost and value likely outweigh this drawback.

Pro Tip

Interview a few local bookkeepers before you make your final selection. Choose those who are familiar with your industry, come highly recommended online and by word of mouth, and are responsive to phone and email.

The Trusted Advisor: Managing Payroll with an Expert in Cloud-Based Tech Integrations

Pros: Keep all the perks of an Ally, but save more hours, time and money on payroll with greater efficiency, and the advice of a professional who can guide you through implementing the best tech solutions for your business

Cons: As your business grows even more, it may make sense to bring on a larger team of trusted advisors or a PEO firm that can add options like 401k and benefits

A bookkeeper who is an expert in cloud-based technology can take your bookkeeping and payroll experience from good to great by helping your business run more efficiently and profitably, while still staying intimately acquainted with your books and your company. While you’ll pay a bit more, you’ll get all the perks of an expert dedicated to helping your business run as a well–oiled machine, along with the power of insight and technology combined. With an app ecosystem, trusted advisors can both employ this technology to handle payroll, taxes and expense tracking quickly and accurately, meanwhile gaining an intimate and accurate bird’s-eye view of your business’s strengths and weaknesses. If your business is required to run specialized reports as part of payroll, it’s especially advisable to employ a trusted advisor. This would include, for example, contractors who work on government–funded construction projects, and are required to run certified payroll. In this case, it would be advisable to employ a certified payroll provider who specializes in payroll and time tracking for contractors.

Because your trusted advisor is well versed in cloud-based technology, he or she can also provided personalized recommendations for software solutions that can help make your business more profitable and efficient. These cloud-based apps give you numerous options when it comes to perks and functionality you’re able to offer employees (integrations like scheduling, apps that allow employees to take pay draws before payday, and new options in time tracking and timesheet technology). Employing a trusted advisor is a must if your company is profitable, growing, and hiring new employees. In terms of cost-benefit, you’ll get the highest level of personalization with the most perks and measurable results.

Pro Tip

Look for advisors who use best-of-breed integrations rather than one-stop solutions. Core accounting engines (like Quickbooks, Sage or Xero) are now built to seamlessly integrate with “add on” best-of-breed apps for payroll, invoicing, expense reporting, etc.

As an expert in cloud-based technology, a trusted advisor will likely have recommendations for apps and automated processes that could benefit your particular business. Don’t shy away from these recommendations, they’re likely to lead to significant gains in profitability and productivity, and will save your advisor time (and you money!) in keeping your books.

The Dynamo: Managing Your Own Payroll Via Cloud-based Apps

Pros: You’ll have complete control, a great deal of flexibility, and the perks of cloud-based technology on your side that save you time and money on payroll

Cons: You won’t have the experience base and dedicated support of someone on your side who is constantly monitoring your business for solutions to save you money when it comes to payroll and bookkeeping

If the Lone Warrior approach is your payroll method of choice but you’d like to up your game (and save yourself some weekend nights running payroll), you can opt to manage your own payroll via cloud-based apps. This option will also be appealing to business owners with an in-house finance department or HR personnel with bookkeeping and accounting skillsets. While you won’t get the big-picture insight and expertise of a trusted advisor, you can enjoy the benefits in profitability and efficiency of cloud-based apps. Choose your core accounting software carefully (read reviews, take recommendations from others in your industry) and then build out your app ecosystem with care, ensuring you’re using best of breed apps vetted through reviews and word of mouth (and don’t forget free trials).

Pro Tip

One of the best ways to vet potential app integrations is through reviews on Intuit’s apps.com site. The vetting process to become a featured app on this page is arduous, and those that make the cut have undergone numerous types of quality reviews (not to mention, you can take a look at customer reviews on this page).

Recommendations

Available in all 50 states, Gusto (previously known as ZenPayroll) is more than just payroll; it’s a great solution for companies looking for additional human resources solutions. This best-of-breed app has earned high praise from business owners for its flexibility, people-first customer service and lightning fast, online payroll.

If you’re one of the 87% of businesses in the U.S. already using Quickbooks Online, running payroll through the same program makes a lot of sense. A trusted name in accounting, Quickbooks offers multiple payroll options to fit your needs, from very basic functions to full service payroll.

For merchant services, Square is a go-to name, allowing businesses to run payroll right from the register. Square is also the expert in California wage laws (no small feat!). Square Payroll is currently available in California and Texas.

The Big Guns: Managing Payroll by Hiring a Large Professional Employment Organization Firm

Pros: You’ll get lots of great perks that employees enjoy, and experts to run high-volume payroll in which mistakes could be extremely costly

Cons: You’ll have higher costs, less control, and you’ll also lose some of the personal connection of working with a trusted advisor. Big picture outlook goes down as well, since payroll services will typically be handled solo instead of in conjunction with your bookkeeping

For very large companies, hiring a large PEO firm (like Employer’s Resource) can make the most sense when it comes to running high-volume payroll. You won’t have a lot of control over the process, but you will gain a lot of options to offer your employees (additions of 401k options, online viewing of paychecks, HR benefits, discounts for cell phone providers that partner with the PEO firm, etc.) One drawback is that you’ll likely have to handle your own bookkeeping and accounting, which can silo two key processes. Not having this comprehensive view of bookkeeping and payroll information means missed opportunities for growth and efficiency. Large PEO firms typically don’t offer the level of personalization and attitude of a trusted advisor for the most part either, when it comes to making recommendations for your business holistically.

No Matter What . . .

No matter which payroll option you decide is the best fit for your business, automating several key features will be key to your success. Attempting manual entry or execution of any of the following will result in far more headaches and mistakes than your valuable time is worth.

Time Tracking

Asking employees to guestimate with paper timesheets or spreadsheets means inaccurate timesheets, which means money down the drain. If 10 hourly employees making $20 per hour fudge even minutes per day on their timesheets, that’s $4,340 lost annually.

With more than 2,000 five-star reviews on apps.com, QuickBooks Time is the gold standard for employee time tracking. It’s accurate to the second, includes features like GPS location tracking and overtime alerts, gives plenty of flexible options so employees can track their time anytime and anywhere, has an intuitive interface that eliminates the need for manual entry or guesswork, and integrates seamlessly with your favorite accounting software. Try QuickBooks Time free for 30 days.

Invoicing

Automating your invoicing will not only save you time, but it’ll help ensure you get paid on time–critical for keeping cash flow healthy in your company!

Flint is your solution if you need a strong mobile option for invoicing and accepting payments, no credit card reader required. Before an employee even leaves a job site, they’ll simply snap a photo of the customer’s credit card and send an email invoice in one fell swipe.

Quickbooks Online is one of the most trusted names for seamless integration of invoicing with your core accounting software. Quickbooks Online makes invoicing both simple and painless.

Expense Tracking and Reporting

Accurately keeping track of receipts, mileage and invoices doesn’t have to be a full-time job (but it can be if you’re stuck on manual entry). No matter which type of payroll service provider you choose, making expense tracking and reporting an automatic, streamlined process will save you thousands of dollars (not to mention hours).

Employee friendly and user friendly, Expensify is intuitive to use and makes it easy for employees to submit expense reports that notify managers when filed.

The Big Picture

No matter which payroll service provider you use, make sure you’re looking at the big picture of how payroll integrates with and impacts all areas of your company’s productivity and success. Payroll isn’t just about cutting checks, just like choosing a payroll service provider isn’t just about choosing a party to help you cut those checks. Making sure you’re working with the best option for the size, type and goals of your company is one of the biggest decision you’ll make this year.