Small to medium sized business owners are all too familiar with the headaches associated with payroll management. In fact, one of the first things business consultants always recommend is to outsource payroll and other non-core functions. A non-core function is anything you can’t charge clients for or use to differentiate yourself from your competitors.
Let’s explore the outsourcing payroll a bit more with a focus on the advantages as well as disadvantages that may be associated with this decision. In a closed perfect business environment outsourcing should have three main benefits:
Frees up Time and Resources
Payroll is a critical function of business operations. However it does not directly contribute to increased sales. Instead it represents a risk as it may increase costs if done incorrectly. This makes payroll an area with a huge con vs. pro margin when it comes to profit margins.
Besides costs payroll represents a huge risk when it comes to legal requirements. Businesses have to conform to various laws from federal to state and local tax laws. These ordinances are forever changing representing a huge amount of time investment to stay in compliance for a business owner.
Historical Data Analysis
Employee salary is often times the biggest expense small to medium business enterprises have to deal with on a yearly basis. One of the ways to mitigate the negative effects of reoccurring costs is to track its historical costs in order to make better financial decisions based on past decisions.
For example, if a certain position has proved to be an issue cost vs. benefit wise you can more accurately catch this with a managed payroll system that provides with graphical data as well as personnel assistance. Without this assistance businesses often risk falling into the trap of repeated mistakes leading to eventual financial ruin.
Payroll management services have built in risk management features that a business may not be able to afford on its own. This includes services such as helping a business owner navigate legal issues, requirements, and even guidance when it comes to sensitive employee relation issues. A good payroll service will have an employee relations management department to ensure smooth communication between employer and employee.