Even if you have been in the business industry for decades, having a small business in Louisiana can overwhelm anyone as it comes with a lot of responsibilities. One of the most challenging areas is payroll, which is often mistaken for being pretty straightforward. A company’s payroll can have various hidden costs and can impact your bottom line.
Many small business owners believe that they can save money by doing payroll on their own. However, this DIY approach can lead to costly mistakes such as misclassifying employees, filing taxes late, or failing to maintain proper records. These errors cause a loss of time, money, company resources, and energy.
Moreover, as payroll regulations change with time, it can be difficult to remain compliant as you are not an expert. Therefore, outsourcing payroll to a Pineville, Louisiana CPA is recommended, which allows you, the business owner, to focus on your primary objectives.
What are the hidden costs of DIY payroll?
Contrary to popular belief, there are various hidden costs of DIY payroll. Here are some of them you should know about as a business owner:
1. Time spent on manual calculations.
Managing payroll requires a chunk of your time. It is estimated that Louisiana business owners spend 8 to 10 hours every month on verifying employee hours, deductions, and reconciling payments. The time spent here could be used to create better strategies for the business and generate more revenue. Therefore, it leads to less growth and opportunities.
2. Risk of errors and penalties.
One of the most challenging things about DIY payroll is dealing with the risk of errors. Mistakes in tax calculations and deductions are common, but they can lead to incorrect employee payments or paying more taxes than you need to. In some cases, such mistakes can also invite audits and result in fines and interest charges. The potential for human error is higher here.
3. Tax laws compliance challenges.
Keeping with payroll laws is challenging since they keep changing. Your business should carefully follow certain laws, including tax withholding and labor standards, which can change often. It takes a lot of effort and reading to be updated on these laws. If your business fails to comply with the laws, it could face fines or even legal action.
4. Investment in payroll software and infrastructure.
While a DIY approach to company payroll may seem like the easy and cheaper way out, buying and maintaining payroll software can be quite expensive. Basic payroll software can be bought on a monthly subscription, but the more advanced ones can be much more expensive. Moreover, you will also need to get IT software to secure the sensitive payroll data.
5. Diversion from primary objectives.
One of the most overlooked parts of DIY payroll is the diversion from primary objectives. When you focus on time-consuming payroll activities, you divert yourself from business-related activities. You are doing something that you are not good at, so it takes more time. You might also have to deal with poor time management since you are not an expert.
Therefore, when you spend time on payroll, you waste your time and resources. This can be avoided when you hire a payroll expert.
6. Costs related to employee training and updates.
When you decide to do payroll yourself, you have to train your employees for the job as well as teach them how to be compliant with the ever-changing laws. Moreover, this education needs to be ongoing as laws keep changing. The time and resources you spend on training employees add a layer of cost. If a particular employee resigns, you have to do it all over again.
Avoid payroll headaches!
Payroll can be one of the most complex jobs in having a business with multiple employees. While you may want to do it yourself to save money, you will eventually end up spending more in the long run. Hire a CPA in Louisiana today!