Easy Money

By SmallBusinessComputing Staff | Posted October 01, 2000
by Angela R. Garber

There's a lot more involved in processing payroll than making sure that checks go out to employees on payday. There are taxes to be deducted, social security to be paid, commissions to be calculated, not to mention healthcare, 401k, and flexible spending accounts to be credited. And, let's not forget, quarterly payroll taxes and end-of-the-year tax preparation and filing.

The process is so involved and complicated that most experts recommend that no business, other than the very small or the very large, even attempt to do it in house. When Lee Bailey started First Step Funding, a mortgage brokering service in Charlotte, N.C., two years ago, he tried doing the payroll himself. But, he says, "It was so time consuming it wasn't even worth it. I always worried that I miscalculated tax withholdings."

Bailey quickly decided to outsource the entire process to Advantage Payroll. Until recently that meant getting on the phone every other week and reading out the information for each of his 16 employees. While light years more efficient than processing it all on his own, the system was not without its flaws.

"You say something on the phone, and it might be misunderstood," says Bailey. "Though it's nobody's fault, it has happened and mistakes were made."

Recently, the process has gotten easier, more efficient, and more accurate. Advantage (along with most major payroll outsourcing companies) has added online payroll filing -- allowing businesses to outsource and automate the process, all at the same time.

ADVANTAGES

For Bailey, the advantages were immediately clear. "The big thing is convenience," he says. As a mortgage broker, he spends most of his time on the phone. When he was calling in payroll, he'd spend the bulk of his days on the thirteenth and twenty-eighth of each month playing phone tag.

"We'd keep leaving messages back and forth. Finally at about 3 o'clock in the afternoon I'd yell out to the office, 'If Tammy calls, find me!'" Bailey says. "Now I just do it when I'm ready."

Bailey says the other big improvement is accuracy and piece of mind. When he initially was doing payroll in house, he was constantly worried that he was making mistakes.

The switch to outsourcing was straightforward -- he faxed his employees' payroll and tax information to his account representative, called at the end of each pay period, and the service took care of the rest. Though mistakes were few and far between when phoning in the numbers, Bailey says there was never an easy way to verify that the information he had given to his representative was accurately recorded. He'd just have to wait until the checks came.

"Now I'm able to enter the information and confirm it right away," he says. "Also, I'm able to check back five minutes later and see exactly how much taxes were deducted from my account."

As is the case for most businesses, it's not only payroll that is coming out of his account on the fifteenth and thirtieth of each month. Bailey needs to know right away what's being deducted. "I'm paying other bills then, too," he says. "And if it's a tight month, I know exactly what's going on instead of waiting a couple of days to get a report back and [finding out] I might have been off two or three hundred dollars."

SET UP

Before signing up for Advantage's online service, Baileys says, he would jot down the payroll information for his 16 employees on a scratch piece of paper and read it to the phone rep when they finally connected. Now he goes to a private Web page that he accesses with a logon and password and enters the information right into a pre-set table.

The service did the initial set up for him, entering in each current employee's name, social security number, pay scale, W2 information, health insurance deductions, and other important information. Now that the initial setup is done, Bailey acts as his own administrator, adding new employees and adjusting information as needed.

"I might have 14 people that are on my list, but because they work on commission, I might only have four checks," he says. "So I can just click on the specific person, I enter their information, and it goes to the next person."

WHAT'S INCLUDED

Bailey finds the reports to be extremely helpful, and they give him a sense of security that everything is as it should be. But on the rare occasion that it's not, the problem must be corrected.

Recently, Bailey submitted his payroll information and then realized upon reading the report that he had forgotten to include commission information for one of his employees. He called his payroll representative and soon received an e-mail to let him know that the inaccurate entry had been cancelled. He then logged back onto the system, corrected the information, and resubmitted the payroll.

"All of the other employees' information had been saved so I didn't even have to redo the whole thing, just that one employee," says Bailey, "and everybody was happy on payday."

In addition to the verification reports he gets after each session, Bailey has online access to current management reports, 401k information, FICA crediting, and employer-paid benefits. He also gets hard-copy reports with each batch of pay stubs.

At the end of each quarter and at the end of each year, the service automatically pays his taxes. They offer him guaranteed tax filing and depositing services for federal and state withholding, federal and state unemployment, and FICA. He doesn't have to worry whether or not they are being paid accurately or on time as he did when he took care of payroll himself. At the end of each year, the service begins preparation for the next year of taxes.

"I really don't have to worry about a thing," he says. Thinking back to the days when he used to struggle to get it all done himself, Bailey adds, "This is just $50 or $60 a month, and my time is a lot more valuable than that."

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