For some small businesses, there will come a time when the staff grows large enough to consider an outside service when dealing with payroll needs. There are pros and cons to going this route: like any vendor, it will have an inherent cost in it, along with a getting-to-know-you period. At the same time, it can relieve the burden of handling payroll — not just the time and effort involved, but also any concerns about accurate calculations and processes.
What Questions to Ask When Assessing Outside Payroll Providers
So if you’re a small business in Marin County or San Francisco looking at payroll options, what’s the next step? Take a look at the items below. We’ve broken them down into categories you can easily ask every payroll vendor when vetting their services.
The Key Questions To Ask Payroll Providers
Electronic or paper checks: Direct deposit is the choice for most people these days but smaller payroll vendors may not necessarily offer both electronic and paper checks at the same rate.
Depending on the size of your company and your general needs, this preference should be established up front — and you should determine if you have a hard requirement one way or the other.
Hourly, salary, or contract: Depending on the size and type of employees you have, you may not need to support all three types of payroll. However, if you do have any combination of these, you’ll need to talk with any prospective payroll vendor about these options.
In some cases, if you only have a handful of contract employees, it might be something that you don’t need vendor support and you can handle yourself — even the tax end by sending 1099s yourself. It depends on if elements like withholdings are going to be involved with handling these situations.
Chances are a payroll vendor will be able to handle all three but they may have differing levels of service (and thus, pricing). Make sure you discuss all of your options and the vendor’s capabilities.
Data security: Payroll data is some of the most critical data to keep secure. Consider all of the possible private information transmitted when setting up and processing payroll: bank data, birth dates, social security numbers, tax data, mailing address, and much more. How is all that secured?
These are questions you should ask your vendor. Chances are you will get different answers bases on the size and capabilities of each particular vendor. Regardless of the actual method of security, it’s critical that appropriate security and encryption measures are used to protect data.
Online access and records: Will you have on-demand access to your payroll records, both the most recent and archive data? Or will you have to request that the company pull that info for you? More importantly, does it matter to you? Smaller companies may not necessarily have an instant-access portal for records. At the same time, the trade off for that lack of feature might be more favorable pricing.
Size: While on the surface, payroll can seem fairly straightforward — you send money out of an account to employees at regular intervals — it can get quite complicated as you scale up. The more employees, the greater the variables involved and the more opportunities for complications involving the account. Because of that, you’ll want to ask potential payroll dividers if they can handle a company of your size.
This also goes with small companies. If you have something that is, say, a family-owned business with only a handful of people on payroll, you’ll want a payroll company that also supports these types of businesses and isn’t charging at a rate for something greater.
Out-of-State Employees: Because much of work can be handled remotely these days, it’s not unusual to have staff working out of state. However, different states have different tax regulations, so you’ll want to verify that your payroll company is versed in this. Some small companies may only handle local payrolls with in-state tax issues, thus it’s important to check that your staff’s geography matches the capabilities of your vendor.
Tax Filing: Some payroll services will simply process your employee payments without preparing the bigger picture. This may or may not be the service level you’re looking for. If you do need more comprehensive coverage, it’s important to ask a vendor what their approach is to quarterly tax filing. If this is handled by your CPA, then this isn’t a concern. However, if this sounds unfamiliar, then chances are you’ll need to ask your CPA what they recommend, then take that information to any potential payroll vendor for further input.
W2 Prep and Filing: Employee W2 filings at the start of the calendar year are an essential part of doing business. While some small businesses handle this through a specialized service or manually, some payroll vendors consolidate this service into their offering. This makes sense, as the streamlining of services keeps it all with the same vendor, ensuring that all the data is accurate and no numbers get lost in translation. If you’re looking to simplify your annual tax process, asking a payroll vendor if they handle this can offer both stress and paperwork relief.
A Solution for Bay Area Small Businesses
Books in Balance is a San Rafael-based provider of bookkeeping services — and now, we’re excited to announce that we’ll be providing payroll services for small businesses in San Francisco and Marin County. We invite you to get in touch and discuss all of the items above to see if we’re a good fit for your small business. Your initial consultation is free, so call, email, or drop by our San Rafael office today!