Why You Shouldn't Do Your Own Payroll

The One Technology You Don’t Need In Your Office

Gene Marks

There are three types of people I just don’t understand: skydivers, long-distance runners and small business owners who do their own payroll.

Jumping out of a plane for the thrill of it just seems silly. There plenty of ways to get yourself killed right here on earth, so why push your luck? Running long distances also seems like a bad idea – the human body wasn’t built to endure that pounding and whenever I look at the faces of the people who finish a marathon there’s never an expression of joy…just agony.

And finally, there’s payroll. Payroll, like skydiving and long distance running, is something that no business owner should undertake.

Sure, there are plenty of great technologies and services that are available for you if you want to do your own payroll. Intuit, Sage and other accounting providers have good standalone payroll products that integrate with their accounting systems. Gusto’s payroll technology is definitely powerful and easy to use. And even human resources platforms like Zenefits, Bamboo and Namely all have payroll options in addition to all the features they offer to manage your staff. If you want to do your own payroll, there are plenty of great options to help you.

But all this great technology cannot protect you against the one thing that can make payroll an enormous burden. And that’s you.

You (or your bookkeeper) are going to make a mistake. It will probably not be a big one either. Maybe it’ll be the transposition of a number. Or you’ll forget to update a tax rate. Or you’ll inadvertently misspell someone’s name. Or maybe you’ll just blank and forget to file an obscure local tax form that’s due when there’s a full moon. None of these are enormous mistakes, of course, but no matter how great your technology is, it will not be able to protect you from being less than 100% accurate. The problem is that once you make this mistake, no matter how insignificant, the repercussions will be swift and merciless.

I know this. I have clients who have tried doing their own payroll with software that they own or rent because it seemed like a good idea. The cost was less than paying a big-box payroll service like ADP or Paychex. The software was easy to setup and use. The process was simple. But in every case, a mistake was made. One of my clients committed a heinous data entry error when submitting his 941 quarterly return. Another forgot to update an employee’s home address on a state return. And another printed, but then accidentally forgot to mail in his federal reconciliation. So what happened?

Letters from the IRS and the state, notices from state agencies, warnings from federal officials and requests for more information. Which meant more time spent fixing the problem and re-submitting the form. You would think that would end the story, but in many cases, it didn’t. For every one response sent back by one of my clients, the IRS would respond in kind with three letters, all saying different things. Checks are sent, then cancelled and re-sent. Copies are made and filed. Phone calls are made. And most important, time is lost.

Payroll technology is great until something goes wrong. You are a business owner. You’re not a tax expert. And no matter how conscientious you are, someone’s going to make a mistake. And when that happens, you’ll pay – mostly in time and aggravation. So yes, you may save a few bucks with software instead of just outsourcing your payroll to a service. But the smartest business owners I know do what they do best and outsource the rest. Payroll services are experts in doing payroll. Are you?

4 Responses to "The One Technology You Don’t Need In Your Office"
    • Gene Marks | January 14, 2019 at 9:43 am

      Hi Laura,

      I believe that with the limited resources time, resources and expertise we have it’s best to leave some things to those that are expert and do it for a living (i.e. payroll, pension administration, legal, taxes, etc) rather than spending our time – or our employees’ time – becoming experts. Of the thousands of business owners that I work with the most successful (and profitable) are the ones that spend their time doing what they do best and then outsourcing the rest to others who do what they do beset.

      So I guess we both feel that each other’s points of view are flawed.

    • Laura Nelson | January 10, 2019 at 12:20 pm

      What a horribly flawed article!!! Is the author suggesting that big-box payroll services never make mistakes or that when they do make a mistake they don’t have to go through the same “time consuming” process as business owners? Doing payroll might not be for everyone and might be a waste of precious time for the excessively busy business owner, but assuming that every business owners’ situation is the same is not logical. What about the small business owner who previously worked as a payroll expert at one of these big-box payroll services, is that person no longer an expert just because they no longer work at the big-box payroll service? And by mentioning “(or your Bookkeeper)”, are you suggesting that Bookkeepers can’t also be payroll experts? In all reality they can be both a bookkeeping expert and a payroll expert. For instance, I was trained to be both and prefer working for small businesses because I can do both. It’s absolutely boring to do payroll only or bookkeeping only, especially if only doing a small segment of bookkeeping (A/R, A/P, budgeting, etc.). I even have experience and training in HR. Considering there is no governing body ensuring payroll people are experts and therefore no specific Continuing Education requirements, the term “payroll expert” (and even “bookkeeping expert”), are a bit subjective. To ensure I stay on top of all I need to know, I attend Employment Law Update seminars every year and spend a little time every quarter keeping appraised of Employment Law regulations coming down the pipeline.

    • Shayne Gardner | January 9, 2019 at 7:59 am

      I sort of disagree; I have suffered trying to fix mistakes by large payroll providers such as ADP. And when they make a mistake, they shift the burden of fixing it onto the customer. Both methods are prone to mistakes, and suggesting otherwise is not realistic. It’s a question of who’s mistakes you’d rather fix: yours, or those created by someone you are paying to be the expert.

    • Dawn Joseph | July 15, 2018 at 10:06 am

      I disagree. I’ve successfully handled payroll and tax filings including quarterly filings for 15 years.
      It is true, this isn’t for everyone, however some people can manage this.
      I considered outsourcing until I realized the most time consuming part was pulling and reviewing time sheets. I’d have to do this even if I outsourced payroll.
      I use Quickbooks Enterprise version. I used Pro version until our business exceeded the capabilities in other areas.
      I worked with my bank to provide direct deposit to my employees’ accounts. They get their pay stubs via email on Monday or Tuesday and it is their responsibility to bring any errors to my attention by Wednesday morning.
      Quickbooks has the schedule built in for payroll and taxes for you to follow.
      I have a memorized report to provide exact payroll for transfer to employees’ accounts. It calculates salary, hourly, overtime, holiday and sick pay if you offer it.
      Getting things set up correctly is the most important.
      A Quickbooks Pro Adviser SHOULD be able to assist you or a CPA can provide you with the specifics if you wish to learn about it.
      I’ve heard of CPAs filing taxes late causing fees.

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