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When it comes to processing your business’s payroll, you have several options. You can do it yourself or outsource the task by hiring a certified public accountant (CPA) or a payroll company to manage it for you. While both outsourcing options can complete your payroll accurately and on time, CPAs and payroll solutions provide different service levels.
Before hiring anyone to help you manage payroll and other functions, it’s crucial to understand how you’ll be charged, where hidden fees may lurk and what each option provides. We’ll break down the services payroll companies and CPAs offer and what they charge.
Payroll companies help employers compute their employees’ pay and payroll withholdings. Payroll services may be full-fledged companies that perform an array of services; they may also come in the form of self-service software.
Payroll services collect employee wage and timesheet data to calculate gross wages. Next, they subtract the appropriate withholdings and deductions and compensate employees via payment methods like printed checks, direct deposit and direct deposit alternatives like payroll cards. Payroll services can also manage employee tax filing information.
Payroll services have various cost structures and pricing based on several factors, including the payment methods your employees need and where your business operates. Most businesses can find a professional payroll platform that fits their budgets.
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Payroll companies generally charge monthly fees, taxes and additional fixed fees for each employee on your payroll. Additional costs may include fees for managing 401(k) distribution, direct deposit, dealing with payroll taxes and payroll forms and more.
Payroll companies have varying pricing structures to accommodate different business needs. In general, they incur the following costs:
Friday is the most popular day to pay employees. Additionally, 43% of employees are paid biweekly, making it the most common payroll cycle, according to the Bureau of Labor Statistics.
Payroll services may also charge additional, less apparent fees, including the following:
Paying for a full-fledged payroll service may be worthwhile for the following reasons:
However, paying for a payroll service may not be worth the cost for some businesses. Consider the following:
The best online payroll companies will provide the services your business needs at a price you can afford. Consider the following top-notch options as you choose the right payroll provider:
Your business may also consider using a PEO service for payroll. A PEO becomes a co-employer and manages payroll administration and employee taxes via its tax identification number.
CPAs can be extremely helpful regarding payroll and other financial functions. A CPA is a financial advisor who helps businesses, entrepreneurs and other organizations map their finances and reach their fiscal goals.
“I would never say payroll replaces CPAs,” explained Sara Menke, founder and chairman of Premier Talent Partners. “But they can complement one another because [payroll companies] don’t offer the same work as an accountant.”
According to the National Society of Accountants (NSA), the average CPA rate is $180 per hour for filing federal or state tax returns and $174 per hour for other tax services.
On average, CPAs handle complete payroll services for $100 per hour and bookkeeping for $109 per hour. However, that price can vary based on factors like the CPA’s knowledge and experience, your business’s location and the size of your company. Because of their level of expertise, a full-time dedicated CPA can be expensive, so most small and midsize businesses work with CPAs on an hourly or project basis.
Typically, CPAs bill clients hourly, but fixed fees are becoming more common. Many businesses opt for fixed-rate CPA plans to get crucial services at a price they can afford. With more custom options now available for managing payroll, CPAs are adjusting their services to better serve small businesses.
CPAs can help your organization meet its financial goals and do the following:
“[CPAs] provide an extremely high level of service to a small business owner,” Menke noted. “It’s not just bookkeeping and the incoming and outgoing of cash management and investments; it’s future strategy. We do a really good job of keeping clients compliant.”
Paying employees on a regular schedule is critical. According to the American Payroll Association, nearly 72 percent of employees said that paychecks being delayed a week would cause trouble for them in meeting their financial obligations.
While having a CPA manage payroll can be a great strategy, there are some disadvantages:
If you hire an accountant to run payroll, you’d likely pay less than you’d pay a CPA. However, CPAs have additional certifications and expertise that justify their price. When you use a CPA to handle your payroll, you ensure the following:
Although both accountants and CPAs have robust accounting knowledge, CPAs receive more in-depth and rigorous training that drills tax laws and standard accounting practices into their expertise. They are also held to ethical standards by the state and must take courses to keep their licenses.
Hiring a CPA to manage your accounting, tax planning and payroll can help grow your business and improve your long-term financial stability.
Selecting the right payroll company or CPA for your business’s payroll needs requires research and preparation. Below, find some common questions about bringing on an expert to handle your payroll.
Before deciding on a payroll service, ask about sign-up discounts or see if the company will match the price of a cheaper payroll service. You may also save money by agreeing to an annual contract instead of paying monthly. Additionally, ask about onboarding fees and if they can be waived.
If you can help it, avoid signing up for payroll software or services with long-term contracts unless you’ve mapped out all payments and are comfortable with the price, support and services you’ll receive. “Check out the surface model, security and how it runs,” Venuto advised. “Ask about your access to payroll specialists and whether they’re well-versed with tax laws in your state. Do your research.”
Before signing an agreement, read your contract thoroughly to ensure it doesn’t have built-in price increases. Contract lengths can vary but you should determine if the contract renews automatically.
It’s also important to understand how the cancellation process works so you can avoid getting stuck or charged heavily when you’re ready to close your account. Find out how much notice you must give and any cancellation costs the company may charge. Beware of signing any contract that has a liquidated damages clause as it can be very expensive to get out of.
Also, look into the company’s employee onboarding process and see if there’s a free trial so you can take the service for a test run before committing.
CPAs manage your taxes, help your business comply with government-mandated regulations and serve as trusted advisors who can help grow your business.
When hiring a CPA, ask how long they’ve been in business, what services they offer and what their fee structure is. These elements are as important as the CPA’s work style, availability, accessibility and acumen.
You may decide that a CPA isn’t the right payroll solution for your business. However, CPAs can be a valuable resource in multiple areas. For example, if you are considering acquiring, merging, selling or closing your business, a CPA can help you make well-thought-out decisions. They can guide you through various tax implications and financial documents, help you analyze assets, prepare final reports and statements and provide a thorough report of your business’s fair market value.
While it is technically and legally possible to handle your own small business payroll, the possibility of human error is high ― especially considering federal and state tax laws and local regulations. Outsourcing your payroll to an expert will ensure you don’t make mistakes that can cause tax penalties and other costly issues.
Danielle Fallon-O’Leary contributed to this article. Source interviews were conducted for a previous version of this article.