Why You Should Outsource Your Payroll
The biggest back-office burden – Payroll! Outsource that shit; you don’t lose control and it isn’t that hard.
Many business owners feel a sense of control by keeping a tight grip on the processing of their own payroll, I mean QuickBooks can do payroll just fine, right? Sure, if you are running a very simple, basic payroll and have no need for any kind of labor cost segregation. Our firm works with the post-acute and long-term care industry, specifically home health, hospice, nursing homes and assisted living facilities. In this world, QB just doesn’t cut it. CAN it do it? Yes. But what you get is very basic and very labor intensive. As healthcare payers continue to reduce reimbursement rates, providers are forced to find efficiencies and fine tune internal processes to maintain any sort of net income.
Many times, providers choose to keep payroll in-house usually due to one of a few different fears:
1) It’s too expensive
2) I’ll lose too much control
3) Changing payroll systems mid-year is too complicated and scary
Let me start by clearing the air – we don’t do payroll, so I’m not just trying to sell you a service. I’m sharing this information from the frontlines, from a vantage point that sees all kinds of payroll systems and how they integrate with the accounting records – or as is true in many cases, how they don’t integrate with the accounting records. My reason for spending my time on this topic is that I feel this is where providers can make a change and feel a huge impact by freeing valuable resources in their agency to be better focused on more meaningful tasks.
While we don’t provide payroll services, we do provide all other accounting tasks in our Complete Back Office service. Our preference is that all of our accounting clients outsource their payroll so we can focus on the accounting and know that the payroll is being handled. We don’t even like getting into the weeds of payroll! We want it outsourced so that our work can be on the higher skill level tasks and we can focus on reporting and providing the necessary coaching that agencies need.
So, let’s cover those fears one at a time.
Fear #1
It’s too expensive or you think you can’t afford to pay a payroll service provider to do something you can do for basically free in QuickBooks. You’re right, there is a cost that comes with outsourcing your payroll functions. But what needs to be considered are the true costs you are paying now to do it the way that you are. Consider the staff time it takes to handle the entire process.
There are a few steps to consider:
1) accumulating the hours/visit/pay data
2) entering all of the pay data into the payroll system
3) Reviewing the data
4) Printing the checks or pay stubs
5) Calculating and paying the corresponding payroll taxes
6) Filing the quarterly and annual payroll tax forms.
Oh, and then do that all again for any corrections needed – I’m not even going to go down the black hole of payroll corrections.
How much time does it take your team to complete all 6 steps? Do a time study of your administrative team to see how much time is spent on each task. You might be really surprised. Or maybe you have a full-time person dealing with this and with on-boarding new employees. That cost has to be considered as part of your payroll processing costs.
Typically, when payroll is outsourced, you still maintain the first 3 steps. So many people feel like they still have a lot of work to do. Yes, that part will always be on the business – to provide the pay data to the payroll processing company. And this is how you keep control, but we’ll get to that later. But if you can cut out half of the process, isn’t that worth something? It should be at least worth investigating.
Oh, you are the owner, and you do it yourself so there really is no cost involved? What is your time worth? Did you start your agency to be a payroll processor? No? Didn’t think so. Free yourself from that burden so that you can focus on growth, strategy, compliance, patient care or riding the tractor on the farm – whatever it is that is the best use of your time.
Fear #2
You think you will lose too much control- you control freak! Okay, okay, I do get it. But as I mentioned earlier, you do still maintain and control the first 3 steps of the payroll process: gather, input and review all data submitted for processing. With the proper staffing you can delegate the steps for gathering and entering the data and then you or a manager can be tasked with reviewing the data for accuracy. This leaves you in complete control of the data going into payroll but removes all liability for the compliance part which is where things can become a problem.
The compliance side of payroll can be very time consuming. If something doesn’t balance – to the penny – you will spend hours figuring it out. Pay items, wage types, benefits, reimbursements, all have different reporting regulations – it is very complicated. To fix a payroll problem any professional services firm – like a bookkeeping, accounting or CPA firm will likely charge hundreds of dollars per hour to fix the problems. And to fix the problem, many times involved recreating payroll…. Think of how much time that would take! My point is payroll can be complex and complicated and compared to the cost of outsourcing it just isn’t worth doing it yourself.
Fear #3
Lastly, you think it is hard to change payroll mid-year. Well, the easy answer there is to do it at the start of a new year. That sounds easiest, true. But this is not what I recommend actually. If you convert to a reputable payroll company mid-year, they will take all of your existing payroll data and audit it before year-end compliance filings are done. They will ensure that everything was properly reported, even in prior quarters and they will complete the year-end filing for you. BAM!! Personally, I would go through a little extra work in converting mid-year just to have the extra audit on my records ensuring the whole year is in compliance.
When converting mid-year, from in-house or from another payroll service provider, you will be asked to supply the new payroll company with a lot of information. This is what scares people. And it does seem like a lot, it is a lot. But in the end, it is worth it. It’s like the saying, nothing changes if nothing changes. Just think of it as a little bit of extra work that will pay off with a much better operating system in the back office.
Many payroll providers, especially smaller companies, will do a lot of the heavy lifting for you. They will take the data in whatever format you can provide it and they will convert it to work with their system. Most smaller providers are going to go out of their way to make the conversion process as easy as possible.
I hope this helps you understand why so many of us professionals think it is a wise move to outsource your payroll. It really does free you and your staff to focus on far more important tasks while making sure this very tedious, yet important, item is completely handled.
About Knight Home Care Financial
Knight Home Care Financial is a Texas-based accounting firm that provides innovative accounting solutions for providers in assisted living, home health, hospice care, and nursing facilities. By focusing solely on post-acute and long-term health providers, the firm is able to offer tailored services that meet and simplify the business and regulatory demands of the industry. For more information, visit www.knighthcfinancial.com.
