Don’t you hate the hassle and pressure of having to rush each and every week to make sure that you have all of your employees’ time records and expense reimbursements in enough time to get their checks cut?
If you think about it, this one task alone drains a lot of time and energy from you and your staff each and every week. Our weeks are hectic enough so what can we do about it?
There are several things that you might want to consider:
- Reduce the number of pay periods you have each year
- Require direct deposit of employees’ checks
- The opportunity cost of doing payroll in-house
Want to know how to do the above?
Reduce the number of pay periods you have each year
If you change from a weekly to a bi-weekly period you cut the time and cost in half to produce the same results. Also consider using monthly or bi-monthly payrolls to cut this even more.
Let’s look at an example. Assuming it takes your bookkeeper two hours to do a payroll, that you change your pay frequency to bi-weekly and you pay your bookkeeper $15 per hour, you will save almost $900 a year! Even better, you now have about six to seven extra days of time available for them to do a multitude of other tasks–collection of your bills, getting better and more timely financial information, social media or anything else that is not getting done in your office.
Require direct deposit of employee checks
Making the change from printing payroll checks to direct deposits typically saves thousands of dollars. Consider what the cost of the following is for your business:
- Special check paper to print the checks on
- Envelopes to mail the checks
- Printer ink
- Labor costs to print, stuff and mail the checks
We are not done yet. There usually is one VERY large hidden cost. Let’s assume you have ten employees who all go to the bank once a week during their lunch hour and that it actually takes an additional 30 minutes that you are paying for. This equates to 260 hours per year, or 32 days–a month! The cost of this at $15 per hour is an astonishing $4,000!
The opportunity cost of doing payroll in-house
This begs the question, why do payroll at all? If you outsource this task, you can not only double the amount of savings you have by reducing the number of payrolls, but you also avoid potentially huge tax penalties.
Remember that you are relying on a relatively low paid person in your office to handle tax payments and they need to be accurate and timely. One mistake can be more than the costs of having someone else handle this for you.
In addition, it saves all of the hours and costs of having to produce and mail W-2’s at the end of the year.