Payroll: DIY or bring in the professionals?

It may be right for your business to outsource payroll

A perennial question for small business owners is which jobs you can do yourself and which should you outsource.

Depending on the industry you’re in, many of these decisions are clear enough: you wouldn’t buy servers to host your own website, for example, or code some word processing software when tech titans have done the job for you.

But other decisions require a bit more thought. There’s a balance to be struck: do you need a cleaner or is there time to whizz around the office with a vacuum cleaner once a week? Can you maintain your social media accounts, or would a freelancer do it better?

One of the biggest decisions all employers face is whether to run your own payroll, pay for the services of a bookkeeper or, perhaps if your business is big enough, an accountant, either full or part-time.

The quid pro quo is fairly clear: doing it yourself saves money; getting someone in saves time. Which is more valuable depends on the stage of your business and whether you are cash-rich and time-poor or vice versa.

Many business owners are somewhere in the middle, so the choice isn’t completely clear. But here are some pros and cons to help you decide.

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Do it yourself

Pros:

It’s cheap

The most obvious reason to take the DIY route is also the best: it’s cheaper to do it yourself. If you can spare the time, then this is the route for you.

Cons:

It’s quite complex

Setting up and maintaining your payroll requires an upfront investment of effort followed by routine maintenance.

The steps include:

Registering as an employer

This is necessary whether you run the payroll yourself or not. As a new employer, you must notify HM Revenue and Customs (HMRC) within four weeks of your employees’ first payday and request a login for the PAYE Online service.

The PAYE Online service allows you to pay bills, check tax codes, get alerts if you report or pay late, and send expenses and benefits returns.

Deciding what payroll software to use

Since payroll must be done using software – and HMRC permits exemptions on a case-by-case basis only – you’ll need to decide what payroll software to use.

Payroll software is designed to seamlessly transact with the HMRC, and pension provider if applicable, taking the pain out of financial record-keeping and compliance, such as QuickBooks – more on this later.

– Keeping your records accurate and up to date with HMRC changes

As an employer, HMRC requires you to keep records such as what you’ve paid your employees, reports you make to HMRC, and so on.

And probably the trickiest part of running your own payroll is keeping on top of changes including tax code notices.

Then there are P45s, student loan repayments, payroll-giving schemes, and apprenticeships. The list goes on. If you have ever described yourself as “not a detailed person” – or you’re the type who leaves everything to the last minute – this is not the job for you.

– Annual reporting

On top of keeping a running total of every financial matter impacting your business, you’ll also need, as an employer, to submit the final FPS of the tax year and as well as your employees’ P60s.

‘With payroll sorted, you’re free to work on your business, and do what you do best’

Getting the experts in

Pros:

Focus

With a payroll professional to help you, such as a bookkeeper or accountant, you’re free to work on your business, including strategy, marketing and business development. You have the opportunity to capitalise on your investment by growing the business faster than if you spent time on payroll tasks.

Professionalism

A specialist works faster and smarter than a novice, with less room for mistakes. But know that, as the employer, even if you outsource payroll, you’re still liable for fines and penalities if you don’t meet your obligations to HMRC.

Get some time back

For many business owners, the technical and compliance aspects of their operation come a distant second to the job of attracting customers and revenue. Admin tasks are often left until after growth projects are complete, meaning late in the day or even after normal working hours. In this case a payroll professional will give you back your free time. And with payroll sorted, you’re free to work on your business, and do what you do best.

Business insights

A bookkeeper or accountant will create useful reports and potentially highlight problems or opportunities you might otherwise miss. A good accountant is worth their weight in gold, providing you with business insights to help you grow your business. They’ll also give you a strategic advantage by helping you understand the implications of the numbers on the page.

Cons:

In a nutshell, hiring a payroll professional (assuming they are reputable and do a good job) does cost money. And you’ll need to factor in time communicating with them, the small amount of disruption if they need to engage employees, and the fact that you can never completely rid yourself of responsibility for form filling, however hard you try.

Whether you run payroll yourself or hire the services of an expert, it’s important to use the best tools for the job. Dedicated accounting software, such as QuickBooks, makes tasks like bookkeeping, staff expenses and payroll easier, quicker, and more accurate. And accountants and bookkeepers can work collaboratively online with you, which means you’ll all have access to up-to-date information.

The best software allows you to sync bank accounts and business apps, providing a secure channel of information between the two. Meanwhile, automated filing of income and payments removes the need to input data manually and potential data-entry errors.

Like all forms of business compliance, payroll is a complex yet necessary task. How you deal with it is up to you, but the job is a lot easier if you take advantage of the payroll software on offer.

SmallBusiness.co.uk has teamed up with Intuit Quickbooks to help you find the right Payroll software for your business. To find out more about getting your payroll and business finances all in one place, click here

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Should small businesses outsource their payroll management?

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