“I have QuickBooks on my computer and payroll is simple. I’ll just do it myself”
Does this sound like you?
A lot of business owners during their growth period choose to do most of the “small” and “simple” tasks on their own.
Like they say, “If you want something done right, do it yourself!”
Well, not really.
This type of person usually tends to be most small business owners. Doing things on their own is the main reason they went into business in the first place. We like to call this type of person “the Jack of all trades.” You see, Jack knows how to do everything, so he thinks the most valuable thing he can do for his business is, well, everything. What Jack doesn’t realize is that he provides a lot more value to his company by focusing on his strengths and delegating all tasks that he doesn’t especially excel in to his employees or contracted professionals.
So what are the opportunity costs associated with doing small tasks like payroll on your own?
Let’s continue to use Jack as an example.
Jack is a plumbing contractor, and right now the demand for plumbers is high in his area. Jack doesn’t want to pay an accountant to do payroll for him, when he could just do it himself. Jack is wise to be saving money where he can for his business, but he’s not seeing the missed potential upside when he uses his time for payroll.
Let’s say Jack spends 3 hours a month doing payroll. At $35 per hour, it would cost him $105 per month to outsource payroll to a professional.
What Jack doesn’t realize is that when he spends time bidding projects, on average, he ends up making $200/hr for his company.
If Jack spent that 3 hours a month bidding on projects, he could potentially bring in $500 of revenue to his company after a flat-rate payroll expense of $100.
Pricing for payroll may vary between tax and accountant professionals.
The Risks of Doing Payroll In-House
As we all know, the tax code can be very confusing and is ever-changing.
If you’re not an experienced accountant, you run the risk of paying the wrong amount of taxes when you pay your employees.
This can end you up in a situation where you, your employees, or both with owe taxes at the end of the year. If your mistakes go unnoticed, you might end up owing back taxes.
The IRS doesn’t go easy on people who don’t pay the proper amount of income tax.