The Juggling Act
Running a business is a tightrope walk. Paying salaries on time, meeting business expenses and generating profit among others is a herculean task. The law mandates that you pay your taxes on time and also manage your books properly. It's like juggling balls while performing a tightrope walk. Because, there is a lot to manage. From payroll to taxation, bank reconciliation to deduction of taxes, the list is long. To make matters worse, every single mistake is penalized and many businesses end up paying heavy fines due to such mistakes.
Big businesses are able to manage this with the help of separate accounts departments but this is a costly affair. Small businesses running with small teams and tight expenses cannot do this with the same efficiency. For such businesses, there are two viable options to choose from. Either they can opt for a payroll management software or they can engage a third party payroll management company.
1. Payroll Management Software
The payroll management software is a good option for small firms. Businesses having small teams, stable business and transactions within the state can easily navigate with them. If you are ready to invest a specific amount of time with consistency to accounts management, they'll work. These programs can present the data in an organized format and simplify your work. But, the chances of error are always there. The person responsible to input the data into the system is you or your representative. If you commit mistakes in keying the data, the software would get helpless and give erroneous results. This brings you back to square one.
Absence of revalidation system
The absence of someone to revalidate the entries is a problem every small business is battling with. If you try to engage someone then the cost of labor and time would make this feat overly expensive. If you don't then there will always be a chance of mistake.
Problems with complex data
The other issue with such programs is that they have to be managed carefully. Too many variations in the structure of entries can create a lot of confusion. If you have engaged part-time workers along with your steady workforce or make payments to freelancers or other third parties, adjusting their payments can be a big nightmare. Calculating the various tax slabs when doing interstate business is also cumbersome in these programs.
Good for simple transactions
There is no doubt that if you are running a simple business without too many variables then these programs can prove to be a very cost-effective solution. But, running a diverse business dependent on them can be asking for too much.
2. Third Party Payroll Management Services
The more viable option for complex scenarios is to hire a third party payroll management service. These agencies with their certified staff can handle the job in an efficient manner. Along with payroll management, you can delegate a number of other important services too like tax management, accounting, balance sheet preparation, bank reconciliation, tax deduction and deposit.
Revalidation of data at various levels
Due to the presence of a structured team of professionals the data is checked at many levels and hence the chances of mistakes are negligible.
These agencies are very cost effective in their service. The same job cannot be executed by an in-house team under the same expenses. In small businesses, the staff will be idle most of the time. In medium businesses, it will be overworked. When calculated on the basis of return on investment, these services are very cost effective.
The Human Touch
The other advantage is of human help. In case you get stuck somewhere about any technical clause or want expert advice these agencies can provide credible help.
No Binding Obligation
The biggest advantage is that these firms operate out of your office and hence no infrastructure expense or overhead expense is there on you. You only pay for the services required without any undue obligation.
So, if you are running a small business and finding it difficult to navigate the confusing path of taxation, payroll management and other technical accounting aspects then you can choose the right service for you. This will help you in focusing on your core strength of business development and no energy would be lost in managing numbers in the books.