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Payroll services recount benefits of outsourcing

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by Jan K. Allen

SBJ Contributing Writer

Many companies large and small out-source their payrolls each pay period, even if they have their own accounting department, according to John Penny, president of Axiom Partners.

Businesses leave the payroll work to the professionals for lots of reasons, two of the main ones being cost-effectiveness and efficiency, Penny said.

Axiom has developed the software to implement payroll processing and tailors the forms needed and procedures used to each particular client.

It reports to and issues payment to taxing authorities, sends funds to the administrator of a 401(k) or other retirement fund and keeps records of employee benefits, such as vacations and insurance premiums.

All of the data concerning payroll goes into the program from the client's computer system, which both Axiom and the client can access. Thus, the business owner has instant documentation at his disposal, Penny said.

Ed Samek, one of the principals in Samek-Fritz and Company, CPAs, said many business owners outsource their payroll because they simply don't have time to do it.

Payroll is a time-intensive process, Samek said. It demands the owner's or clerk's full attention prior to the pay period deadline. In a small company, the function may take that person away from other important duties.

Sometimes the business owner starts out doing his own payroll, but as the company grows, he usually finds he can better use his time in other aspects of the business, Samek stated.

He may also discover that tax laws involving withholding and income reporting have become more complicated and have a tendency to change regularly. The IRS is very watchful of its share of the payroll pie, and penalties for miscalculating or late filing of reports can be significant, Samek said.

Samek-Fritz provides full accounting services to its clientele and does provide payroll processing if the client wants it. Transmitting the data electronically has streamlined the process for many businesses, making outsourcing more convenient, although some clients still submit records in hard copy, Samek stated.

"The important element to remember in the payroll function of a business is that time is of the essence," Samek said.

Employees want to be paid on time, and government entities want their portion without delay.

Payroll specialists are aware of the time-sensitive issues and make sure everyone is satisfied, from the government agency down to the employee receiving the check.

Samek recommended that business owners seeking a professional service to outsource payroll or other accounting procedures should look for experience, consider the cost and find a firm with which he or she can develop a good rapport.

Jennifer Silliman, accounting service representative for Whitlock, Selim and Keehn, said there are several reasons for outsourcing payroll, which can be of benefit to companies both large and small.

It usually costs less and is more convenient than keeping a full-time payroll staff, she said.

All types of businesses, from sole proprietors to manufacturers, use payroll services to free up employees for other tasks, Silliman said.

Penny stated that, as part of the service, his company provides the client with software to access data transferred by modem. The client can print all forms pertinent to the payroll function when necessary.

Many software programs are available for businesses to install on their own, but the time and skill needed to implement the programs can make it expensive, Penny said.

Through the electronic system, employers can key in hours and send the information to Axiom's data base. The information is accessible by both the client and the payroll service instantaneously.

"We like to call it co-sourcing," Penny said.

Axiom services about 350 companies locally and throughout the country. The clientele includes every type of business, from car dealers to fast food restaurants.

Responsiveness and accuracy are two of the side benefits payroll servicing offers to customers, Penny said. He added that he believes a business owner usually finds himself ahead of the game to use a service offering multilevel skills, rather than hiring an entry-level person to key in payroll data.

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