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At what point does it make sense to outsource payroll and/or handling contractor payments?
My wife's recruiting business currently uses the part-time services of anywhere between 4-6 individuals that all work from home. Since they are all used on an ad-hoc and project by project basis, they are mostly paid as contractors. It is getting hard for her to manage all their payments and I was wondering if anyone had any advice on when she should consider finding a solution to manage that process, how she should think about that decision process, and if anybody can provide any recommendations?
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5 Answers
Alex, this sounds similar to the dilemma that I assess every year with my business, Initial Call. I have a combination of 1099 and W2 employees, depending upon the role they perform and frequency of work they do for me.
Every year I evaluate whether to use a local payroll service company, pay by auto deposit, etc... Every year for 8 years it has continued to be most cost effective to have a local contract book keeper who physically cuts checks and calculates taxes for me, working within my QuickBooks system. This is a low tech option, but it has continued to be the least expensive, simplest process for me.
Catherine, thanks for the feedback. Out of curiosity, does your bookkeeper charge you by the hour, on a retainer, or by number of contractors/employees he/she has to cut checks for? Or do you pay him/her to handle all of your bookkeeping and this is just part of his/her service?
I have two individuals: I pay a part time book keeper employee, on whom I pay employee taxes, etc... Then I have a CPA, who charges me hourly each quarter, with a higher rate to do my federal and state taxes. Cutting physical checks is still less expensive than going through bank auto deposit to my staff. I am happy to share specific rates if you'd like to contact me at cbrown@initialcall.com. It may make you jealous to live in Oklahoma though, where the cost of living is so inexpensive!
She can:
Hire a VA (contractor) who can keep her books or do payroll virtuall
Hire a local book keeper to come in do ddo the books.
There are online payroll program available where someone plugs in numbers and everything is automated.
Hire a quickbooks specialist to do it all.
Hire an intern or work/school person from the local college's accounting program to come in once a week and do the payrool
The contractors I hire bill me and then they are paid within 10 days.
What would she do with her time and energy if she was freed from managing the contractor payments, etc? This answer might be the true value proposition that needs to be considered. If her time was focused on other tasks - sales, marketing, client relationships - would the costs of paying a service or hiring a part-time bookkeeper be cost effective?
Time is an expensive resource that when applied to the right tasks returns the most benefit!
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