When you’re on a job that requires extensive electrical rewiring, you call a certified electrician, right? And when you have to redirect a labyrinth of pipes for a client’s master bath you get a skilled plumber involved, no?
So why are you still at the office late the night before payday getting your employees’ paychecks ready? You’re a remodeler. Do you really need that headache?
According to financial management consultant and REMODELING columnist Judith Miller, owner of J. Miller & Co., in Seattle, outsourcing payroll can provide numerous advantages to a remodeling company, among them, the assured accuracy of individual paychecks and accurate reporting of quarterly and year-end taxes, as well as taking a potentially expensive burden off an overworked employee.
“But if the company uses in-house labor on its jobs, it is essential, for good job costing, to mimic the payroll information from the payroll service in the in-house accounting/job cost system,” Miller says. “Setup can be a chore, but once accomplished provides good accountability on the all-important job costs.”
Is Outsourcing Payroll Right for You?
Don Darragh, vice president of Energy Swing Windows, in Murrysville, Pa., says that outsourcing this function is the smart thing to do because it lets you work on your business rather than in your business. “If you run your business by the numbers and not from your toolbelt, the benefit of using a payroll service far outweighs the cost, without a doubt,” he says.
While Darragh is an outspoken advocate of outsourcing payroll, that wasn’t always the case. “I fought it,” he now admits. “I did not want to let that go. I thought that there’s nobody who knows my company as well as I do and someone else will just mess it up. That’s when I was young and stupid.”
His mind changed when he got so busy working in the business that he simply didn’t have time to concern himself with payroll. “Selling for me was most important. I either had to find a person to be a salesman or find someone to do payroll. And it was easier to find somebody to do payroll than to train someone to sell.”
According to Ken Darrow, senior marketing manager at Intuit’s Employee Management Solutions division, outsourcing payroll is the right choice if you have any employees who require a W-2. “[Payroll] becomes a multi-hour process as soon as you have your first employee,” he says. “What a remodeler will find is you will want to spend your time doing things that are constructive and that are growing your business and that help accomplish your main business goals. If you’re spending hours doing payroll, then you’re basically spinning your wheels. You’re doing something that other people can help you do much more effectively at a pretty nominal fee.” Intuit is not only the maker of QuickBooks Payroll, but is also a payroll provider with more than 1 million small-business customers.
Sal Hazday, division vice president of strategy and business development at ADP Small Business Services, stresses that outsourcing payroll can also allow any small-business owner to gain tighter control of one’s business. “You can improve the management of your cash flow, improve the management of your people, and minimize risk, which all combines to enable you to focus on what’s important, like growing and running your business and not dealing with all those other things,” he says. “People who are more growth-oriented than strictly cost-conscious outsource things that are less mission-critical to how they’re growing their business.”
Contractors often tend to be on the move, with an ever-changing roster of employees, and a business that grows and shrinks as the economy fluctuates. “Those things that are viewed as complexities to your business are actually good for outsourcing because you don’t have to worry about all those dynamics as they change over time,” Hazday says. “Generally speaking, it won’t be an HR payroll specialist in-house [taking care of payroll], it’s going to be an office manager or the owner. And it’s not what they’re trained to do, which can be a problem.”
Don’t Mess With Taxes
According to Rob Myers, president of Myers & Co. Construction, in Akron, Ohio, outsourcing his company’s payroll was the best thing he has ever done, much for the same reasons that Darragh states. Filing the tax forms is an even bigger benefit because Myers has to file in each of the small towns the company works in, an “amazingly burdensome issue,” he says. When it was time to choose his payroll service, it all came down to reputation and cost. “The service has to be there in case of any mixup or questioning by the government,” Myers says.
Mark Gentry, owner of Mark Gentry Remodeling, in Sacramento, Calif., opted to outsource his company’s payroll after trial and error. Essentially, he tried and erred and that was all it took for him to realize that this was something he definitely should not be doing. “The first — and last — time I tried to do payroll myself I got an IRS penalty for not doing it right,” Gentry says, adding that he asked his bank for advice and the bank recommended a service provider. That provider, the remodeler says, has “handled my payroll and I’ve never had another penalty.”
A payroll services company can also make sure you have paid the appropriate Social Security and Medicare contributions, according to Darrow. “One guy was taking out the right amount of money from all of his employees’ paychecks but didn’t do anything with it,” Darrow says. “He knew that money had to come out but he neglected to send it to the government.”
When Karen Sorrell, president of Simply Stone, in Finksburg, Md., had a run-in with the IRS, she delegated. “I passed it on to my payroll company,” she says, adding that her contract with the payroll service states that it is the provider’s responsibility to rectify any tax issues that come up due to miscalculations or timing errors. “It’s just one more thing I don’t have to deal with. I outsource to have one less monkey on my back!” Sorrell says.