The Evolution of Small Business Payroll

As a youngster, I couldn’t wait to get my first real job. Sure, I’d mowed lawns and dug the neighbors’ weeds and shoveled their snow for what seemed an eternity, but a real paycheck at the end of the week…now that was something to look forward to.

As it inevitably does, time marched on and to this day I recall the palpable excitement as I watched my first actual employer calculate the payroll. There were only three employees so it couldn’t really have been that big a deal but it took some time and eventually I received a handwritten check…that was much smaller than I’d expected. I knew something of taxes but federal and state and, adding insult to injury, Social Security. Now there’s money that I wouldn’t see for at least a half century.

It turns out that all of that money that was withheld from my paltry wages, not to mention employer contributions that I hadn’t even contemplated, was destined for separate accounts that in turn had to be paid to a whole alphabet soup of government agencies. The sad ending is that my employer didn’t take the obligation to file payroll returns or make the required deposits nearly as seriously as the government did and neither he nor I were employed very long.

Let the Accountant Do It

Even the smallest of businesses tend to need outside help when it comes to administrative chores such as accounting and payroll. There are just too many different rules to keep track of and they change frequently. Also, if a business owner or manager is spending time on such ancillary tasks, he isn’t spending where it really needed…on making the business prosper.

That’s where bookkeepers and accountants come into play. Businesses have been transferring these functions to outsiders for a very long time and though outsourcing has become a dirty word in these difficult economic times, this is one group of functions that really lends itself to getting professional help. By transferring accounting work generally, and payroll processing specifically to someone else, both employer and employee are freed to make the business work and a specialist can make sure that the myriad administrative, technical and legal details are handled properly. Even the smallest of businesses have recognized this necessity.

Technology to the Rescue

Though tough to argue with the logic of having a professional take care of payroll work, paying for the service can be fairly expensive. As the personal computer became ubiquitous, among the first, and still most popular, applications were accounting programs. They’ve become more and more versatile and easy to use and most businesses now perform at least some of their accounting work, including payroll, using this type of software. You can check out our Accounting Software Review site for objective comparisons of the best of these software packages.

Be that as it may, the software in and of itself isn’t the answer to the greatest payroll pitfall of them all, namely filing quarterly and annual federal, state and often local returns and making the obligatory deposits. Even businesses that use payroll software often turn over this function to an outside payroll service.