When you’re an entrepreneur, if you want something done, you have to do it yourself. You put a lot of effort into your business in order to see your dream become a reality. And with hustle and grit, many of you will succeed. But some things are better left to the pros, and tax compliance is one of them.
Once a business starts growing and adding employees, business owners have to learn complicated employment laws and payroll processes. And in the world of payroll and taxes, making mistakes can be costly. Despite the challenge, many business owners take on these new tasks in stride, even if they feel unprepared.
But that doesn’t stop business owners from spending more time on these tasks than they realize. Often, their processes are inefficient, making the fear of an audit all the more stressful, according to a recent QuickBooks Payroll survey.
Most entrepreneurs simply aren’t tax experts or are unaware of accessible solutions that can help them get back to doing what they love: running their businesses.
Payroll and tax compliance is difficult and time-consuming, survey says
Within the survey, business owners revealed overarching themes around just how complex and time-consuming these processes can be:
- The majority of business owners prefer to take matters into their own hands: Over half (53 percent) of business owners said they process payroll themselves. Another 29 percent use an in-house accountant, while 16 percent outsource the task. Meanwhile, 49 percent of business owners manage payroll taxes themselves. Another 28 percent use an in-house accountant, and 20 percent outsource.
- But staying up to date on the laws can be difficult: Over three-quarters of respondents find it hard to stay current with payroll tax laws. And another 70 percent say varying labor laws across cities and states make things even more difficult.
- Unfortunately, as careful as business owners try to be, audits happen: A quarter of businesses surveyed have come under the scrutiny of the IRS at some point. Among these, 15 percent were audited, and 17 percent were fined. And growing businesses seem to be more likely to come under scrutiny. Of businesses with 10 or more employees, 40 percent were audited or fined. Among businesses with fewer than 10 employees, only 14 percent were audited or fined.
- Confidence is high, but many business owners don’t realize how time-consuming this task can be: Sixty percent of respondents are confident in their existing processes. However, 63 percent of business owners are unaware of how much time they spend running payroll. The report found that each pay period, business owners spend 4 hours and 52 minutes calculating, filing and paying these taxes. That’s 21 days a year.
- Once they were made aware of the time they spent on payroll, many business owners preferred a different solution: And 65 percent wished they could outsource this task. Another 34 percent said they weren’t at all comfortable with the payroll process.
- For those who outsource or use automated software, the right help boosts their confidence: Of business owners who are confident about tax season, 81 percent outsource or use software to process and file payroll taxes.
How to make payroll and payroll taxes a breeze
You shouldn’t be expected to know everything about payroll and tax compliance. Luckily, there are better options that can help relieve the burden of this task and give you more time back in your day.
Outsource payroll
Outsourcing was one option that business owners reported using or wished to use in order to manage payroll. This option can work for entrepreneurs whose businesses are growing but don’t yet have an internal expert for the task.
But not all businesses can afford this option, and some don’t trust it at all. When asked why they keep financial tasks in-house, 45 percent of respondents said outsourcing is too expensive. Another 34 percent said they don’t trust anyone else to put their business’ best interests first.
Selecting an outsourced agency can be tricky. When doing so, ask for quotes and check out reviews, as agency prices may increase year after year. You should feel empowered to make informed decisions about your business, especially when it comes to important financial matters.
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Get an automated solution
Automated payroll systems provide entrepreneurs with a more streamlined and affordable process. And the right software can do the heavy lifting, like calculating taxes and withdrawing employee payroll on a schedule.
Combine this task with other automated systems, like time tracking, and you can access all of your company’s information in one place.
Automated software can also help improve cash flow, according to the survey. Seventy two percent of respondents say automated payroll led to an improvement in cash flow for their business. Among those respondents, a combined 73 percent said the software helped them maximize deductions and keep money in the business.
The QuickBooks Payroll survey helped pull the curtain back on how time-consuming and complicated this task can be for new business owners. But the process doesn’t need to be so burdensome: great solutions exist that can help take the pain out of payroll taxes.
