What is Payroll Accounting?

Processing payroll in a timely and accurate manner is essential for any company. Because of the complexities involved in monitoring and maintaining salary, benefit, and tax information, many small businesses choose to outsource their payroll accounting to qualified specialists. Companies that provide payroll accounting services can provide some or all of the following services:

• Computing salaries and wages (including bonuses and commissions)
• Withholding payroll taxes
• Administering employer-paid benefits (insurance, profit-sharing, etc)
• Electronic tax filing and payments

Why is Payroll Accounting important?

Payroll accounting is a critical part of any successful business. Through payroll accounting, businesses manage the following items for their employees and for the business:

• Paycheck distribution
• Federal taxes
• State taxes
• Recordkeeping
• Bonus withholding
• Tip reports
• W-2 taxable wages
• Year-end payments
• Benefits, such as health care, life insurance, and vacation time
• Social security taxes
• Year-end balances
• Year-end checklists

While payroll accounting is often done on-site, some businesses choose to outsource their payroll functions to payroll accounting firms. These firms specialize in providing paychecks as well as special reports and services while meeting tax filing deadlines and keeping the business's payroll accounting organized.

How should a vendor for Payroll Accounting be selected?

When selecting a vendor for payroll accounting, it is important to ensure that your vendor has experience in providing payroll services for your industry. For example, if you are in the restaurant industry, then the vendor should understand how to work with tips. If you are in the retail industry, then the payroll accounting vendor should understand how to work with bonuses based on sales.

Consider the following before hiring a payroll vendor:

• Do they have a proven ability to met tax deadlines?
• Can they pass a background check, including a check through the Better Business Bureau?
• Do they use accountants and individuals that are financially savvy and comfortable with financial calculators
• Ask for references in order to ensure that the company is organized and keeps all files up to date
• A good payroll accounting firm will use due diligence to find out answers to questions, such as the amount of vacation that employees had, overtime hours, and more.
• Does the firm file taxes electronically as well as by mail? It may be important that your company has options when it comes to filing.
• The company should have access to all tax and reporting forms.
• The company should provide a detailed end-of-year report of the business's payroll situation on an annual basis. Some companies also provide detailed monthly reports.
• Is customer service widely available anytime you have a question for the company?
• What is the cost of payroll processing and reporting?
• Will the company provide options for your business growth if you take on more employees and payroll expenses? For example, does the payroll vendor handle small, medium, and large business accounts?

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