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Survey: Small-Business Owners Misjudge Time to Prep Payroll

Jan. 31, 2020, 3:10 PM

Processing payroll can be a time-consuming task for small-business owners, who spend nearly five hours each pay period calculating, filing, and remitting taxes.

At the end of the day, about 65% of employers said they would rather outsource payroll, even though 80% said they were the most qualified to manage their company’s finances, Intuit QuickBooks said in a recent survey.

The survey of 1,006 U.S. employers, conducted in November for Intuit Inc. by the consulting firm Kelton Global, found that 63% never realized how much time they spent on payroll taxes. Additionally, 82% of business owners said they reviewed calculations manually to ensure accuracy.

The frequency of payroll processing varied for employers: two weeks, 42%; weekly, 38%; monthly, 15%; other, 5%. The time commitment was about 111 minutes to calculate payroll taxes, 96 minutes to file taxes, and 86 minutes for allocate funding, the survey said. For some, the time to process payroll could total 21 days over a year, it said.

Of those who calculated payroll themselves, 49% said the process was frustrating, 47% said it was complicated, 44% said it was confusing, and 33% said they were uncomfortable with the process, the survey said. Complicating the processing were diverse labor laws across states and cities, 70% of employers said.

“Those who’ve had a positive experience using automated software or outsourcing payroll are more ready to hand off these tasks to the professionals,” the survey said.

Thirty-eight percent of employers said they could spend time focusing on the business if payroll were outsourced to a third party, the survey said. Thirty-five percent said other tasks that require their attention could be better prioritized, 32% percent said they could trust that the process could be completed accurately, and 31% said an outside payroll-processor would give them peace of mind.

The survey found that 63% of the small-business owners were solo payroll processors, 19% assigned in-house finance or accounting departments to process payroll, and 6% of in-house employees received help from a business adviser or outside company. Eleven percent of employers said they outsourced payroll duties. The percentages were about the same for the management of payroll taxes.

The cost of outsourcing payroll was why 45% of employers kept those duties within the company, the survey said. Thirty-four percent said they were not willing to pay for outsourcing and did not trust another company or outside adviser to complete payroll duties.

And what would employers rather do instead of calculating, filing, and paying payroll taxes each pay period? The responses included spending time with family and friends, 56%; improving business products or services, 47%; spending time with customers, 42%; networking, 37%; and maintaining or repairing the business, 31%.

Intuit, a financial services company, markets the accounting software program QuickBooks.

To contact the reporter on this story: Michael Trimarchi in Washington at mtrimarchi@bloombergtax.com

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