As a small to midsize business grows, demands on its time, talent and resources inevitably expand right along with it. Many business owners reach a point where continuing to do everything in-house — or even themselves — begins to slow progress or expose the company to unnecessary risk. Have you reached this point yet? If so, or even if you’re getting close, outsourcing could be a smart move.

Common candidates

Many business activities can be outsourced. The key is identifying functions that, if handled by an external provider, would improve efficiency, strengthen compliance, and give you and your team more time to focus on revenue-generating work. Here are some common candidates:

Accounting and financial reporting. A reputable provider can manage your books, collect payments, pay invoices and keep accounting technology up to date. It should also be able to prepare financial statements that meet the standards expected by lenders, investors and other outside parties.

Customer service. This may seem an unlikely candidate because you might believe that someone must work for your business to truly represent it. But that’s not necessarily true. Internal customer service departments often have high turnover rates, which drives up costs and reduces service quality. Outsourcing to a provider with a more stable, well-trained team can improve both customer satisfaction and operational consistency.

Information technology (IT). Bringing in an outside firm or consultant to manage your IT needs can provide significant benefits. For starters, you’ll be able to better focus on your mission without the constant distraction of changing technology. Also, a provider will stay current on the best hardware and software for your business, as well as help you securely access, store and protect your data.

Payroll and human resources (HR). These functions are governed by complex regulations that change frequently — as does the necessary software. A qualified vendor can help your business comply with current legal requirements while giving you and your employees a better, more secure platform for accessing payroll and HR information.

Downsides to watch out for

Naturally, outsourcing comes with potential downsides. You’ll need to spend time and resources researching and vetting providers. Then each engagement will involve substantial ongoing expenses.

You’ll also have to place considerable trust in providers — especially in today’s environment, where data breaches are common and cybersecurity is critical. Finally, even a solid outsourcing arrangement requires ongoing communication and management to maintain a productive relationship.

Not a one-size-fits-all solution

Every business owner must carefully consider when to outsource, which services are worth the money and how to measure return on investment over time. If you’d like help evaluating your options or better understanding the financial and tax implications of outsourcing, contact us.

© 2025

Today’s job seekers and employees have grown accustomed to having an incredible amount of information at their fingertips. As a result, many businesses find that failing to adequately disclose certain things negatively impacts their relationships with these parties.

Take pay transparency, for example. This is the practice, or lack thereof, of a company openly sharing its compensation philosophy, policies and procedures with job candidates, employees and even the public. It typically means disclosing pay ranges or rates for specific positions, as well as clearly explaining how raises, bonuses and commissions are determined.

You’re not alone if your business has yet to formalize or articulate its pay transparency strategy. In its 2024 Global Pay Transparency Report, released in January of this year, global consultancy Mercer reported that only 19% of U.S. companies have a pay transparency strategy. Here are five general steps to creating one:

1. Conduct a payroll audit. Over time, your company may have developed a relatively complex compensation structure and payroll system. By meticulously evaluating and identifying all related expenditures under a formal audit, you can determine what information you need to share and which data points should remain confidential.

You may also catch inconsistencies and disparities that need to be addressed. Ultimately, an audit can provide the raw data you need to understand whether and how your company’s compensation aligns with the roles and responsibilities of each position.

2. Define or refine compensation criteria. To be transparent about pay, your business needs clear and consistent criteria for how it arrived — and will arrive — at compensation-related decisions. If such criteria are already in place, you may need to refine the language used to describe them. Again, your objective is to clearly explain to job candidates and employees how your company makes pay decisions so you can reduce or eliminate any perception of bias or unfairness.

3. Develop a communications “substrategy.” Under your broader pay transparency strategy, your company must have a comprehensive substrategy for communicating about compensation with job candidates, employees and, if you so choose, the public. There are many ways to go about this, and the details will depend on your company’s size, industry, mission and other factors. However, common aspects of a communications substrategy include:

• Providing written guidelines explaining your compensation philosophy and structure,
• Supplementing those guidelines with an internal FAQs document,
• Holding companywide or department-specific Q&A sessions, and
• Using digital platforms to share updates and issue reminders.

4. Train and rely on supervisors. Your people managers must be the frontline champions and communicators of your pay transparency strategy. Unfortunately, many companies struggle with this. In the aforementioned Mercer report, 37% of U.S. companies identified managers’ inability to explain compensation programs as their biggest challenge in this area.

Naturally, it all begins with training. Once you’ve defined or refined your compensation criteria and developed a communications substrategy, invest the time and resources into educating supervisors (and higher-level managers) about them. These individuals need to become experts who can discuss your business’s compensation philosophy, policies, procedures and decisions. And it’s critical that their messaging be accurate and consistent to prevent misunderstandings and misinformation.

5. Get input from professional advisors. Before you roll out a formal pay transparency strategy, ask for input from external parties. Doing so is especially important for small businesses that may have only a few voices involved in the planning process.

For example, a qualified employment attorney can help ensure your strategy is legally compliant and limit your potential exposure to lawsuits. And don’t forget us — we’d be happy to assist you in conducting a payroll audit, identifying all compensation-related expenses and aligning your strategy with your business objectives.

If your company has been in business for a while, you may not pay much attention to your payroll system so long as it’s running smoothly. But don’t get too complacent. Major payroll errors can pop up unexpectedly — creating huge disruptions costing time and money to fix, and, perhaps worst of all, compromising the trust of your employees.

For these reasons, businesses are well-advised to conduct payroll audits at least once annually to guard against the many risks inherent to payroll management. Here are seven such risks to be aware of:

1. Inaccurate recordkeeping. If you don’t keep detailed and accurate records, it will probably come back to haunt you. For example, the Fair Labor Standards Act (FLSA) requires businesses to maintain records of employees’ earnings for at least three years. Violations of the FLSA can trigger severe penalties. Be sure you and your staff know what records to keep and have sound policies and procedures in place for keeping them.

2. Employee misclassification. Given the widespread use of “gig workers” in today’s economy, companies are at high risk for employee misclassification. This occurs when a business engages independent contractors but, in the view of federal authorities, the company treats them like employees. Violating the applicable rules can leave you owing back taxes and penalties, plus you may have to restore expensive fringe benefits.

3. Manual processes. More than likely, if your business prepares its own payroll, it uses some form of payroll software. That’s good. Today’s products are widely available, relatively inexpensive and generally easy to use. However, some companies — particularly small ones — may still rely on manual processes to record or input critical data. Be careful about this, as it’s a major source of errors. To the extent feasible, automate as much as you can.

4. Privacy violations. You generally can’t manage payroll without data such as Social Security numbers, home addresses, birth dates and bank account numbers. Unfortunately, possessing such information puts you squarely in the sights of hackers and those pernicious purveyors of ransomware. Invest thoroughly in proper cybersecurity measures and regularly update these safeguards.

5. Internal fraud. Occupational (or internal) fraud remains a major threat to businesses. Schemes can range from “cheating” on timesheets by rank-and-file workers to embezzlement by those higher on the organizational chart. Among the most fundamental ways to protect your payroll function from fraud is to require segregation of duties. In other words, one employee, no matter how trusted, should never completely control the process. If you don’t have enough employees to segregate duties, consider outsourcing.

6. Legal compliance. As a business owner, you’re probably not an expert on the latest regulatory payroll developments affecting your industry. That’s OK; laws and regulations are constantly evolving. However, failing to comply with the current rules could cost you money and hurt your company’s reputation. So, be sure to have a trustworthy attorney on speed dial that you can turn to for assistance when necessary.

7. Tax compliance. Employers are responsible for calculating tax withholding on employee wages. In addition to deducting federal payroll tax from paychecks, your organization must contribute its own share of payroll tax. If you get it wrong, the IRS could investigate and potentially assess additional tax liability and penalties. That’s where we come in. For help conducting a payroll audit, reviewing your payroll costs and, of course, managing your tax obligations, contact us.

© 2024  

Ensure Your Payroll System is Reliable & Cost Efficient

Sales Tax Services