Business consultants have long advocated outsourcing non-core functions.
A non-core function is one that is not a profit center (meaning, you don’t charge customers for it). A non-core function may be essential, but doesn’t differentiate your business strategically from competitors. In most businesses, administrative and back-office activities such as payroll are non-core functions. As such, they are potential candidates for outsourcing.
But the question business owners and managers want answered is: what do you actually gain from outsourcing payroll? Is it worth all the time and effort just to investigate and identify appropriate outsourced service providers? Then there’s the work involved to transition the function outside to the third party service. Do the benefits of outsourcing outweigh that effort?
CPA firm Clayton & McKervey noted several long-term advantages to be gained from outsourcing payroll:
“… a company had one person performing all of the payroll processing functions. The company is now outsourcing the functions as a result of thinking ahead. They chose to outsource the functions to reduce the risk of the payroll not being processed, to manage growth by anticipating the increased payroll responsibilities that will be required as the firm grows and hires more employees, and to keep up with technology, such as pay cards and direct deposit.”
Ideally, outsourcing achieves three main goals:
- It frees up time and resources to focus more on your core business.
- It gives you access to more technology and expertise to perform payroll well.
- It reduces costs and risks.
These in themselves are great reasons to bite the bullet of change and bear the initial upheaval transitioning will bring, to completely exploit and gain from the longer-term benefits of outsourcing.