Bookkeeping & Payroll Services: What are the Differences?

Breaking Down Payroll

Payroll, in the most basic mean, is a company’s list of employees. However, it is also commonly used to refer to:

• The calculation and distribution of paychecks to the employees during payday.
• Employee financial records including salaries, wages, bonuses, withheld taxes, deductions, and others.
• The amount of money being paid to the employees by the company.

You will need specific information from your employees in order to run payroll. Some of them include:

• a filled out W-4 Form
• There working hours records if they work hourly.
• Time Off
• Salary or wages
• Overtime Pay
• Fringe Benefits

Payroll can be run in multiple ways but the most common ways are payroll accounting, payroll software, and manual payroll.

If you want to save some time, it might be a good idea to outsource your payroll. The accountant will do the entire payroll process for you. 

Payroll software, on the other hand, automates most of your payroll program. It can also help calculate wages and taxes. Some software can even file taxes for you.

When it comes to manually do payroll, your number one challenge is the time since it’s a time-consuming job. You will also need someone who knows how to do the payroll also called a bookkeeper.

Disadvantages of using a Payroll Software

Like any other IT system, payroll software can have several weak points. Some of the issues you may encounter include:

• Data security, loss or theft
• Cybersecurity and fraud
• Unauthorized access to information, quality, and control

Cost is another limitation that arises with the use of payroll software. It’s generally more expensive to use full-featured software than doing the manual payroll systems. Other disadvantages we already mentioned above such as requiring computer equipment, resources, and skilled operators. You will need to invest money into producing them if you don’t already have them in-house. 

Breaking Down Bookkeeping

A person who records, stores, and retrieves financial transactions for an individual, company or nonprofit organization are called a bookkeeper. The tasks a bookkeeper does is called bookkeeping.

Common financial transactions are also included in bookkeeping, such as:

• paying suppliers
• Invoicing for services provided or goods sold to clients
• Documenting customer receipts
• Recording invoices
• Employees payroll processing
• Financial reporting
• Accounts receivable monitoring
• Recording depreciation
• Providing financial reports

Bookkeeping these days can now be done by computer software such as Quickbooks. There are some benefits you can get from using bookkeeping software including faster accounts processing, accurate reporting, and data backed up. The person who performs this is the bookkeeper but keep in mind that a bookkeeper is not similar to an accountant.

A bookkeeper records the day-to-day financial business transactions and handles the recording aspect of the accounting processes. Accountants, on the other hand, takes care of all parts of the accounting process.

Disadvantages of Hiring a Bookkeeper

• Extra expenses. You may have to deal with some hidden costs with hiring a bookkeeper or you may also find yourself stuck in a contract that you no longer needed anymore.
• You’re not in control. If you’re hiring a bookkeeper, your handing over some control instead of you having the final say on any significant business decisions. Are you okay with handing over your trust to a stranger who you may have only spoken over the phone? Make sure you’re comfortable to entrust the complete visibility and control over your books to someone as it is similar to allowing another person to analyze your business and manage its finances.
• Dealing with human error and accountability. When you hire a bookkeeper, ensuring that they are accurate and honest is one of your responsibilities. You have to trust them and their work. This means you’ll have to face the consequences if they make a mistake or report inaccurate results. 
• There are apps that help you do the bookkeeping yourself and you don’t have to worry about the accuracy anymore. There are tools available that can guide you through the whole process even if you don’t think you have the knowledge or experience. This will allow you to save money and stay in control.

When deciding whether to outsource or do payroll & bookkeeping yourself, understanding everything related to these two tasks is important. It all comes down to how much you’re willing to risk or how badly you want to save time and money.