Most Business Owners Still Prepare Payroll by Hand

Despite the proliferation of accounting software, when it comes to preparing payroll, small-business owners prefer doing it themselves and on paper, a new survey shows.

Of 750 small businesses polled across the country in April, two-thirds said they prepare their company's payroll in-house, according to a survey released Aug. 30 by the National Federation of Independent Business, a small-business advocacy group based in Washington.

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At more than half of businesses, the task of preparing payroll falls to an owner-manager, the survey found. Among all the business owners polled, only about 30 percent said they assign the job to an employee, while just 20 percent said they use payroll services, the survey showed.
Surprisingly, less than 62 percent reported using an electronic spreadsheet to calculate employee earnings — with the owners of the smallest companies more likely to do the paperwork by hand, the survey found.

"It's just such a critical thing that a lot of business owners like to keep it hands on," said William Dennis, the group's senior researcher.

Dennis said business owners who prepare only two or three paychecks a week simply find it cheaper and easier to do it by hand. It's only when a business grows to several dozen paychecks distributed among a mix of full and part-time workers that the task becomes a burden for most owners, he added.

Still, even among the businesses that use accountants and bookkeepers to handle payroll, fully half reported submitting records on paper, rather than electronically, the survey found.
"It's so important, nobody wants to take the chance that a computer glitch will wipe out their records," Dennis said.

The main reason owners gave for handling payroll in-house was that it was cheaper, followed by greater control and better oversight, the survey found.

Among those that used an outside payroll service, many owners said doing so allowed for a smoother workflow, while yielding fewer mistakes.

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