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Three Reasons to Outsource Payroll

Three Reasons to Outsource Payroll

Three Reasons to Outsource Payroll

When is the best time to outsource any or all of the various pieces that make up the payroll process? Since each company is unique, the answer to that question will vary, but there are some general guidelines that a business owner can follow to make that determination. In the context of this article, when we refer to “payroll” we are including the logistical payroll process itself, legal requirements for withholding and remitting certain amounts from compensation, as well as the various other deductions handled through the payroll process. payroll does not include various human resources matters that are directly connected to the payroll process, even though the two functions are closely related. Outsourcing payroll involves hiring an independent third party to perform some or all of the steps necessary for completion of the payroll process.

Payroll is a basic business process that involves several types of inputs, the organization, filtering, and accumulation of those inputs, and then the creation of several types of outputs. For the process to operate efficiently and effectively, it requires confidentiality, consistency, and compliance, as well as other quality related factors. Each of these factors can influence the decision regarding when outsourcing is appropriate.

Confidentiality

Above all else, the payroll process (as well as other HR matters) must be performed with strict confidentiality. Information regarding an employee-employer relationship is very sensitive, and the inappropriate disclosure of such confidential information can cause unnecessary disruption within a company. There are also legal implications that come from the disclosure of confidential information, so the process must be handled carefully. In most owner-managed businesses, because of the risks involved, the owner or a very trusted employee must take on most of the duties involved in the payroll process.

Consistency

Since payroll is a very routine process that must be performed in the same order at the same time during every payroll cycle, the person (or persons) doing payroll must be able to schedule their time accordingly. Due to the confidentiality issues mentioned above, this generally puts the owner (or his designee) in the position of having to block out certain time periods, creating constraints on their ability to be involved with other facets of the business.

Compliance

Since you, as an employer, are required to withhold and remit payroll taxes at the federal, state, and various local levels, administering those tax requirements can be a significant part of the payroll process. The administration functions include gathering, managing, and reporting the information, as well as paying the appropriate taxes. The payment timing requirements and amounts vary by tax type, so the time required to manage the entire process can be fairly significant.

Many employers also offer a benefits package and/or a retirement plan that involve employee participation and are commonly handled through a payroll deduction process.

Similar to the various types of payroll taxes, the administration of these programs includes gathering, managing, reporting the information, and paying the various amounts to the various providers, and again, the time commitment required can be a significant one.

When to Outsource Payroll

Generally speaking, the best time to outsource payroll is when it becomes more cost-effective to have a third party perform parts of the process than to perform them internally. This cost can be measured in terms of the compensation and benefit cost of the person responsible, as well as the opportunity cost of that person’s time. When the business owner is the person handling payroll, it is typically easy to justify the decision to outsource, since the owner should be focusing on adding value to the business.

Founded in 2001, FocusCFO is the leading onsite fractional CFO services provider in the Midwest and Southeast, with more than 100 CFOs and Area Presidents throughout Ohio, Indiana, Kentucky, Michigan, North Carolina Pennsylvania, South Carolina, West Virginia and Tennessee. FocusCFO works closely with small to medium sized businesses helping business owners gain control over three key financial and operational areas: increasing cash flow, reducing business risk, and creating a platform for scalable growth. This allows business owners to then realize full financial control and increased value in their businesses.

For more information, visit us at focuscfo.com or follow us on LinkedIn.

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Welcome Curt Wible

Welcome Curt Wible

Welcome Curt Wible

Welcome to the Team!

 

Curt is a Finance professional with over 30 years of experience in public and privately-held businesses. Over this time, he has developed expertise in profitability analysis, process improvement, annual planning / budgeting, cash forecasting and management, the use of key performance indicators (KPI’s), and knowledge of Quickbooks.

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The Inconsequential Owner

The Inconsequential Owner

The Inconsequential Owner

By Michael Stier

In all likelihood, you are absolutely critical to the success of your business. Without you, there is no business.

We need to fix that!

With good planning and some work, we can help you become an Inconsequential Owner. Think Dr. Evil (Mike Myers) from the movie ‘Austin Powers: International Man of Mystery’, “The details of my life are quite inconsequential…” 

All owners understand (at some level anyway) that they will someday leave the businesses they have created. Let’s assume for a moment that tomorrow you leave your business permanently. If you are an Inconsequential Owner, your exit will have no impact on the business, and that’s good for business value. Buyers pay for business value—not for the departing owner.

If you constitute a significant part of your company’s value (a/k/a a Consequential Owner), and you have left the scene, there will likely be few buyers interested in your company, and those who are will likely pay significantly less than they would have had you been an Inconsequential Owner.

Exit Planning is the process you can use to transform yourself into an Inconsequential Owner for your sake, for your family’s sake and the sake of your business and employees. While perhaps not the most flattering label, it probably aligns with what your children have been telling you for years!

Put another way, your Exit Plan should answer this question: “What has to happen in my business by the time I leave it, to:
1. enable me (and my family) to achieve financial security
2. allow me to move forward with the rest of my life, secure in knowledge that I have been a good steward of the business?”

Our mission at FocusCFO is to help owners achieve their personal and business goals. Critical to this mission is increasing the awareness of proper exit planning for all business owners. Many of us a FocusCFO are Certified Exit Planning Advisors (CEPA®), accustomed to helping owners think through their plans and orchestrate their team of advisors to achieve the goal.

Michael Stier is an Area President for FocusCFO based in Charlotte, NC. 

Founded in 2001, FocusCFO is the leading onsite fractional CFO services provider in the Midwest and Southeast, with more than 100 CFOs and Area Presidents throughout Ohio, Michigan, Kentucky, Indiana, Pennsylvania, Tennessee, and North Carolina. FocusCFO works closely with small to medium sized businesses helping business owners gain control over three key financial and operational areas: increasing cash flow, reducing business risk, and creating a platform for scalable growth. This allows business owners to then realize full financial control and increased value in their businesses. For more information, visit us at focuscfo.com or follow us on LinkedIn. 

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Five Questions for Your Headache

Five Questions for Your Headache

Five Questions for Your Headache

By Todd Peter

You, the small business owner, are on a roll. Every day you are out, landing a new customer at least once a week. You hired a great engineer and she is turning your new product ideas into reality and you can barely build enough to keep up with orders. But it’s payroll week again and the cash in the bank is barely enough to cover your employees. It looks like another month of explaining to your spouse the thrills of working 16-hour days and the stress of never seeming to have enough cash. You wonder, “Is this roller coaster ever going to end?” You call your Uncle who is the CFO of a Fortune 500 company and he reveals to you 5 questions that you must answer, and assures you that your headache will be gone by morning!

Question 1: Am I making any profit?
Question 2: What is the gap between profit and cash?
Question 3: Is there cash hidden in the balance sheet I can uncover?
Question 4: Can I obtain a bank loan to support the gap between profit and cash?
Question 5: Can I reach my growth goals and not run out of cash?

The Dilemma

You conferred with your bookkeeper and your CPA, and you again sought the counsel of you Uncle.  He said you need a CFO to help you answer these questions.  He noted CFOs are typically highly skilled professionals with backgrounds that span multiple decades of financial and operational experience but they may command a salary that might be unaffordable. 

The Role of the CFO

A CFO typically functions as the third leg of the stool for your company. They are as good at understanding cash as most owners are at understanding customers and operations. They are an owner’s financial partner; they work to make sense and provide business insights from the numbers that emerge from your accounting software; they work to integrate the past into a picture of the future. A CFO is there to help the owner make sure the business is healthy. They provide a little aspirin to dull the short-term pain, strong antibiotics to cure any illnesses, and a wellness and fitness program to build long-term health.

Fractional CFO Solution

Alas, many small businesses cannot afford the expense of a full time CFO. A perfect solution is the use of a fractional CFO. The use of a fractional service model allows the investment to be very moderate relative to other professional services. Most are engaged on an ongoing long-term basis, work onsite at their clients, and average a day a week over time. They work as partners and confidants of the business owners to help them meet their goals and assure the financial health of the business. How do I know this? I’ve been a fractional CFO for four years.

Todd Peter is a FocusCFO principal, based in Cleveland, OH.

Founded in 2001, FocusCFO is the leading onsite fractional CFO services provider in the Midwest and Southeast, with more than 100 CFOs and Area Presidents throughout Ohio, Indiana, Kentucky, Michigan, North Carolina Pennsylvania, South Carolina, West Virginia and Tennessee. FocusCFO works closely with small to medium sized businesses helping business owners gain control over three key financial and operational areas: increasing cash flow, reducing business risk, and creating a platform for scalable growth. This allows business owners to then realize full financial control and increased value in their businesses.

For more information, visit us at focuscfo.com or follow us on LinkedIn.

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Welcome Rex Bevis

Welcome Rex Bevis

Welcome Rex Bevis

Welcome to the Team!

 

Senior finance executive with 25 years of hands-on experience building, strengthening, and leading finance teams for companies in both high-growth and turnaround situations. Comprehensive knowledge across the financial planning and analysis, controllership, and tax functions. Broad exposure to service industries with an extensive background in contract negotiations, software implementations, mergers and acquisitions, and post-deal integration projects.

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The Pyramid to Success

The Pyramid to Success

The Pyramid to Success

By Mark Clower

 

 The truth about entrepreneurship is that the smallest company and the biggest company must be capable of doing three things beautifully: 

1. The product or service you want to sell must be fantastic 

2. You must have great marketing 

3. You must have tremendous financial management 

Which reminds me of a quote that I think about every day as I’m working with small businesses:

“No one person can do all three and no one does it alone.”

Ernesto Sirolli 
Entrepreneurial Business Expert

 This quote perfectly states what the world is like for entrepreneurs. The goal of most entrepreneurs is to have a successful business. Success will be defined differently for each entrepreneur. Given that success is defined differently, each entrepreneur will still set off on a journey to meet their definition of success. 

Before starting this journey, or early on, you need to ask yourself some questions. Questions that need to be asked include: 

  • What do you do best?
    • Can you make it?
    • Can you sell it? 
    • Can you look after the money? 
  • What is most important role for you in your company and where should you spend your time? Remember Ernesto Sirollo’s quote “No one person can do all three and no one does it alone.” 

Now how does one proceed? At FocusCFO, we believe there are four phases that all businesses will move through on their way to being successful: Foundation, Health, Growth and Value. These areas build upon each other like a pyramid. 

Foundation 

This area is the base of the pyramid. This is your internal accounting and administration. Your internal accounting and administration include, but are not limited to, internal processes, procedures / workflows, timely monthly closing, strong internal financial reports, insurance policies, employee benefits, HR policies and contracts. You should consider a good relationship with your banker and CPA as part of the Foundation. Without a solid foundation the pyramid will be unstable and impact your business. 

Health 

The key items to be addressed in Health are cash flow, finance, and operations. This area includes ongoing operating forecasts and budgets, understanding operating costs/profit margins, meaningful weekly metrics, Key Performance Indicators (KPIs), strong bank agreements and forward-looking cash flow projections with cash flow break-even analysis. These are vital tools. A healthy business allows for successful and profitable growth. 

Growth 

This level of the pyramid addresses revenue and growth. Specific tools that a business needs for Growth are profitability by customer and product line, sales platform, sales growth strategy with pipeline forecasting, a well-documented vision, mission, and values, mid- to longer-term (3- to 5-year) cash flow-based financial projections, defined business goals, SWOT analysis, and a strategic plan. Growth without a solid foundation and health will create serious issues for the business. 

Value 

The top of the pyramid is Value which can be the continuation of the business or a decision to transition the business on (succession) or exit. The Value level will include defined owner goals, options, and path forward, healthy, growing company with real value, strong internal management team with great systems, a team of advisors to help with your goals. These will generate a higher business valuation. This will also give the owner significant control of their business. 

These four phases are critical for your business and build upon each other to make your business successful. However, for most entrepreneurs, their greatest value to the company resides in making and selling their product or service. Utilizing a fractional-CFO will allow the entrepreneur to focus on those roles, while assuring a trusted advisor is gathering and watching the numbers. 

Mark Clower is a FocusCFO Area President based in Dayton, OH. 

About FocusCFO 

Founded in 2001, FocusCFO is the leading fractional CFO services provider, with more than 100 CFOs and Area Presidents serving clients throughout Ohio, Michigan, Pennsylvania, Kentucky, Indiana, North Carolina, 

Tennessee, and West Virginia. FocusCFO works closely with small to medium sized businesses, helping business owners gain control over three key financial and operational areas: increasing cash flow, reducing business risk, and creating a platform for scalable growth. This allows business owners to then realize full financial control and increased value in their businesses. FocusCFO provides services on a fractional basis, meaning clients get all the advantages of a full-time, seasoned CFO under terms that are flexible, affordable and within each client’s budget. What really sets Focus CFO apart is their CFOs work exclusively onsite at the client’s office under a recurring schedule. Typically, engagements range from two days a month to several days per week, and many clients are in the $2 to 10 million revenue range when they initially engage with FocusCFO. 

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