Are you comfortable keeping up with approximately 400 legal and regulatory changes every year? Are you confident about making up to 268 tax calculations annually? Do you prefer to do routine administrative tasks instead of serving your customers?

If you answered “yes” to these questions, you can stop reading. But if you’re like most business owners, these issues are among the very last things you want to deal with. And yet, they’re exactly what you need to be doing if you process your own payroll.

Sooner or later nearly every business owner realizes it’s time to let someone else handle the time-consuming, risky and unproductive task of processing payroll to a specialist provider. But how do you choose the right one? When you make that decision, here are five key things to consider, and to ask potential providers about as well.

 

Tax liability

 

Tax issues are probably the number-one pitfall of handling payroll yourself. Every year federal and state penalty notices, levies, and legal action not only reduce productivity, but put many small companies out of business entirely. Often the business owner was trying to do everything correctly, but was simply unaware of all the rules for calculating paychecks, timing tax payments and filing.

If you hire a CPA or accountant to do your books, that person can handle your payroll as well. But that individual isn’t going to pay your penalties and interest if something goes wrong. A professional payroll service company will. And a good one will even work with the tax authorities on your behalf if you ever face a payroll tax problem.

 

Payroll expertise

 

Any reputable payroll service you choose will be able to cover the basic needs, such as calculating hours and vacation time, cutting checks and mailing them to your employees. The trouble is, those might not be your needs. An experienced, trained payroll professional will get to know your business, understand what it requires, and work with you to make sure your payroll solution is a good fit. For example, you may want to combine your online banking with online payroll processing or offer your employees a 401(k) plan.

 

A trusted provider

 

Of course, the provider you select needs to be someone you can trust. For something as critical as handling your payroll and taxes, look for an established brand with a solid history, extensive resources and experience, and a reputation for great service. The last item is particularly important since at some point you’ll probably face an urgent situation: if your administrator unexpectedly went into labor tomorrow, could your provider step in and make your filings on time?

 

The right features

 

All businesses have different needs, but those of small companies are especially diverse — and are becoming more so. These days, even with just a handful of employees you might need payroll deductions for 401(k), a flexible spending account, and perhaps a health savings account for your health plan, plus direct deposit. And because every minute you spend on administration keeps you away from your core business responsibilities, you want it all to work as smoothly as possible.

To simplify your finances, consider working with your bank. Full-service banks can offer payroll services that have some unique advantages, such as tying payroll directly to online banking for maximum convenience. If you find yourself in a situation where you need to move money very rapidly, you will appreciate having payroll services as part of your overall banking relationship.

 

Cost effective

 

If you’re still wondering whether hiring a payroll provider is worth the cost, consider that one in three business owners will face a tax penalty each year. After several years the question will no longer be if you’re one of them — it will simply be a matter of when. Even if you’re a very hands-on manager, working with the Internal Revenue Service or state agencies on payroll issues is one task you’ll be glad to give to a professional payroll provider. When that time comes, the pennies per week you spend on payroll processing may turn out to be the best business investment you ever made.

 

Linda Russell is a 28-year veteran of the financial services industry and currently president of the South Coast Community Bank, Wells Fargo & Co.