Running a business and maintaining all its functions can be difficult for many small businesses, especially if they have a tight budget.
This is why most business owners outsource the accounting function to third-party bookkeepers. Their service is relatively cheap compared to the cost you have to incur as a small business owner to maintain a separate accounting team.
However, most business owners think that accounting and payroll go hand-in-hand. Hence they think a single team can manage both functions. So the golden question is, do bookkeepers manage payroll too? Can a single third party handle both functions?
In this article, we will give you a brief overview of both functions and answer your golden question so that you can hire a suitable party for your business.
Is bookkeeping the same as payroll
No, bookkeeping and payroll are two separate functions.
Payroll is a systematic process that calculates and pays the salaries net of taxes and other due payments to your employees. Whereas bookkeeping relates to recording financial transactions related to your business and updating them daily.
Therefore payroll and bookkeeping are two different functions of a business. But when you get into the latter sections of this article, you will notice that these functions are interconnected.
Which department is responsible for payroll
The Human Resource Department of a business is closely affiliated with handling the organization’s payroll function.
Every business has to perform various yet crucial functions to survive in the industry. Some of these functions are human resource management, accounting and finance, and marketing, etc.
In a large company, there are separate departments to handle each function individually so that their responsibilities are clearly specified. Therefore in a large company, payroll functions fall on to the HR department.
So who is responsible for payroll in a small business? The payroll function can get complicated, along with the number of employees in the business.
Therefore even in a small business, a single person wouldn’t be able to handle multiple functions along with payroll if the business has more employees.In such a situation, it’s better to hire a separate individual to handle the payroll function if you plan to do it internally.
Which information is used in payroll processing?
It’s crucial to calculate and pay your employees’ due salaries and wages on time. The process may seem simple and easy, but it involves a series of calculations which are prone to human errors. This could get more complex with a higher number of employees and the industry you are in.
Why is the payroll process complex? What information should you consider when preparing the payroll of your employees?
First, you must keep track of your employees’ attendance and leaves taken. Then, you should consider the basic salary details, superannuation contributions, salary taxes, insurance contributions, other fringe benefits given to the employees, etc., when generating the final payslip for each employee.
You might have to process a series of data to derive each of the above information. Therefore setting up a payroll system can be complex and could take time.
What do bookkeepers do?
Bookkeepers would record and update the daily financial transactions on the relevant books. The accountants would use these data and prepare the financial statements to present to investors and other stakeholders.
Therefore bookkeeping and accounting are two different roles, although sometimes the term “bookkeeper” is used to define both. Bookkeepers are basically responsible for recording financial data, preparing monthly reports, and bank reconciliation statements.
Payroll information is only a portion of data that the bookkeepers use in order to perform their basic duties. Sometimes they are given advanced duties to file for taxes, prepare financial statements, etc.
Although they are not responsible for payroll, an internal bookkeeper could handle payroll if the business is small in volume and has few employees. But this can be stressful and overload the work for the given individual.
Read more: Xero
Do third-party bookkeepers manage payroll.
Now we have established that bookkeeping and payroll processing are two different roles. Therefore most businesses hire two separate individuals or teams internally to perform these roles.
However, hiring a third party to handle the books and payroll functions could be cost-effective and efficient, especially if you have a small business. So the golden question is, do third-party bookkeepers manage payroll too?
Yes. Although they are two different functions, most third-party bookkeepers would also manage the payroll function. Hiring a single third party to do all these jobs can be highly beneficial and cost-effective for your business.
However, contact your external bookkeeping service to check whether they do payroll too.
Should you contact SPS
If you are looking for a third-party service specializing in accounting, taxing, bookkeeping, and payroll, please don’t hesitate to contact us. We have served hundreds of clients over the past years, and we have helped them manage their businesses efficiently.
SPS Consultants are Xero certified practitioners. We use Xero, which is recognized worldwide to give you an outstanding service
We have customized packages that suit your business regardless of its scale. We also offer you tailor-made packages to suit your business. Place your trust in us, and we will deliver a service beyond your expectations.