How to Decide on an Accounting System

Business accounting--including payroll--is one of the most complex
and confusing areas of business management. To choose the right
system for your needs, get good advice and then dig into the numbers.

Difficulty: Moderate

Instructions

1. Consult with a knowledgeable information technology (IT) professional if this is not your area of expertise.

2. Shop for a system based on the size of your business. Systems targeting a small business will work best managing a small payroll (25 to 50 employees). Systems targeting a medium business work best for businesses with up to 250 employees. If you employ more than 250 people, an enterprise-level accounting system is recommended.

3. Inventory your existing database software, as well as the operating system and software of your business network. For example, your creative group may be on Macs while the accounting department is on Windows and your servers are running Unix.

4. Keep projected growth in mind. An accounting system that works in your current business environment may not scale up well if your business doubles in the next five years.

5. Hire an outside payroll vendor if the task is too daunting. Businesses of all sizes outsource their payroll and accounting work to companies dedicated to this service. That may be the best solution if you don't have a full-time, in-house accounting expert. The American Payroll Association's Web site has a listing of firms. Go to americanpayroll.org and click on "Vendors."

Tips & Warnings

• When comparison-shopping for payroll and accounting systems, include your IT person in the decision-making process at the earliest possible stage.
• Establish safeguards so that your accounting and payroll information stays private.
• A functional payroll system is essential to any business, no matter how small. There are federal and state laws requiring that you disclose records related to payroll. Failure to do so could result in heavy fines.

Who Can Help:

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[arstringfellow]

on 9/21/2008 It's important to do your research and decide on a system that is going to work for your personal situation. For many, outsourcing the payroll process makes the most sense, if they can spend that time on more productive and income-producing activities. For independent contractors, it may make sense to outsource some of your back-office activities, such as invoicing and collections, to a portable employer of record. This option can also help save money on taxes, and makes filing taxes much simpler by providing you with a single W-2 at the end of the year.