Money for Nothing, and the T4s for Free

October 22nd, 2008 Chris Posted in Financial | No Comments »

As I’ve mentioned (ad passim, ad nauseum), I am not a big fan of blinding outsourcing everything. I find too often that you lose critical control of pieces that are key to the business and it’s just doesn’t make financial sense much of the time.

There is one operation in our business that I’ve recently become an outsourcing convert to, though.

The other day, our book-keeper came to us and said that ADP (the payroll giant) was making a big drive into the small business market and had a good deal. I was skeptical – we were managing payroll in a largely manual fashion which was time consuming, but cheap.

It was painful though – cutting cheques, tracking payroll tax, etc. And the only other service we’d looked at for payroll was through Quickbooks – which was not cheap and still required a lot of manual gyrations.

But ADP made us an offer we couldn’t refuse: for $12 an employee per month, they’d do it all. Calculate all the right deductions, calculate the payroll taxes, withdraw the money from our corporate bank account, make the direct deposits to employees, pay our tax with-holdings and payroll taxes and generate pay statements. The whole 9 yards. Here are the details…

In fact, I was originally quite skeptical – how could they make money from us? Well it turns out they have an interesting business model. They withdraw the money from our corporate account three business days before pay-day. Aggregate that over all the businesses, and that’s a lot of cash. Cash that can be leveraged. So, even if they don’t make money on us, they make money on our float.

So, chalk this one up to an outsourcing win. Doesn’t happen very often…

C.

P. S. Unfortunately the T4s aren’t free. There is a small charge for those ones… Still cheap though!