August 27, 2021

Many small businesses find a payroll provider simply by searching on Google and reading reviews to make a decision. This informal process is likely to find you a suitable payroll provider, but it may not give you the best option available. For optimal results, you’ll need to take a more formal approach. An RFP (Request for Proposal) is the formal way to inquire about a payroll service provider’s services, get answers to company-specific questions, and come to an informed decision on your choice of a payroll provider. If it’s your first time writing an RFP, there’s no need to worry: we’ve covered everything you’ll need to know below!

Selecting Vendors

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As mentioned above, many SMBs use Google to find a payroll provider. This is a great start, but not where the RFP process ends. Using a search engine, find and compare multiple payroll software providers, writing down top contenders along the way. These are the providers that you will be submitting an RFP to. Standard practice is to submit five RFPs to five different providers, but you can do as little as three if options seem limited. Once you’ve selected the potential providers, it’s time to begin creating your RFP.

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While we cannot tell you exactly what to write in your RFP (the contents will vary by business), we can tell you how to write it. The key thing to remember is that submitting an RFP is a formal process; as such, your writing should be formal and concise. The goal is to receive straightforward answers, so your questions must be clearly defined and not open to interpretation. Although it is possible to request additional information after you’ve received a response, you should try to include any possible questions in your RFP. This will help speed up the process and prevent you from waiting unnecessarily. 

Paint a Picture

In order for a payroll provider to properly answer your questions, you’ll need to give them some context. Provide a brief background of your business, such as your routine operations, where you’re succeeding, and where you’re struggling. By clearly establishing the payroll issues you’re facing, you’re giving the payroll provider a chance to explain how they can properly address these issues (and why they should be the provider you choose). Without context, you may receive generic answers which are unlikely to give you the company-specific information you’re seeking.

Establishing a Payroll Provider Criteria

Within your RFP, it’s vital that you spell out your specific requirements and expectations for your new payroll provider. Some important things to address are implementation time, integration capabilities, automation abilities, budgetary restrictions, and projected business growth, among others. Establishing payroll provider criteria is essentially writing down what your perfect provider would offer, and seeing how the responses of the providers you’re submitting your RFP to compare against these expectations. No details—no matter how small—should be left out of your payroll management software criteria.

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Establishing Response Requirements

The best part about submitting an RFP is that you can establish requirements for how they respond. Alongside answering & addressing the issues listed in your RFP itself, you may also request references, case studies, background information, and any other details you feel might be relevant or affect their ability to adequately provide payroll services. Again, the goal of an RFP is to gather all important information in one go, so make sure any questions you have are listed within the proposal requirements. The formal approach is more time-consuming than an informal Google search, so there’s no sense in dragging it out by omitting questions now that you’ll surely want to be answered later.

The Decision

If all went well, you’ve submitted your RFPs and received proposals from all the payroll providers you were considering. Now is the time to review the answers, compare the proposals, and make your final decision. The payroll software provider you choose can have an extremely positive (or negative) effect on your business overall, so don’t worry about rushing this part. Take as much time as you need, dwindle down your options, and make the most educated decision you can make. Your payroll department is sure to thank you!

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