Square: Why We Want To Innovate Payroll For SMBs

The average SMB owners on the eve of starting their first business is a person with a passion. They have a good or service that they think they can offer-up — and can do it well enough and with sufficient joie de vivre that they are inspired to do that and only that for the rest of their working life.

Unfortunately, says Caroline Hollis, head of Square Payroll, what entrepreneurs quickly find once they’ve begun the process of turning their passion into a profession, is that an awful lot of what they do isn’t going to be the thing they find inspiring. It is a lot of paperwork, trueing up ledgers, figuring out payroll and on the whole, managing the basic blocking and tackling mechanics that are the administrative side of every SMB.

“The small business owner is literally doing everything themselves and once they step into the real world of operating a business and managing employees it is a huge amount of complex work,” Hollis told Karen Webster in a recent interview.

Or at least, that has been the status quo up until very recently. Square’s ongoing efforts in building an entire ecosystem of services for SMBs, she noted, is predicated on the idea that with the right technological infrastructure a lot of that operational complexity can be paired-back and automated away.

It’s why Square Payroll extended its service to include its latest free tool for SMB owners — EIN Assistant, described by Hollis as a digital tool designed to streamline the process for SMB of obtaining an Employer Identification Number.

“Our audience for this tool is any individual who is ready to take that next step and start a business,” Hollis said.  “At the end of the day, our goal is to create more business by enabling more of them to start-up and they become active employers themselves.”

Cutting Through EIN Complexity

An EIN is a must-have for any business that hopes to retain and pay their workers, Hollis noted, because without one it is impossible to pay them. However, she noted, the process for obtaining one can be pretty opaque — mostly because it involves a series of dense, legalese-filled forms required to create a separate tax entity for a business that can feel overwhelming to an up-and-coming business owner.

There are bankers and accountants that entrepreneurs can work with to avoid having to take on the vast and terrifying filing jungle on their own, she noted, but those services are going to come at a premium price that the average cash-strapped entrepreneur is going to be less than delighted to pay; particularly if they aren’t yet open for business and generating any revenue.

The EIN assistant is, at base, a task wizard that guides business owners through a dramatically streamlined step-by-step version of the application process via a simple questionnaire. With the data collected, the assistant fills out IRS form SS-4 and then manages the filing process. On average, the business gets its EIN in 1-2 business days, and those that are also Square merchants will have their new  EIN automatically associated with their Square profile once it’s approved.

There is an incentive for Square merchants to use the service — she noted, but any individual can access the EIN assistant for free — the addressable market for this service, Hollis noted, is larger than the installed base of Square merchants. It does, however, create an incentive for merchants entering the arena a reason to move into Square — mainly as they are hitting the sharp learning curve of everything that operationally goes into an SMB.

“We, on the whole, want to remove all of [those] manual efforts and the time it adds to an owner’s day in terms of having employees and managing a payroll, so that they can focus on doing the thing they went into business to explore.”

Filling The Holes In The Market

Most payroll software, she noted, is built for companies that have salaried workers. That, she said, is the most straightforward payroll to run — because once the basic benefits package information is in, it is more or less a “set it and forget it” kind of system. The world of hourly work, she noted, is much different. Those systems must be capable of calculating hours worked, overtime, tips pooling and the number of shifts worked. Allowing those business owners to outsource that to Square by building in check in and check out capabilities in the Point of Sale means that Square can calculate actual hours worked. The goal is for payroll to just run automatically in the background where the business doesn’t have to worry about it.

All that frees up time, Hollis noted, but the liberation is more significant than that. It also frees SMBs to hire more employees — because new workers become a tool by which to boost productivity instead of a new weight to be thrown into an operational process. SMBs unweighted by time mostly burned on manual processes can invest that time into growing, thriving and expanding.

“That’s good for the entrepreneurs individually, but also good for the economy as a whole,” Hollis remarked.