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Accounting & Finance

Are Payroll Software Solutions Worth it?

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Managing small business payroll is not as easy as people like to make out. Usually people who talk about it have worked in the same payroll manager position for many years and are used to dealing with W-4’s, or W-9’s suitable for contractors for the IRS. However, when running a small business, learning how to do payroll yourself takes time.

There are different choices when running payroll, paying wages or tracking staff hours. Small businesses can stick to doing it manually, they can use software to help with the payroll aspect, or use an integrated management solution that practically does it all for you.

Let’s now look at these choices in a little more detail.

Software for Payroll

Software is available just to run payroll. It will happily tot up the pay that’s due for each worker, perform the payroll calculations, prepare the tax forms for payroll to the IRS, and initiate the bank wire transfers to pay each employee.

This works fine for small to mid-size companies where staff tend to have fixed salaries without overtime where monitoring individual hours worked is less of a concern. For simpler payroll which doesn’t usually include time clock tracking, managerial oversight and sign-off, and other niceties, these solutions are quite workable.

When you need to go beyond the basics by integrating the functions of time tracking, vacation time, time sheets with GPS verification, along with detailed reporting at the local or regional level, a more integrated software solution is required.

Manual Payroll

Manual payroll can certainly be done with the help of a calculator, a ledger, and a solid understanding of the relevant tax rules. For people who have always completed payroll this way and have never moved up to a more sophisticated software solution, it’s certainly possible to continue in this manner. However, it doesn’t scale well at all when the company grows with an increasing number of employees, part-time workers and contractors.

Some parts of a manual process might still use computerized solutions to help out e.g. a timesheet for people to sign in and out or the collected monthly records from a clock-in/clock-out machine might confirm hours worked. Companies might have gone a little high-tech with biometric badges that confirm who’s on-site, when they arrived and when they left for the day. Some aspects of payroll might be performed in Excel too.

No matter the manual payroll procedures and patchwork software solutions deployed to complete payroll each pay period, it becomes awfully messy as a few employees gradually become a substantial workforce.

Better Managerial Oversight Using Software Solutions

Appropriate managerial oversight, particularly within the finance department is important. When there’s ever been an issue over questionable financial transactions and enquiries with the bank about them, having the right information to hand means issues get detected earlier.

With software solutions that offer digital timesheet recording, a supervisor can look over the timesheet information provided using a mobile app to check it for errors. This avoids either over- or under-paying members of staff by mistake.

Software for Payroll and Time Tracking

You can save even more time and stress if the software you use to run payroll also captures your time tracking data. This is especially valuable for larger, more mature businesses with many employees. Anyone working in a payroll role within an accounting department can quickly become overwhelmed by the complex task of aggregating and verifying time and attendance data for a large staff list. By generating ready-to-run payroll reports based directly on the data captured by your time clock, these more comprehensive software products can save your accounting team hours of work.

Customized Reporting and Data Analytics

Customized reporting and detailed analytical data are useful for senior managers concerned about the rising cost of payroll or spikes in the demand for staff in a seasonable business where payroll grows substantially. Rather than operating largely in the dark over variable staffing costs, by using excellent payroll software from a quality provider, it’s possible to compare month-to-month and past seasons’ staffing expenses.

When credible data is available, senior managers can better appreciate whether the workforce is growing with demand at the same rate or a greater number of staff members are managing less business revenue per employee. The latter indicates either a reduction in worker efficiency or perhaps low revenue per sale compared to previous years due to scaling up into less profitable markets.

While there’s no doubt that some companies can function satisfactorily using a purely manual system for payroll calculation and payments to staff, as the companies grow, running payroll becomes far less manageable this way. Some firms will move to payroll outsourcing, but this has worrisome security considerations and costs grow notably as the staffing roster balloons up. Managing payroll in-house using sophisticated, scalable software solutions is a far better option for most companies.

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