3 Signs That Your Payroll is Stuck in the Dark Ages

Natalia Autenrieth In her professional lives across the United States, Natalia Autenrieth, CPA has audited Fortune 500 clients as part of a Big 4 team, built an accounting department as a controller of a large hospital, and served as a CPA consultant to municipalities. Today, Natalia coaches in the financial industry and writes about business finance, financial technology, and personal money management. Her ghost-written articles have appeared in thought leadership and expert blogs, as well as Kiplinger and Accounting Today. Read more about Natalia and her practice at www.AutenriethAdvantage.com.

3 Signs That Your Payroll is Stuck in the Dark Ages

Most small business offices these days have wireless printing, video conferencing and cloud document vaults. However, chances are they still use payroll workflows that are 50+ years old. In terms of the speed with which new technologies are developed and perfected, that is practically Dark Ages!

Sure, the typical tasks of payroll processing have remained unchanged. You still have to keep track of hours, calculate wages, withhold taxes and deductions, print and deliver checks and pay employment taxes to the government. However, if you are doing it all the old-fashioned way, you are doing your business a disservice. Here are three reasons why.

First, manual (or mostly manual) payroll processing is risky. The IRS code is complex, and new regulations are being added every year. Are you certain that you are up to date on the most recent guidance? If problems arise, you are exposing your company to costly IRS penalties and fees.

Second, manual processing takes too long. Staying up to date on complex rules is just the beginning. Tracking time and calculating payroll manually, filing and paying federal, state and local payroll taxes on time is a full-time job. Most small businesses do now have a dedicated HR/payroll manager, so this translated into more work for you.

Finally, legacy systems are a hassle. Cutting and mailing checks, maintaining spreadsheets and making sure employee personal information is up to date are activities that don’t add value and are only somewhat effective in minimizing your risk exposure. With a cloud solution, you can empower your employees to make changes to their own files, request extra copies of forms and do other basic account maintenance.

What are some of the advantages of the modern payroll packages?

  1. They can be set up quickly. A simple small business can transition its data and get started in a matter of hours or days.
  2. Payroll cycles run fast (as in, a few minutes fast). You cannot do manual calculations and processing that quickly and accurately.
  3. Cloud software is always accessible. Updates are easy and effortless. You don’t have to worry about space on your server or upgrades.
  4. Payroll processing is secure. In fact, many of the cloud service providers are considerably more secure than your own office because they make a consistent high investment in encryption and infrastructure.
  5. You are no longer forced to choose between having it all (expensive bells and whistled included) or nothing. Packages come in a range of functionality from payroll only to full-on HR system. Some vendors will allow you to pick and choose and help you build the ideal package to suit your needs.

Are you looking to implement a modern payroll cycle?

Here is your blueprint.

  1. Research your options. There are dozens of software packages in the market. With some due diligence, you will be able to find the one that fits both your needs and your budget.
  2. Be clear on your needs. Every small business needs something a bit different. Do you need to track hours worked, vacation and sick time accruals, manage deductions and transfer tax files to the appropriate filing service? What about integration with the general ledger? Some companies can benefit from an ability to develop an organizational chart complete with project billing codes, while others would find that unnecessary. Know what you need so that you don’t get sold on bells and whistled you won’t use.
  3. Ask for user feedback and references. How long has the company been in business? Do they offer unlimited support via phone or online portal? How do they handle the need for onsite help or urgent requests outside business hours? Do they have history of successfully supporting businesses of your size in your industry?

Getting your payroll out of the Dark Ages

When selecting a new payroll system, there are many important factors to consider. Be sure to do you research, reflect on your needs and define your budget. Your choice of vendor will define your experience, so investing in due diligence on the front end is entirely worth it.