Small businesses rarely have sophisticated payroll systems. Payments made by cash or check are common with cumbersome paper documentation of dubious accuracy. With such systems, tracking payments made to employees can be difficult. Lost time slips, missing checks, and concerns regarding underpayment or overpayment of employees are common. To resolve these problems, many small businesses are moving to automated payroll systems offered by third parties. When moving to an automated payroll system, expect a variety of benefits and a few challenges.
Improvements with Automated Payroll Systems
Automated payroll systems help increase departmental and organizational efficiency. An automated payroll system can reduce the costs of a payroll system by as much as 80 percent. This improved efficiency comes from a streamlined submission and approval system, a reduction in physical paperwork, and an increase in the speed of payments. Reduced overhead will contribute directly to increased organizational profitability.
Improved documentation is another benefit of automated payroll systems. Electronic records are more secure than manual payment systems and provide reliable documentation of cash outflows. When filing taxes, employers can easily determine the exact amount of funds paid to each employee without pouring through a potentially inaccurate ledger or digging through bank statements. Examining employee hourly histories and referencing payments is simple with an automated payroll system. This makes determining whether an employee is owed unpaid overtime a simple affair; this can be a point of contention in a company with an inefficient payroll system.
Automated payroll systems also allow for cost-effective compliance with governmental regulations. With sophisticated documentation, businesses can quickly determine withholdings from employee paychecks and determine their liabilities for government programs like Social Security. Additionally, modern payroll systems will provide efficient compliance with Sarbanes-Oxley and other regulations that otherwise provide a drain on modern corporate resources. Businesses outside the U.S. can also access systems that operate according to regional laws. A small business in British Columbia, for example, can easily find a system that functions in accordance with Victoria payroll policies.
Challenges Presented by Automated Payroll Systems
Like any new technology, the small business owner must learn to use the technology effectively. The small business owner must subscribe to the automated payroll service and enter all employer and employee data as necessary. This involves a small investment in time in order to research the chosen service and learn the new system.
Once you make the decision to implement a new automated payroll system, employees and suppliers must be integrated into the new system. Some suppliers may be unwilling to enroll in the automated payment program and will have to be paid in the standard manner; as a result, the business must still have someone responsible for accepting and processing submitted invoices on hand. Some employees may not understand the new system and must be trained to use it.
Automated payroll systems significantly reduce the costs of payroll systems. Employers can expect fewer discrepancies and disputes over payment amounts. Employers can expect other benefits, such as improvements in security and more consistent debits from company accounts. Employers should expect a brief transition period when moving to a new system in which employees may have questions or submit timecards or invoices incorrectly. After this initial transition period, employers can expect improved efficiency, productivity, and documentation.
Savannah Bobo is a freelance writer/blogger, English graduate, and former small business employee. A small business owner who knows the ins and outs of payroll systems and also know how to take advantage of technology is a step ahead in the game. Victoria payroll services such as NEBS PAYweb.ca can help streamline finances with no third party involvement and no special software requirements.