Considering the extensive role technology plays in our work lives, it’s somewhat surprising to learn that many small business owners and managers still process payroll the old-fashioned way. A manual payroll process can be time-consuming: According to a new survey from QuickBooks, some owners spend nearly five hours each pay period calculating, filing and paying payroll taxes. This works out to about 21 days a year!
Increasingly, the solution for busy businesses that process payroll in-house is to automate it. If you’re still using traditional payroll methods, here are five good reasons to make the switch to automation.
1. Simplified Collection
Historically, one of the hardest and most time-consuming parts of payroll activity is collecting and organizing data. Information must be collected from multiple departments, from several employees and in potentially different formats. If you’re using Excel, this can require many updates.
Using an automated system interface solves this problem. Data is input or edited just once — at its source. The system updates automatically so that all functions and calculations are based on the “latest and greatest” information. Prior versions immediately become obsolete and can be deleted. A bonus is improved data security, because the need to keep the data stored in various locations is eliminated.
2. Immediate Data Transfer
Automatic data collection can be part of an integrated system that enables information to be transferred between parties seamlessly. For example, if your HR department is integrated within payroll, the two systems can communicate as a single “voice of authority.” This means that the data used by each system is kept in one location. When needed, it can be accessed by linked functions.
Not only are traditional data transfers no longer required, but data is stored in the same format. So it doesn’t have to be exported to a different system or backed up to desktops. This simpler process frees up managers to pursue other priorities.
3. Automatic Validation
Automatic data validation is one of the hallmarks of an automated system. In the past, business owners might have spent hours — even days — manually checking spreadsheets against each other to verify that the information being processed is accurate and up-to-date. Then they would manually check the resulting payroll.
With automatic validation, you can customize your payroll system — for example, by establishing thresholds for salary increases and net costs. The system performs validation checks according to your directions. To simplify things further, validation procedures usually are triggered by a specified event such as “locking payroll.” Instead of spending time looking for errors, you can focus on any necessary revisions or implement changes to avoid future problems.
4. Better Time Management
As already mentioned, technologically sophisticated payroll solutions can save businesses a lot of time. For instance, you can schedule repetitive tasks to run and finish automatically. Many items involving data transfer are now initiated when the preceding activity is complete. For other tasks, the responsible payroll staffer is promptly notified when a job is ready to proceed to the next step.
Companies that still process payroll manually can find certain tasks, such as generating paystubs in conjunction with HR functions, particularly cumbersome. But advanced payroll systems are capable of populating paystubs in the HR system automatically. In fact, systems can be designed to allow employees to log in and directly access paystub information.
5. Shorter Overall Processing
Each of the previous four advantages involve time-saving steps. This fifth benefit reflects the cumulative efficiency of the automated process.
If your previous processing window was 12 days, automation could cut it down to ten days, and probably less. This shortened period translates into more data per payroll run with fewer required adjustments. Each automated step ensures that accurate and complete data is processed so that fewer supplemental runs are needed.
Time Is Money
As you know, time is money. And as an automated system saves you and your employees time, such savings affect your bottom line. There are, of course, some upfront costs associated with automation, but a system generally pays for itself quickly. For advice on how to upgrade your payroll system, talk to your accountant.