advantages of a payroll. Small and mid-sized business owners frequently try to complete their payroll on their own. But that’s almost universally a mistake. If you’re still struggling with a spreadsheet (or, even worse, with paper documents), you should consider the advantages of a payroll accounting system.
Payroll accounting systems aren’t just for large enterprises. They can greatly reduce the time spent on payroll and potentially costly mistakes. Let’s look at some major advantages.
Keep Track of Payroll Accurately
First, one of the most important advantages of a payroll accounting system is that it can help business owners keep track of their employees’ payroll accurately. Payroll rates change, employees change their deductions, and health insurance rates are updated. When business owners try to complete payroll on their own, they often make mistakes. This can lead to overpaying or underpaying employees, which can result in significant financial consequences for the business owner.
Complete Your Payroll on Time
Another advantage of a payroll accounting system is that it can help business owners produce their employees’ paychecks on time. This isn’t just an issue with employee morale; you need to pay your employees on time to be compliant with state and federal laws.
If you find that it takes you hours rather than minutes to run your payroll every other week, a payroll accounting system will help.
Pay Your State and Federal Taxes
If you don’t pay your taxes on time, you may be subject to interest and penalties. And, as noted, if you don’t withhold the correct amount from your employees’ paychecks, you may end up owing more than you withheld. Small business owners commonly make mistakes with deductions, as they are difficult to properly reconcile. A payroll software system will automatically generate payments to state taxes, federal taxes, unemployment insurance, social security, and more.
Manage Employee Time Off
A payroll accounting system can also help business owners track and manage employee time off. This includes vacation days, sick days, and personal days. If you don’t have a system to track employee time off, it can be difficult to properly manage your employees’ vacation and sick days. This can lead to disruptions in your business and unhappy employees.
Let employees request time off through a consolidated payroll platform—and automatically avoid any scheduling issues. When employees can manage their own time and find coverage for themselves, everything runs more smoothly without your intervention.
Track Employee Absenteeism
Payroll systems don’t just track hours for the purposes of payroll; they can also help business owners track employee absenteeism. This is important for two reasons: first, it can help you identify employees who are frequently absent; and second, it can help you track the impact of absenteeism on your business.
If you don’t track employee absenteeism, you may find that it’s difficult to identify patterns or problems. If you aren’t there every single day (or don’t have a supervisor paying attention), it’s easy for things to go unnoticed until they have become a larger problem.
Create an Audit Trail for Employee Payments
If employees do ask you questions about their payroll, how long would it take you to answer them? If you have an employee payment portal in your payroll software, they can answer their own questions. Further, you will have an audit trail if what you paid them ever comes into question.
Reduce Both the Time and Money You Spend on Payroll
The final advantage of a payroll accounting system is that it can help business owners reduce the time and money they spend on payroll. This includes the time spent calculating paychecks, printing checks, and distributing checks. In terms of money, a good payroll accounting system will be less than trying to hire a bookkeeper or an outsourced payroll service.
And, speaking of outsourced payroll services…
Payroll Accounting Systems vs. Outsourced Payroll Services
With all of the above in mind, you may be wondering why not just outsource your payroll?
Using a payroll accounting system still keeps you in charge of your payroll and your schedule. This is especially critical for those with complex or dynamic scheduling.
A good payroll accounting system is more than just a payroll service; it includes quality-of-life features such as the ability to schedule employees on the fly and track paid time off.
And many payroll accounting systems can export directly to an outsourced payroll service so that checks or ACH payments can be sent out—so it’s not necessarily a scenario of one vs. the other.
What’s Holding You Back?
For the most part, small business owners don’t deploy a payroll accounting system for a few reasons:
- They’re worried about having to learn a new software solution. Luckily, most payroll systems are extremely intuitive.
- They are worried about the cost of a payroll system. But payroll is actually one of the most commonly outsourced features and it’s usually fairly inexpensive.
- They don’t feel that payroll is complex enough to merit a new solution. Unfortunately, you probably won’t realize how complex payroll is until you’ve made a major error.
A payroll accounting system reduces the chance of errors and administrative time—while keeping employees happier. Many business owners are surprised to discover just how inexpensive a payroll system is and how easy it is to learn.