Payroll management is one of the most important processes a business consistently undertakes. From ensuring accurate and timely payments, complying with tax regulations, managing employee categories, and scaling for growth, payroll is more than simply cutting checks.
This being said it is clear why payroll is also one of the most challenging business processes. The intricate details of each paycheck can be daunting for businesses, especially those that rely on outdated systems and manual processes.
Read on to learn more about the challenges of payroll management and how the right payroll service solution can help.
Challenges of Payroll Management
Without the right processes, payroll administration is prone to error. Ernst & Young (EY) recently reported that the average company has an 80% payroll accuracy rate and makes 15 corrections per pay period. These corrections can be costly and time-consuming to resolve. The inaccuracies can also be frustrating for employees who often start looking for a new position after just one payroll mistake.
Here are some of the common challenges payroll management businesses face:
Manual Errors and Inconsistencies
There is a lot of information required to keep accurate payroll records. This includes everything from employee classifications and exemptions to tax rates and, of course, the hours worked by your employees.
When manually entering all this information, it’s easy to see how mistakes can occur. Even the smallest accounting error can drastically affect payroll data and lead to mistakes surrounding tax withholdings and gross pay that can cost your business money and time to fix.
Misplaced Documents
Many small businesses that rely on manual payroll management processes analyze pay stubs and keep paper records of payroll information. It’s easy for documents to become lost or misplaced, leading to miscalculations and errors.
Handling Varied Employee Categories
Understanding employee classifications is key to a seamless payroll process. Forbes explains that employees can often fit into two categories, contractors and full-time employees. If you misclassify employees, you could wind up with a lot of issues down the road, such as penalties for unpaid taxes.
You also need to consider which of your employees are exempt or non-exempt. The former is not protected by The Fair Labor Standards Act (FLSA) and cannot receive overtime wages, while the latter can receive overtime pay.
Properly classifying employees ensures your payroll team can calculate taxes correctly, pay employees fairly and remain compliant overall.
Compliance with Payroll Rules and Regulations
Speaking of compliance, it’s essential for businesses to remain compliant with both federal and state regulations. The Fair Labor Standards Act (FLSA) outlines minimum wage, overtime, recordkeeping, and more rules.
Benefits of Payroll Service Solutions
Even the best payroll department can be bogged down by these common challenges. And for many small businesses, HR is tasked with payroll on top of other responsibilities, which can add to the confusion.
One of the best ways to ensure an accurate and efficient payroll is with payroll manager software. Business.com emphasizes that an organized payroll management system can both streamline your finances and eliminate human error. It gives employees peace of mind they will be compensated on time and in full and also keep your business compliant with government regulations.
Payroll-managed services put all your important payroll information in one place. The combination of time-tracking tools and customized permissions ensures employees are paid accurately. At the same time, payroll taxes are calculated and filed automatically, along with full payroll reporting.
In short, the right payroll management system streamlines payroll and gives your business a holistic view of its finances to help make accurate, strategic decisions for your future.
Choosing the Right Payroll Service Solution
Of course, not all managed payroll services are created equal. Modern businesses need a holistic, scalable solution to help simplify their finances and help them grow. Here are a few factors to keep in mind when choosing a payroll processing system:
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- Do you want an on-premise system or a cloud-based system? The latter is often more affordable and easier to set up but offers less control and flexibility.
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- What are your business’s specific needs? For some, direct deposit may be a priority, while time tracking is the main focus for other businesses.
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- What is your budget? Some payroll systems charge per employee monthly, so make sure you can afford this solution.
Implementing a payroll management system comes with a learning curve, but the payoff is priceless. Accurate, efficient payroll is essential for business continuity and keeping employees engaged and productive throughout the years.
How FINSYNC Can Help
FINSYNC allows you to run your business on One Platform. You can send and receive payments, process payroll, automate accounting, and manage cash flow. To learn more about how we can help your business start, scale, and succeed, contact us today.