Managing payroll is a routine process for most businesses. Of course, being routine & being straightforward are two vastly different things: in truth, many small businesses find themselves struggling to complete payroll calculations every week! There are many different reasons for this, such as making mistakes or missing deadlines, but fortunately, these challenges can all be overcome by using payroll software for small business! Managing payroll manually may work for very small companies, but as your operations expand, it’s vital that you find a more efficient system to manage your payroll. If your company is currently struggling to maintain a productive & efficient payroll department, read on to learn how you can make these woes go away!
1. Human Error
Payroll employees make mistakes; it happens. Unfortunately, the IRS (Internal Revenue Service) is far less forgiving than your average person when it comes to mistakes being made, especially when it comes to payroll. Worst case scenario, a simple mistake that’s overlooked could result in fines & other penalties from the IRS, a situation that you surely want to avoid. According to recent studies, around 40% of small businesses incur $845 or more of fines from the IRS each year as a result of human error. Fortunately, although people are prone to making mistakes from time to time, computers are not. This is why switching to an automated payroll system can be so beneficial: it eliminates the risk of incurring penalties from human error! Of course, knowing that your employees are being properly compensated every pay period is also a helpful factor.
2. Processing Time
Even if your team is able to process payroll successfully without any errors, it’s a process that’s likely to take up a bit of time. To process payroll faster using in-house specialists, you’ll need to onboard more payroll staff, which increases overhead costs. This can be avoided by using payroll software to process payroll instead. An automated payroll system can complete your payroll in a matter of minutes, allowing you to actually downsize your payroll staff without sacrificing accuracy or efficiency. Software solutions are generally charged on a per-employee basis, which ends up costing far less than employing additional payroll staff.
3. Maintaining Well-Managed Records
Whether the result of a misplaced folder or a poor file management system, maintaining records that can be easily accessed is a challenge if you’re keeping paper records. It becomes nearly impossible as your company expands; the records are spread throughout multiple folders and file cabinets, making instant access impossible & disorganization likely. Because of this, many companies choose to maintain digital records instead. If you use a payroll software solution to maintain your payroll records, employee & payroll information can be accessed instantly by using the “search” feature, making it much easier to retrieve and compile information faster.
If you’re still managing payroll on paper, you’re essentially throwing money out the window. Software solutions offer quicker processing, accurate calculations, organized records, and lower prices than the alternative. Whereas the average payroll specialist costs $46,327 per year to employ, a company of 20 employees could be managed for as little as $1,440 per year using payroll software! Most likely, you also employ other employees to manage your Human Resources departments, but by using all-in-one payroll solutions, you can save even more money automating both HR and payroll!
5. Categorizing Workers Incorrectly
This is unlikely to pose much of an issue for very small companies. However, as your business expands it becomes very easy to overlook the details and accidentally miscategorize workers. In fact, employee misclassification takes place in up to 30% of businesses in the United States! Unfortunately, this can be a very costly mistake. For employees, you’re responsible for withholding deductions from their paychecks; with contractors, you’re not. Confusing the two can result in unpaid taxes, fines from the IRS, require reissued paychecks, and anger your workforce. Such oversights won’t be a problem if you’re using small business payroll software, as the system can identify worker types based on their pay frequencies and other factors. If it detects a discrepancy, the system will alert you, preventing the situation from spiraling out of control.
Offering faster processing, accurate calculations, and potential money savings, the advantages of using payroll software for small businesses far outweigh the slight inconvenience of switching over to a new payroll system. If you’ve already made the switch, then congrats: you’re ahead of the game! If not though, today is the best day to upgrade your systems and improve your payroll process.