Managing payroll is an essential yet time-consuming task for small business owners.
From calculating wages to ensuring accurate tax deductions, the complexities of payroll can often take valuable time away from focusing on core business activities. However, thanks to the advancements in technology, there’s now a game changing tool available — payroll software.
With the advent of payroll software, managing payroll has become significantly easier and more efficient. It goes beyond just automation — it streamlines processes, enhances accuracy, and frees up valuable resources and time that can be directed towards business growth.
So, if you’re a small business owner wondering whether payroll software is the right choice for you, or an outsourced payroll provider wondering how it can help you cater to the needs of your small business clients better, we’re here to help.
Let’s dive in and find out what the benefits of payroll software are, and how it can benefit your business.
How do small businesses manage payroll?
There are various methods small businesses can use to keep track of payroll tasks effectively. Here are some common approaches:
1. Manual methods
Many small businesses start by using spreadsheets like Microsoft Excel or Google Sheets to track payroll tasks. They can create templates with columns for employee information, hours worked, deductions, taxes, and more. However, manual entry and calculations can be time-consuming and prone to errors.
Some small businesses also prefer traditional paper-based methods, where they maintain physical files and documents for each employee. However, this approach requires meticulous record-keeping and manual calculations.
2. Payroll software
Small businesses can choose to invest in payroll software, specifically designed to streamline payroll tasks. They help to automate calculations and tax deductions, and also generate payslips and reports. Plus they come with lots of additional features like white labelling, tax filing, and integration with accounting systems.
Alternatively, those already using accounting software like QuickBooks, Xero, or Zoho Books can opt for payroll add-ons or modules offered by these platforms. This enables a seamless integration between payroll and general accounting tasks, simplifying overall financial management.
3. Outsourcing payroll
For small businesses with limited resources or complex payroll needs, they can also opt to outsource their payroll tasks to third-party payroll service providers or accountants. These providers handle all payroll-related functions, including employee payroll calculations, tax withholdings, payroll tax filings, and issuing payslips. It ensures compliance with legal requirements and frees up time for business owners and their small, lean team to focus on core operations.
What are the benefits of using cloud payroll software?
According to a study done by Clutch, almost half of all small businesses (45%) employ neither an accountant nor a bookkeeper, and 25% of small businesses still record their finances on paper, instead of on a computer. It goes to show that payroll processing remains largely manual, and business owners are often dealing with administrative payroll tasks that they are not entirely familiar with.
And that comes with many risks. While some small businesses may think it’s more cost-efficient to not pay for payroll software, we think otherwise. Here’s why.
For small business owners
1. Reduced administrative mistakes and improved accuracy
Payroll management involves complex calculations, tax regulations, and compliance requirements that are prone to human error. Small businesses often have limited resources and may not have dedicated payroll professionals, leading to mistakes that can have significant financial and legal consequences.
By adopting payroll software, small businesses can automate complex calculations and other payroll processes, minimising the risk of errors. It can accurately calculate salaries, taxes, deductions, and benefits, ensuring employees are paid correctly and on time.
Additionally, payroll software can generate automated reports or even send out report packs regularly, reducing the chances of manual data entry errors and facilitating compliance through timely statutory reporting.
2. Accurate time tracking for small businesses with shift workers
Small businesses usually struggle with cash flow, hence having proper timesheet tracking and rostering is absolutely crucial. Any issues such as overpaying or underpaying of employees, or over-forecasting manpower needed will impact them significantly.
It is also extremely taxing on small businesses if they run into any non-compliance issues. Not only will it impact their reputation with their employees or customers, it will also hinder their business. Not to mention having to spend precious time and money to resolve the issue. Payroll software can help provide accurate time tracking and reduce the risk of such situations happening.
Employees can use these tools to record their work hours, breaks, and time off directly. Automated time entry eliminates manual data entry and reduces the risk of errors associated with traditional methods like paper timesheets or manual spreadsheets. There are also built-in validation checks to ensure accurate timesheet submissions. This feature can flag potential errors or inconsistencies in time entries, such as overlapping shifts, excessive hours, or missed break times.
3. Ease and security of having data in the cloud
One of the biggest advantages of using payroll software is the ability to store and access data securely in the cloud. Cloud-based payroll systems allow small businesses to eliminate the need for physical storage of any kind. Especially when it comes to sensitive payroll information such as employee records, tax forms, and payment details — you don’t want to be relying on paperwork that can be easily misplaced.
By utilising encrypted and password-protected cloud servers, payroll software ensures that you enjoy enhanced data security, and that all sensitive data remains safe from physical damage, theft, or loss. In addition, cloud-based systems provide you with the convenience of accessing payroll information anytime and anywhere — so you can now manage your payroll remotely with ease.
For outsourced providers managing payroll for small businesses
4. Scalable according to business needs
All businesses experience various phases of growth, and as they expand, their payroll requirements evolve as well. Payroll software offers flexible scalability, allowing businesses to adapt their payroll processes to changing needs.
As an outsourced provider, your small business clients will eventually scale up too, and maintaining manual processes wouldn’t be flexible and fluid enough for you to keep up with the different changes. Utilising payroll software to manage your small business clients makes it so much easier to keep track of any changes, such as an increase in headcount, or expansion in the number of locations and more. Equip yourselves with the tools to grow and evolve with them, so you can build a strong long-term partnership.
As your portfolio of clients grows, you can easily fulfil the needs of more clients whilst still maintaining the same quality of services — simply by using payroll software to automate all payroll tasks. You won’t have to worry about investing more time or resources in order to cope with the growing number of clients. Plus, you can take on more small business clients whilst still maintaining the same headcount, which translates into more revenue for the business.
5. Comprehensive tracking and accountability
Rather than keeping files and stacks of paper in cupboards, payroll software enables you to maintain a detailed record of all payroll-related activities, including employee data, timesheet entries, earnings, deductions, tax withholdings, and payments. This comprehensive tracking provides an audit trail, and can be easily traced back if needed.
This is especially important for outsourced providers, as small business clients often don’t have proper processes to document payroll information, which is confidential information that should not be tampered or leaked. Using payroll software means you can step in to assist your small business clients in safeguarding all this confidential information securely, and eliminate the risk of any data leakage.
Also, when your attention is divided into managing multiple small business clients all at once, having an audit trail to refer to can help to alert you to any key issues. You can then offer your clients any necessary advice or services quickly and promptly.
6. Record keeping according to legislative requirements
Need to pull up a payroll record? There’s no need to go diving into your files and spend a whole afternoon finding one piece of information. Especially if you have many small business clients. Statutory legislation also often requires businesses to keep payroll records for a set number of years, even after an employee has left the company.
Payroll software eliminates all that hassle by providing secure data archiving and storage capabilities, which ensures that historical payroll data, including audit trails, are securely preserved for the required duration as mandated by local regulations. Having reliable and easily accessible archives of payroll-related information facilitates efficient retrieval of data during audits or compliance reviews.
Also, any issues or penalties arising from non-compliance affect small businesses the most, because they usually don’t have a legal team nor the time or money to resolve such issues. By utilising payroll software, you help your small business clients to mitigate these risks and ensure compliance with local employment laws, so they can fully focus on business growth without any worries.
Simplify payroll operations with Employment Hero
Many small businesses struggle with tight budgets and limited resources, but that doesn’t mean you have to resort to processing payroll manually. Manual payroll management can be time-consuming and error-prone, and result in non-compliance which leads to costly penalties.
Let Employment Hero help you out. Our all-in-one payroll solution caters to businesses of all sizes, including small businesses. And if you’re looking for a cost-effective solution that covers all your payroll needs without breaking the bank, check out our brand new plan, Employment Hero Payroll Essentials.
In this plan, you’ll have access to basic payroll functionality, payslips, automated leave accruals, public holiday updates and statutory reporting. Get started for only $2 per employee, per month*.
Designed for small businesses, it’s time to revolutionise the way you do payroll. And if you’re an outsourced payroll provider, speak with us to learn more about how we can help.
Need more help with payroll? Check out our payroll guide for more helpful tips.
*Terms and conditions apply.
