5 signs that it’s time to review your payroll system
23rd August, 2016
At what point should you consider a change in your payroll system?
All too often small businesses reach crisis point before making a decision to review, improve or change. This puts people, systems and relationships under pressure, which is never good for business or morale. Worse still, leaving it too late can result in the loss of key staff through illness or resignation.
Here are some early warning signs that your payroll system may be in need of an overhaul.
1. The vicious cycle
As each pay day rolls round, you find yourself in a familiar pattern.
You spend most of the morning chasing timesheets from staff, deciphering the handwritten ones, reconciling or querying variations from the roster.
Then you have the joy of manually keying the hours into the payrun, checking the payroll calculations on your trusty calculator and logging into your online banking to make wage deposits.
Time and wage records are stuffed into a shoebox that you’ll sort later and that’s another week done.
Sound familiar?
But then you realise you’ve missed the 20th of the month deadline for lodging the PAYE and filing the monthly IR reports. So you’re on the phone to IRD to plead for leniency (which never works), and risk a late payment penalty.
When employees are chasing you about payroll errors, annual leave balances or payslips, it can put you under extreme pressure. If you find yourself still trying to clear errors from the previous week’s payroll while setting up the following week’s payroll, this is a recipe for disaster.
2. Growing pains
Your business is growing organically, which is great! But you know you’re going to outgrow your current systems and procedures at some point.
There has been the odd issue here and there but they are becoming more frequent.
Or perhaps you’re approaching a peak trading period and need more staff. Along with recruitment, you need to set up new team members in your existing payroll system.
Can it cope? If you’re not prepared or your system is not scalable you could be in trouble.
A good payroll system should meet your needs now so that you’re not paying for features or functionality you’re not using. But it should have the ability to “add-on” new functionality and grow with you.
4. Compliance
Staying on top of legislation, compliance and employer obligations changes can be a constant challenge, not to mention IRD payments and reporting deadlines all while trying to run your business.
Do you know if you’re compliant with the employment laws when it comes to the minimum wage, parental leave and holiday pay?
Are you working off the right tax rates, ACC levies, Student Loan and KiwiSaver rates?
If you’re not sure, you’re in trouble. Besides being liable for any underpayments to employees and interest-bearing penalties to the IRD, you can be audited at any time by the Labour Inspectorate and fined or even imprisoned if found in serious breach of the Employment Standards Legislation Bill.
5. Desktop ball and chain
Or maybe you’re tied down to the one desktop PC where your payroll software is installed.
You don’t have the ability to log in when out of the office. You also find you’re exporting, emailing, importing data files to/with/from your bookkeeper or accountant. In this day and age this way of working breeds inefficiency and is not sustainable in the dynamic world of the small business owner.
Desktop, disconnected, CD-ROM, data entry, human error – these are all remnants of payroll yesteryear.
Our world is getting more connected and payroll systems are getting smarter. Online accounting software has changed the game and integration connects you to people to streamline the process from end to end.