3 Key Insights to Payroll Processing
Most small businesses would have considerable difficulty operating without their employees. Whether your business offers a product or service, a dedicated labor force helps drive growth and profitability in addition to managing day-to-day operations. Employees do not just play a critical role in the success of an organization, they can also represent one of the most significant costs reported within a company’s financial statements. With such a high level of value and cost surrounding employment, it is critical to help ensure that accounting and finance teams have sound procedures and systems in place to facilitate payroll processing. Effective payroll processing resources will help provide the tools to onboard, compensate, report, and track employee information and will also provide the ability to help meet tax and other compliance requirements. Whether an organization is paying employees for the first time or re-evaluating current payroll processes and procedures, careful consideration should be given to the overall payroll process.
Payroll needs assessment
While payroll processing and compensating employees has been around for generations, processing payroll has never been more complicated. A heightened regulatory environment, the presence of remote work, additional filing requirements, and payroll processing platform alternatives have all contributed to the growing complexity of payroll processing. Accordingly, when designing an organization’s payroll cycle, it is crucial to carefully analyze the specific payroll-related needs of the organization and employees, including:
- Time tracking – Will the organization need to track time for both hourly and salaried employees?
- Remote work – Are there any employees working outside of the employer’s physical jurisdiction?
- Workforce composition – In addition to employees, will nonemployees be paid?
- Employee count – How large is the current or projected company labor force?
- Accessibility – How accessible is payroll information to employees and third parties?
- Reporting capabilities – Do the system reports provide information necessary for decision making?
- Other reporting needs – In addition to tax compliance, does the system produce information necessary for other areas (insurance, retirement plans, etc.)?
- Complexity of earnings and deductions – Does the company have complex earnings and deductions that will need to be reported through payroll?
- Benefit accruals – Do accumulated paid time off balances need to be tracked and reported?
- Detail tracking – Does the system allocate payroll data in alignment with accounting needs?
- Systems integration – Does the processing solution integrate with the accounting system?
- Scalability – Can the system grow with the organization?
- Support – What level of support over payroll will the company need?
- Data security – Will employee and company information be protected?
Select a provider and platform
A thorough payroll needs assessment will help generate the specific objectives of evaluating and selecting a payroll provider and processing platform. There are countless payroll providers in the market today who all offer varying levels of service, functionality, and technology at varying price points. It is important to select a provider who can help match the objectives generated by the payroll needs assessment. Selecting an experienced provider can help assist with:
- Efficient, timely, and accurate payroll
- Full-service tax compliance and notice response
- Compliance with updated payroll-related regulations
- Personnel management
- Automated accounting
- Document retention
- Cost reduction
Although selecting a payroll provider and processing tool is a very detailed and time-intensive process, it should be periodically assessed to determine if the organizational payroll needs have changed and if the previously selected platform and procedures still meet the current objectives.
This article is a selected piece from By the Books: FORVIS' Complete Guide to Small Business Accounting & Finance, which we are excited to release in April 2023. Subscribe to our Small Business list to get future updates and articles and be the first to receive the full guide.