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As we get closer to year-end, many entrepreneurs have payroll on their mind. It’s at this time of the year that you get to decide whether you stick with the status quo or if it’s time to make a change.
Have all of your employees been paid correctly? Have you filed and paid all of your government taxes? Do you have to do your year-end reporting manually? And most importantly – how stress free has the entire experience been on your purse strings and your health?
If you’re in love with your current solution and don’t anticipate making a change anytime soon, you might fancy rewarding yourself with a funny cat cartoon instead.
But the rest of you – keep reading because at the end of this post, you’ll learn how your payroll decisions stack up against your peers.
Our expert advice on how these trends could affect your business and what you can do about it.
1. The number of small businesses using manual methods to run payroll has more than doubled since 2014.
While most small businesses are currently using a commercial payroll system, there has been a 13% increase in the number of users who are relying on manual methods like pen and paper or even Microsoft Excel!
“More than twice as many potential buyers are using manual methods to handle their payroll needs this year as compared to last year (24% versus 11%).”
Software Advice Payroll Software Small Business BuyerView | 2015
This trend could be a result of more small businesses doing payroll in-house in an attempt to reduce internal business costs. In fact, the findings show a drop in the number of buyers, outsourcing their payroll, going from 16% in 2014 to only 6% this year.
This is an alarming trend because relying on manual methods can result in costly errors. In 2013, the IRS issued 6.8 million penalties, totaling $4.5 billion, all in relation to employment taxes. That’s almost the cost of a new Navy destroyer! Failing to file or pay payroll related taxes could even be considered a federal crime if the IRS refers your case to the Criminal Investigation Division. That’s serious stuff!
In addition, there are security issues with maintaining manual payroll records, and you could also find yourself being non-compliant with payroll regulations if your manual methods don’t account for all the necessary paperwork that is due to the government.
Let’s face it! You may have payroll superpowers, but the pen and paper method is a tedious business, and even the most accomplished superheroes can make mistakes. Consider year-end reporting, employees across different states, new hire reports… insert any and all confusing payroll terms here!
That is precisely why manual payroll should always be handled with care and with plenty of research.
Our advice is to find a payroll software solution that gives you more control over your payroll while keeping your costs down.
There are a number of cloud-based payroll solutions that offer a subscription/transaction model, which are generally more affordable, and they can handle most, if not all, your payroll processing requirements – direct deposits, tax reporting, year-end reporting, etc.
We hope this cost-driven trend is short-lived because any mistake, big or small, could mean additional costs, penalties or legal punishment for you and your business.
2. Owners or founders are leading the search for payroll software.
In 2014, owners and founders only represented 6% of prospective payroll buyers, but this category has seen a significant jump to 21% in 2015.
This trend could be a result of small businesses not having access to an HR or accounting professional in-house due to cost constraints.
So, what’s the big deal?
Well, as the owner/founder of your company, you certainly play an essential role in guiding business strategy and making key operational decisions. However, it’s worth noting that unless you have a background in HR or Accounting, you lack the subject matter expertise to make an informed decision.
Our advice is to take the time to do your research.
Make a list of popular payroll software solutions that are available in your state and don’t forget to confirm if local taxes are also included. Review sites like G2 crowd offer comprehensive profiles on most payroll companies, and the best part is that you can see customer reviews simultaneously.
Outline all the basic features you need i.e. Direct deposits, federal, state and local tax reporting, W2s/1099s, and also include the not-so-basic features i.e. New Hire Reporting, Wage detail reports, etc.
Contact each of the companies on your list to get a quote on pricing for your required features. Most software companies have transparent pricing on their websites, and the quotes are based on a monthly subscription / transactional model.
By following these steps to get organized, you will have all the information you need to make an informed decision.
3. The two most common purchase drivers are a need for organization and missing features.
This third trend focuses on the reasons why small business owners are looking to switch from current payroll solutions.
The primary purchase drivers continued to be the same as last year:
Increase organization and efficiency, and
Current solutions are missing features/functionality.
A majority of the buyers would like their payroll solution to be part of an integrated software suite in order to reduce errors and eliminate a lot of unnecessary double entry of data.
But it’s worth mentioning that attempting to consolidate the core HR function i.e. payroll, benefits administration and time tracking can add a strain on your budget. Most payroll software companies integrate with third-party time tracking and/or benefits administration solutions to offer their customers core HR functionality.
Our advice is to ensure that you get a sense of all costs, including third-party costs when speaking to your list of potential payroll companies.
4. Reporting, Tax Processing and Employee Self-service are the most requested payroll functions.
Detailed payroll reports and complete year-end reporting are important payroll functions that keep your business compliant and in order.
So, it’s no surprise that reporting ranks at the top of the list of the most requested features among prospective payroll buyers.
This trend will continue to be a priority for small businesses because various government agencies at a local, state and federal level need access to proper returns to ensure that companies are being compliant.
Employees also need to have access to their W-2s or 1099s to do their own taxes, and by giving them access to these reports via their employee accounts reduces the burden on you and/or your HR team.
Our advice is to make sure that your payroll software provides detailed payroll reports, including relevant employee reports like pay stubs, W-2s / 1099s.
Keep in mind that even though, tax processing/filing ranks second on the list, it’s an extremely important payroll function and most payroll software companies offer this functionality, sometimes at an additional cost.
Despite the difficulty and increased risk of penalties, the number of small businesses using manual methods to run payroll has more than doubled since 2014. Our advice is to find a payroll software solution that gives you more control over your payroll while keeping your costs down.
Many owners and founders are making the big payroll decisions without consulting experts within their company or community. To avoid making a bad decision, our advice is to take the time to do your research.
Organization, efficiency and increased functionality can be found with integrated payroll solutions, but be aware that it can come at an additional expense. Our advice is to get a clear sense of all costs, including any third-party costs as a result of their integrations.
- Reporting is the most requested payroll feature because of the important role it plays in ensuring compliance. Our advice is to make sure that your payroll software provides detailed payroll reports for you and your employees.
And on that note, if you need any help finding the right payroll solution for your small business, think Wagepoint, your small business payroll service providers. With our payroll software, you get everything you need from a payroll standpoint, all for one simple price.