How to bring your payroll system up to date

Small Business Guides

7 min read

If your payroll software is more than a few years old, it might be holding your business back. New systems can do much more for you in less time. So how can you bring your payroll system up to date?

Payroll is getting easier

Managing payroll is necessary for any business that employs people. Even if you're the only employee of your business, you may still be legally required to be on the payroll.

But payroll means more than just ensuring your employees are paid correctly, regularly, and on time. It also means:

  • tracking employee hours
  • managing benefits and healthcare
  • recording pension or superannuation contributions
  • paying and accounting for expenses
  • complying with legislation
  • handling tax reporting and payment
  • tracking vacation time, maternity and paternity leave
  • processing new joiners and leavers.

All of this used to be hard work. But new software is making life easier for businesses all around the world. And it's giving those businesses a competitive advantage. By saving time on payroll, they're saving money too.

A challenge for established businesses

Businesses starting from scratch today have some fantastic labor-saving options available. But where does that leave more established businesses?

The software package you chose when you launched your business might have been the right one at the time. But is it the right one now?

Technology is changing business systems

Technology is changing everything. As software becomes more connected, it's touching every area of business life. For example:

  • Social media puts you in closer contact with your customers.
  • Dynamic websites help you market your products and services.
  • Collaborative tools let you share documents and information online.

These and other business tools are based in the cloud or online. You can access them from anywhere, logging in securely using a smartphone, tablet or laptop.

And these tools are connected – data flows between them to help you work faster and more intelligently.

Eight great benefits of cloud-based payroll systems

Conventional payroll systems don't have cloud connections. But new ones do. That opens up all sorts of time-saving opportunities. When your payroll is integrated with other systems:

  1. Employee hours can be tracked automatically instead of being input manually.
  2. Salary payments can be scheduled and made directly, via automated bank transactions.
  3. Employees can be given limited access, to update their personal records or apply for leave.
  4. Payroll data can be shared with accounting systems to reduce duplication.
  5. Individual tax codes can be updated automatically.
  6. Tax reporting and filing can be simplified with pre-filled online submission.
  7. Data can be mined and analyzed, with useful reporting tools.
  8. Backups and software updates are handled remotely.

All of this can cut your expenses significantly. But once you've decided to update your payroll software, how do you go about it? How do you get from where you are now to where you want to be?

Analyze your requirements

Any new system is only good if it meets the needs of your business. What suits a big manufacturing company might not be appropriate for a small retail business.

So make a list of your current requirements, and also think about your wish list:

  • Write down exactly how you use your existing system.
  • Get feedback from people in all areas of your business.
  • Ask your staff what they would like to change about the current system.
  • Research online forums and find out how similar businesses are using payroll.
  • Talk to business mentors, partners, trusted clients – ask which tools they use.

After doing this you'll have a better idea of what you can expect when you upgrade. You will probably also have a short-list of software that might suit your business. Find out if you can run free or low-cost trials of that software, to see which would suit you.

Remember, the more research you do at this stage, the smoother the transition process will be. A good payroll system will stay with you for the life of your business. It pays to get it right.

Make sure your staff know how to use the updated system – before it's implemented.

Five steps to making a change in your software

The biggest problem you're likely to face is the transition process itself. Moving from one system to another might be complex – which can be expensive. But you can make it easier by planning carefully.

  1. Get the timing right
    There's no point in moving to an updated payroll system in the middle of a financial quarter. Leave it until the end of the three-month period. Then you'll be able to reconcile the data and move it all across in one go. It's even better if you can wait until the end of the financial year. But then you may have to offset the ongoing cost of using your existing system for longer.
  2. Get professional advice
    You may already have an accountant or bookkeeper. You might even be outsourcing some of your payroll work to them. So talk to them, find out how they can help you make the move to your chosen new system. Getting them involved now will help you streamline the process.
  3. Avoid downtime
    Payroll is an ongoing job – there's always something to be done. So if the system you use is inaccessible for a day or more, that could have a big impact on your business. Try to schedule the transition for a weekend – preferably one with an extra public holiday attached. Hopefully there won't be any problems, but if there are then at least you'll have time to resolve them.
  4. Run parallel systems
    Don't flip the off-switch on your old system straight away. Consider running the two systems in parallel for a few weeks. It will help you cross-check any errors or unexpected figures. Archive the data from the old system when you do finally switch it off. It contains valuable business information, and you may want to refer to it at some point in the future.
  5. Train your staff
    Make sure your staff know how to use the updated system – before it's implemented. You can do this with trial accounts, online web training and documentation. All of these will be available with quality cloud-based payroll accounting software.

As with most areas of business, proper planning will help everything go smoothly. This is a fundamental part of your business, so you shouldn't simply dive in without preparing carefully. The pay-off for this work is you'll end up with a much better, flexible payroll system.

Why it’s important to stay up to date

Once your payroll system is fully up to date, you'll want to keep it that way. Here’s why:

  • Regular updates
    Cloud-based software is updated regularly and automatically. You don't have to wait six months for a new, bug-free version. Critical updates happen while you sleep.
  • Subscription-based payment
    Instead of paying a large lump sum for boxed software, you'll be paying on a monthly basis for access to online systems. This usually works out cheaper in the long run, and makes it easier for you to budget.
  • Backed by the experts
    Cloud-based software companies have professionals working full time on your payroll system. So you'll have peace of mind that your payroll data is in good hands.
  • Automated backups
    Your data is stored on remote servers which are securely and regularly backed up. Using a cloud-based system instead of an in-house one means there's less chance of your data being compromised.
  • Strong security
    Payroll data is confidential information. So storing that information on remote servers is safer than leaving it on a desktop computer in your office. With online payroll software your data is stored on a secure encrypted connection. Read our introduction to cloud security for more information.

Make the most of your updated payroll system

Once you've brought your system up to speed, you can start using it in new ways. Investigate add-on software, extra reporting features and ways of connecting to your accounting system.

Having made the jump from a traditional system to a connected online one, you'll have plenty of new opportunities.

An up-to-date system will put all your payroll information in one convenient place. It can bring you new insight into your business and its finances. This in turn will help you find ways to grow your business – without spending a fortune on payroll.