Payroll may not be a whole lot of fun, but it’s one of those things that simply needs to be done. And when you’re walking the fine tightrope between having enough staff to make money, but not so many that they’re wasting money, payroll can become even more tedious.
We know. Because many businesses ask us to do it for them.
But that’s not the point.
The risk of error that surrounds payroll within the SME sector is huge. Businesses are focussed on growth, survival, outlasting – the types of activities that determine their survival – and the types of activities that overshadow the more mundane, yet critical, back-office operations, like payroll.
And surprising as it is, the risk of human error still abounds as many organisations still rely on spreadsheets to administer their core processes. Huge room for failure – making potential pitfalls in non-compliance, the make-or-break of your business.
Knowing the Facts
The biggest governing factor about successfully managing your payroll, is the need to be compliant & responsible. And although somewhat wordy, the Government’s payroll pages are a great place to start. From calculators to PAYE tools, they have put together a list of resources aimed at helping UK businesses keep themselves in check. Whether you import or export, whether you’re VAT registered or not, the intricacies of IR36, gambling duties and childcare – the list is comprehensive and provides a great reference to anyone who needs to keep themselves up to speed.
The HMRC pages themselves offer a wide selection of blogs and articles about the latest changing standards and regulations – and it’s always a good idea to ensure that you are aware of any and all changes (current and forthcoming) that may affect your business, and your industry.
Your business plan needs to remain agile – and while you think you’ve built up the necessary reserve against risk – changes in law, like the recent GDPR standards, could result in substantial operational changes needed for your business.
Half the battle won is through simply keeping up to speed with things like correct employee classification, important dates and deadlines, auditing your internal systems regularly. Keeping your payroll records tidy and organised pays off in the long run – meaning that any historical data you need to access quickly, will be available to you without the need for endless searching. Forget the filing cabinet, consider the cloud. Keep your functions matched up so that your HR function can easily access employee records when they need to. Thinking about your payroll function not as an isolated ‘must-do’ but rather as a ‘critical inter-functional can-do’ is the first step to thinking about how your data is organised. Think about naming conventions and data strategies that make sense throughout your business. You never know when you may need it most.
Especially when your auditors decide to pay you a visit.
Investing in Software
Yes, the talk of the town (for the last several years) has been digital disruption. And while many business owners would think that it may not apply to them, things couldn’t be further from the truth. In fact, in a study conducted by Wakefield Research and Concur (2017), and Gartner (2015), the scary reality is that the majority of SMEs in the UK still use spreadsheets to track their invoicing, their spending, their payroll, plan their budgets.
And that at a time when many automated systems cost next to nothing.
In the same study, The Wakefield Research and Concur data showed that 42% of small businesses surveyed have errors in matching invoices to clients. Another 42% say they’ve experienced errors reconciling invoices. And when every penny matters, that’s a real problem.
So, before you wave another digital message away, perhaps it’s time that you start to count up how much money you’re losing, simply because you haven’t yet looked at a better way of doing things.
Letting someone else do it
For some business leaders, keeping on top of their payroll and finance processes is simply something they’re not cut out to do. Which is why they choose to let others do the heavy lifting for them.
According to Kathy Lloyd (EY tax team), for a small business to decide which model is fit for purpose, upfront planning is vital to ensuring the correct level of investment is made in terms of both time and money. It’s critical to get the best tax advice from specialist and reputable counsel in order for the business owner or leader to make the best decision within the complexity of the process. She adds, “They should factor in the external environment, company growth and mid- to longer-term business goals,” she continues. “Taking such an approach would ensure the payroll function develops and grows in line with the business. If the person running payroll is pulled onto other matters vital to the business and errors are creeping into pay runs, outsourcing may be a good option.”
When a business grows, your focus should be on your long-term sustainability. It’s usually at this stage that agile organisations look towards their network to look after critical business functions on their behalf – working in collaboration with their business goals.
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