11 Tips for Small Business Owners Selecting a Payroll System

Managing payroll is a critical aspect for any employer that requires careful consideration. The Internal Revenue Service (IRS) penalizes nearly 1 in 3 businesses for payroll mistakes. As a small business owner, choosing the right payroll system is pivotal for ensuring accurate and efficient payment processing. In this blog post, we'll guide you through the key factors to consider when choosing the best payroll system for your small business.

It's essential to find a payroll system that strikes the right balance between affordability and functionality because we know small business budgets are often tight.

1.Assess Your Business’ Needs

Conduct a comprehensive assessment of your small business’ specific payroll needs before delving into researching payroll systems. The ability to tailor your payroll system to align with these needs will enhance its effectiveness.

Consider the following:

• The size of your workforce

• The location of your workforce (now and potentially in the future)

• Payment structures (hourly, salary, and subcontractors)

• Tax support for all types of workers

• Frequency of payments

• Benefits offered (stock options, health/dental/vision insurance, 401K, etc.)

• Any other unique payroll requirements

2. Budget Considerations

It's essential to find a payroll system that strikes the right balance between affordability and functionality because we know small business budgets are often tight. Payroll systems typically charge a monthly or annual base fee. You may be charged an additional fee for employees over a certain threshold depending on the number of employees you have. Look for a solution that meets your small business requirements without unnecessary frills that might strain your financial resources.

3. Trustworthy Reputation

Payroll systems with a solid track record are critical.  There are a few ways you can verify a company’s reliability. Check with the Better Business Bureau (BBB), conduct a Google search, read reviews, ask for client references within your industry, talk with other small business owners, and speak with your accountant. 

4. Compliance & Tax Regulations

Navigating the complexities of tax regulations and compliance is a crucial aspect of payroll management. A payroll provider that can automate and handle these taxes is a necessity. This is key if you are in a highly regulated industry. Ensure that the payroll system you choose can handle tax calculations accurately and stay updated with changing regulations. Ask how often their tax tables and regulations are updated. This feature is vital for avoiding legal complications and financial penalties. If mistakes are made with taxes or payroll, it will still be your responsibility as a business owner and not the payroll company.

5. Scalability

As your small business expands, so will your workforce. Many cloud-based payroll services are scalable but check that their features can meet more complex payroll requirements you might need in the future. Choose a payroll system that is scalable and can accommodate the growth of your business. This ensures a seamless transition without the hassle of changing systems frequently.

6. Time Saving

A payroll system that allows ease of use each pay period is key. There’s nothing like engaging in a manual and arduous process each pay period or year end to ensure accuracy.  A payroll system should run on autopilot saving you time on data entry throughout the year that can be re-allocated to other important tasks in your small business.

7. Employee Onboarding

Once you begin hiring employees, onboarding needs to be easy, or you’ll need to assign that responsibility to someone on your team.  Depending on how many employees you hire per month, there is a plethora of paper chasing, data entry, and recordkeeping that must be done.  Ideally, new hire documents such as offer letters, direct deposit forms, and background and drug test results should be easily completed and housed in your payroll system that can be integrated with your Human Resources Information System (HRIS).

8. Systems Integration

A payroll system that integrates seamlessly with other business systems, such as accounting or HR software, can significantly enhance overall operational efficiency. Seek a system that meets your future needs and not just your current needs. Look for solutions that offer integration capabilities to streamline data flow across different facets of your small business without disruption to you and your team.

9. User-Friendly Interface

Ease of use is paramount assuming you or your team are not payroll experts. Few small business owners and their teams can waste time on poorly designed web interfaces and software. Opt for a payroll system with a user-friendly, simple, and intuitive interface that minimizes learning curves. This ensures smoother adoption and reduces the risk of errors associated with complex systems. Also, if running or monitoring payroll on-the-go is important, ensure a mobile app exists that you can use.

10. Data Security

Payroll systems deal with sensitive employee information and financial data. A major consideration is researching if a payroll system has been a part of a recent data breach. Prioritize systems with robust security measures to safeguard against data breaches and unauthorized access. When seeking a system, also ask about any guarantees or protections if a data breach occurs. This is crucial for maintaining trust with your employees and protecting your business’ reputation.

11. Customer Support & Training

Responsive customer support can be a lifesaver where time is of the essence. Choose a payroll system provider that offers accessible customer support and training resources. Remember that you or your employees can have questions (especially when paychecks are issued) and being able to call (not just send a chat or an email) customer service is vital. This ensures that you can quickly resolve any issues and make the most of the system's features. Also, the payroll system provider should provide formal initial and ongoing training for you and your team since there will be a learning curve to master the technology. You should not be required to exhaust your own efforts with training.

Conclusion

Choosing the best payroll system for your small business involves a thoughtful evaluation of your specific needs, budget constraints, scalability requirements, and compliance considerations. By investing time in selecting the right payroll solution, you not only streamline your payment processes but also lay a solid foundation for financial efficiency as your small business grows. Enlist the help of an HR Consultant like CPR to help you in the process!

Disclaimer: The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information.