6 Risks and Inefficiencies Associated with Manual Payroll Systems

Can you be sure that the current payroll process your business performs each pay run is:

1. Compliant
2. Efficient
3. Secure
4. Free from Errors

And what about the potential consequences if you fail to ensure that your payroll run meets all these requirements?

These risks are what many businesses who use manual pay run processes face each week.

The result is an unnecessarily increased risk profile that can result in significant penalties and potentially irreparable damage to your business brand that you can never recover from.

What's frequently overlooked is not just the potential compliance risks but also the paradoxical belief that it isn't worth investing in all-in-one payroll software because it costs additional money. However, the savings in time by using all-in-one payroll software can have secondary implications on shifting your bandwidth towards other business functions that can save you money and improve efficiency.

So, what are the most common signs of a terrible manual payroll system?

Often, this is entered into a feature within your accounting software which it's able to calculate basic conditions such as tax and superannuation, but not much else, leaving out areas such as additional loading and penalty rates.

Then this information is entered onto payslip templates where potential errors can be made if not entered correctly. This means that every employee payslip needs to be checked before being issued - a significant waste of time due to double handling.

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Modern Awards and Enterprise Bargaining Agreements (EBA) are becoming increasingly complex and often require ongoing in-depth knowledge of the changes - something that many businesses do not have the time for unless they have a specialised payroll or legal department.

Using a manual payroll system as an attempt to adhere to this can add to an already time-consuming process. This will also be treacherous for businesses that operate in multiple locations with legislative changes in individual states.

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As employees work longer within an organisation, the process of accruing leave entitlements is a task that's not to be underestimated.

Business owners or payroll teams using a manual payroll system spend each week:

1. Gathering leave requests
2. Ensuring employees have sufficient leave in their balance.
3. Check to see if the leave balance has been signed off by their relevant manager.
4. Adjust the hours taken on the form and ensure that's tracked somewhere

The margin for error is high and once again, requires multiple staff members reviewing up the chain to ensure that any errors are captured before the leave is processed.

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In cases of staff turnover, without sufficient documentation of a manual payroll system, this knowledge can virtually disappear overnight when such personnel leave the business.

Having an all-in-one payroll software can mitigate this. By automating many of these processes that require very little knowledge, the system is designed to perform checks and balances on all aspects of payroll that a staff member would typically do for more manual payroll systems. 

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In a manual payroll system, a hard copy of a report is printed off and given to the Finance Manager or CFO for review.

The Finance Manager then annotates the printed off copies before being returned to the finance team to process these changes.

Once this has been completed, the pay run is finalised, payslips manually sent, lodgements such as superannuation are complete before a batch file is sent to the business' internet banking to execute the payment.

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Switching to a cloud payroll software will have significant benefits in reducing time spent on administrative tasks such as data entry and reviewing.

Tasks such as the issuance of payslips can be automated with payslip creation and distribution within the software. Also, staff can access their payslips and apply for leave through employee self-service functionalities with the software.

The result is that this frees up time to shift the focus on other business functions to improve time and cost.

Finally, having cloud payroll software as a solution will significantly reduce risks associated with compliance and errors that often occur with manual payroll systems. With regular updates as legislative changes occur, you can expect that businesses will remain at the forefront of staying compliant by using payroll software instead.

If you're interested in making the shift from a manual payroll system to a cloud payroll solution, Pay Cat are leading experts in Australian payroll. We help businesses find the right cloud payroll system that includes employee onboarding. Many professional payroll firms, as well as end customers, utilise Pay Cat for this unique service.

If you're interested in seeing how we can help your business make the transition, get in touch with us today.

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