How to build a business that runs smoothly?
Finance. More specifically, how money moves through your business.
And of all the financial functions within a business, payroll reaches the most departments. Processing payroll accurately and on time is simple…
In theory.
The problem?
Payroll is broken at most businesses. Between payroll mistakes costing companies thousands each year and payroll problems causing employees to jump ship, smart financial management is difficult.
Until you get payroll right.
That’s why this guide exists. Here’s what’s covered:
- What Is Payroll Management & Why Does It Matter?
- Why Customizable Accounting Software Changes Everything
- How Much Are Payroll Mistakes Really Costing You?
- Key Features Your Payroll System Needs
- How Effecient Payroll Helps Your Business Grow
What Is Payroll Management & Why Does It Matter?
Payroll management is just that — managing payroll. Calculating wages, withholding taxes, distributing paychecks and keeping records for all employees.
Simple. Right?
Well, not really. With all the steps involved in processing payroll there are opportunities for things to go wrong. When you factor in hours, overtime, taxes, employee benefits, compliance rules, etc. it’s easy for one small mistake to become a much bigger headache.
Payroll is one of the most critical functions your business will perform.
And why does it matter?
Because payroll isn’t isolated to the accounting department. When payroll is successful (or not), it trickles into everything from employee satisfaction to tax compliance to your overall business reputation. Run your payroll properly and watch how much smoother everything else operates.
Why Customizable Accounting Software Changes Everything
Every business is different.
A brick-and-mortar shop has entirely different payroll needs than a mobile construction business or independent contractor. That’s why a customizable accounting solution designed for payroll is so crucial.
One size fits all payroll softwareforces businesses into a rigid box. But the best payroll management systems understand every business has different needs. Customizable accounting software empowers you to set up tax configurations, payment frequencies, deduction types, and report formats that work for your unique business.
Not to mention when you sync your payroll with your accounting software everything lives in one place. Using accounting software with payroll built in means you’re not switching between programs or manually transferring data. From wage calculations to tax filings, payroll and accounting integrated into one system saves precious time and reduces your chances of making errors.
Plus the right payroll software grows with your business. Whether your team is five employees strong or you have fifty on payroll, the platform should easily scale as your hiring needs increase. That’s what sets a useful tool apart from a true financial management system.
How Much Are Payroll Mistakes Really Costing You?
Small. Payroll errors may not seem like they’re a big deal.
Your employees won’t take off without pay? Big whoop. But when you look at the numbers they start to tell a different story:
Businesses who mess up payroll cost the IRS approximately $3 billion dollars annually. Yes, you read that right. 33% of employers.
That’s not all…
Gusto found that the percentage of small businesses missing payroll has increased by over half since 2019. To be exact, in 2024 over 3 million employees at small businesses were affected by missed payroll.
(FYI: missed payroll doesn’t just affect a “number.” These are real people that were unable to pay their bills on time)
Also, 40% of small businesses receive penalties from the IRS at an average of $845 per year because of payroll filing mistakes. And if your employee finds a mistake on their paycheck you can expect to spend approximately $291 on average to fix it. (Source: EY)
Moral of the story?
Payroll mistakes cost your business money, employees’ trust, and time dealing with unnecessary compliance.
Key Features Your Payroll System Needs
Not all payroll systems are created equal. When searching for the best payroll management software keep these features in mind.
Features your payroll system should have include:
- Automated tax calculations – Payroll software should automatically calculate Federal, State, and local taxes. (Taxes come up a lot. They’re crucial!)
Keeping up with tax compliance means your business isn’t manually calculating every pay period.
- Direct deposit/pay flexibility – Employees these days expect their payments to be fast and reliable. Look for payroll systems that offer direct deposit and multiple payment options.
- Customizable reporting – Every business is going to want different reports. Do you need payroll summaries? Tax liability reports? Payroll costs per employee? You should be able to customize your reports to fit your business needs.
- Automatic tax updates – Tax laws change constantly, and yes that includes payroll related taxes. A payroll system with automatic tax updates means your software does the work for you and you’ll never have to stress about updating a tax rate manually.
- Scalability – When you find the perfect payroll system for your business, it should scale with you. Need to add ten more employees? Easy. Opening up a location in a new state? No problem.
If your payroll platform has these features you’re well on your way to successful payroll (and financial) management.
How Effecient Payroll Helps Your Business Grow
Efficient payroll doesn’t just help your business run smoother on paper. It can actually help grow your business.
Running payroll shouldn’t just be about preventing payroll mishaps.
It starts with saving time.
By automating your payroll, you could be saving yourself hours of manual labor each month. Hours that you can now spend… growing your business.
Helps you gain employee trust.
If your employees receive their paychecks accurately and on time each period, they’ll assume you run your business just as timely. In fact, 50% of employees start looking for a new job after two payroll errors. Employee retention starts with proper payroll.
Better cash flow visibility.
When your payroll is integrated into your accounting software you’ll have clear visibility into your biggest expense. When you know where every dollar is going, you can budget better, create more accurate financial forecasts, and have a clearer picture of your overall business financial health.
And here’s a benefit most people don’t think about…
Running efficient payroll will make life (and the accountant’s life) easier come tax season. If the books are already organized because payroll and accounting are synced, that saves tons of money on professional fees.
Wrapping Up
Smart financial management starts with payroll. You can have all the fancy money-making tactics in the world but if your payroll is all over the place your business will suffer.
Let’s recap:
- Payroll is the foundation of your business financial management
- Customizable accounting software allows you to manage payroll how you need to
- Payroll mistakes cost businesses across all industries approximately $3 BILLION dollars a year
- By having a payroll system with the right features, you can help prevent payroll mistakes
- Efficient payroll saves you time, builds trust with your employees, and helps your business grow
Don’t wait until you or your employee misses payroll to find a new payroll system. Leading businesses invest in the right tools year after year allowing them to scale.
Peyman Khosravani is a global blockchain and digital transformation expert with a passion for marketing, futuristic ideas, analytics insights, startup businesses, and effective communications. He has extensive experience in blockchain and DeFi projects and is committed to using technology to bring justice and fairness to society and promote freedom. Peyman has worked with international organizations to improve digital transformation strategies and data-gathering strategies that help identify customer touchpoints and sources of data that tell the story of what is happening. With his expertise in blockchain, digital transformation, marketing, analytics insights, startup businesses, and effective communications, Peyman is dedicated to helping businesses succeed in the digital age. He believes that technology can be used as a tool for positive change in the world.
