The Impact of Efficient Payroll Systems on Startup Success: Insights and Expert Advice
Payroll is about money management and along with looking after your staff is the bedrock of startup success. Efficient payroll systems benefit every type of company and especially if you are a startup business.
Efficient payroll systems underpin your success and along with other financial matters like profit & loss, product and service margins and return on investment must be understood.
We’re going to take you through creating efficient payroll systems for startup success. Our experience as an established payroll service provider in Liverpool, Merseyside and beyond is unquestioned. Give us a call for a free chat…
In this article:
- Introduction to payroll systems
- What is the right system for your startup?
- Making your payroll management easy
- The wonder of technology
- Mistakes to avoid
Introduction to Payroll Systems
A payroll system is all about the process. To be precise it is a series of processes set to be efficient and reduce errors.
What does it do?
‘The process by which a business pays its employees for work performed during a set period.’
That’s the essence of what a process does but what you have to remember is it provides efficiency, taking into account variables like hours worked, holiday pay, and taxes and can be shown to be compliant with the latest government legislation.
What you want is a bullet-proof process or service that doesn’t take an excessive amount of time and therefore maximises your time for your startup business.
Your payroll options:
- In-House
- Outsourced
- Hybrid
The fully outsourced option is what we recommend, we are an established business past the startup stage and value outsourcing as it offers time and money savings. You may wish to keep payroll running in-house. That’s inexpensive but without professional training, errors may occur, keeping up with compliance will be time-consuming and it may be the stress you don’t need when you would be better off utilising experts.
Businesses using a hybrid option calculate pay and distribute pay cheques themselves while having the third-party payroll service handle tax filings, direct deposits and the actual printing of the checks. This option is a halfway house worth considering on the way to fully outsourcing payroll (and the stress) to a third-party service.
What is the Right System for Your Startup?
As outlined above you have three options. The critical question you have to ask yourself is, ‘Will this give me time to progress my business?’ With option one, payroll in-house, the answer is ‘no’. With the third option, the answer will be ‘some’ but with option two, the answer is ‘yes’.
You may have allocated your budget for other expenses like advertising but when you did your business plan did you take into account how much time you can buy? Think about your expenses in terms of the time you can buy (and be efficient and compliant) to use on business growth.
Making Your Payroll Management Easy
Outsourcing payroll to a specialised service means you are managing less. Such a service makes life easy for you. They are the ones repeating the same processes each month, they are the ones adapting to the latest legislation and they know that they cannot afford to make errors.
Although there are different levels of service you can expect an outsourced payroll service to carry out the following:
- Working out employee’s pay (inc. benefits and reimbursements)
- Deducting employee income tax
- Making any other deductions (eg. retirement contributions)
- Filing (and even paying) taxes with HMRC
- Making payments to employees
Which level is right for your startup? Which level of support will reduce your stress and supply you with more, invaluable, time?
The Wonder of Technology
At the root of technology is the use of cloud-based systems. Wonderful, isn’t it? All the data you need is online to share with your payroll provider, your staff and HMRC. But what if it goes wrong? Outages occur, so what process do you have for your in-house systems? Can you afford multiple backups? Can you afford backup process systems?
An outsourced payroll service will be highly compliant, not just for tax but for data integrity and privacy standards. One failure in your startup system could be extremely costly. Using an outsourced service means the onus for backing up data and having secondary processes is on them and they wouldn’t have the reputation they have without the best IT systems.
Mistakes to Avoid
Payroll processes do have variables that can lead to errors. One of the most common errors is caused by not understanding tax codes. This can lead to withholding too little or too much pay. If this is not spotted quickly the error can get out of hand and manual solutions may also be incorrect.
Another item to look out for is investing in an incomplete system. For example, starting without a basic system that offers simple tax reporting. Getting this wrong can lead to trouble with HMRC and fines.
A business must guard against errors and if one or more occur, must be able to roll back to before the identified error. An outsourced service will take all this into account.
Conclusion
You’re growing a business and your time is limited. Where is the best place for you to focus your time and energy? You know that will be on ensuring growth, new business, working with partners and growing a loyal customer audience. You’ll want your startup to run like clockwork and that means the statutory processes taking care of themselves.
You have to invest money to make money and outsourcing your payroll is an investment.
We help many startups at the start of their journey and understand exactly what you need.
Contact E&P Services for a friendly chat today.
The E&P Services Team
[image credit: Sable Flow, unsplash.com]