Advantages Of Manual Payroll Systems
In-House Manual Payroll New companies may be tempted to process payroll using a manual, in-house payroll system. It's an attractive option to fledgling businesses because there are no expensive service fees or pricey software packages involved. However, manual payroll systems can result in inaccurate payroll processing. Tax regulations are complex and change regularly for both state and federal tax returns. Manual systems have no built in processes to catch mistakes. Manual payroll processing is usually more time consuming than software payroll processing because all calculations must be done manually, opening the door for mathematical errors. In-House Software Payroll An in-house software payroll program can simplify the payroll process for some managers.
After the user initially enters information, payroll software saves employee and payroll settings to expedite the periodic processing. However, the processor is still responsible for the result. If the user doesn't update the software on the regular basis, payroll reporting could be incorrect when new tax laws are implemented. There are also disadvantages for small companies concerned with confidentiality. Less-committed employees may not take confidentiality measures seriously and leak sensitive pay information. Even if the payroll processor doesn't say anything, he may leave documents with pay information in public places or in unsecured files. Third-Party Payroll Providers Third-party payroll companies offer to take the tedious task of payroll processing off a company's plate.
Many manual operations are computerized. Manual payroll still exists, but there are numerous advantages to using a computerized payroll system right now.
These services typically file quarterly payroll returns on behalf of the company so managers don't have to worry about incurring costly late fees. However, service comes at a price. Third-party payroll providers may not be worth the rates they charge if the company already has a good handle on payroll processes. In addition, most payroll companies require the company to electronically submit payroll information.
At the point that a representative must enter the information electronically, an outsourced system doesn't offer much time savings over in-house software. Other Considerations Many managers view payroll processing as a necessary task that doesn't add value to the company. However, accountants can use payroll information to help managers understand costs. Computerized payroll options are better at providing additional data and analysis to make the payroll information useful. For example, some software breaks down payroll costs in a customized fashion to facilitate accounting entries.
Outsourced systems typically offer an electronic portal for managers with the option to search electronically for payrolls or view year-over-year pay trends.
Cost A traditional payroll system for a small business is usually considerably cheaper than contracting payroll preparation out to a payroll service, and can often be cheaper than manual preparation of payroll due to savings achieved through a reduction of payroll errors, and the knowledge level and time required for an employee to manually prepare payroll. With a basic amount of understanding, clerical staff can learn to use a payroll system and the business saves the cost of hiring a payroll professional.
Because a payroll system calculates withholding taxes for you, it eliminates mistakes made in tax filings, eliminating penalties and interest often charged for filing errors. Automatic Withholding Calculations You add new employees to a traditional payroll system by adding information about the employee, such as name, address and all information from the Form W-4, in which the employee designates his filing type and number of exemptions. The payroll system comes preloaded with the Internal Revenue Service payroll deduction tables that supply the deduction rates for Social Security, Medicare/Medicaid, federal tax withholdings and federal unemployment tax. Using a combination of the employee information and the provided tax tables, the system will automatically calculate all payroll deductions and apply them to the gross pay before issuing a check for payroll.
Spending hours manually calculating payroll withholdings, and risking a calculation error are a thing of the past with a traditional payroll system. Tax Compliance Payroll system software developers will provide annual updates to the tax tables as the IRS changes withholding amounts. Download Whatsapp Messenger For Nokia N81.
The updates are easily installed into the payroll software and ready for use at the appropriate date, completely eliminating the need to keep up with changes in tax rate tables and deduction rates and limits. By providing you with regular updates, payroll system developers help you maintain tax compliance by assuring your payroll deductions are always calculated using the required rates. Payroll systems also calculate the amount of employer tax due to the IRS and to the state, if you pay state unemployment in addition to federal unemployment. You can generate reports that provide you with the exact information needed to fill out federal and state forms for payroll tax remittance, and in some cases, the payroll system may generate the forms for you.