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Software helps small businesses work more efficiently, but it’s not the best solution in every case.
For example, I don’t use software to keep my personal budget. I made my own Microsoft Excel template that tracks my income, spending, and investments in lieu of more high-powered applications.
However, it’s hard to find a good reason to keep doing payroll by hand in a time when payroll software is affordable, secure, convenient, and accurate. Let’s talk about the difference between running payroll by hand and using software and when it’s time to make the switch.
Manual payroll means calculating and cutting employee paychecks without software or a payroll specialist’s help. Most business owners should leave the number crunching to software or an expert, but some small business owners prefer to run payroll by hand to save money.
If your business has just a couple of employees, and you’re intimately familiar with payroll tax rules, you might be a good candidate for running payroll manually. In any other scenario, you’re better off enlisting software’s help.
Here are the pros and cons of running payroll manually.
Unless you were a payroll administrator in a previous life, payroll software is a small business owner’s best bet at running payroll accurately and without breaking the bank.
Even if your business has just one employee, consider the advantages and disadvantages of payroll software.
Consider these telltale signs that your small business is ready to upgrade from manual payroll to a software system.
As you add employees, it becomes less justifiable to run payroll by hand. Though Microsoft Excel is a powerful program for calculating and organizing gross wages, it’s not as good for calculating payroll taxes accurately. Running payroll by hand becomes too laborious when you have more than a handful of employees.
Say your business has two employees. For years, you’ve been comfortable calculating payroll using an Excel spreadsheet, and you keep up with the latest payroll tax guidance. You’re happy having saved hundreds in software subscription fees.
Then one day, you receive a letter telling you to garnish an employee’s wages. The letter explains how to calculate the garnishment, but it’s making your head spin. Absent software that can walk you through the process, you risk incorrectly garnishing the employee’s paycheck.
Payroll solutions are set up to handle garnishment and other complicated payroll matters. When you have questions, customer support can help you to make payroll on time.
Small businesses are agile, able to change with their environments. As your business grows, you might find yourself with less time to dedicate to running payroll. Don’t compromise your payroll process to save time -- invest in software instead.
Running payroll is not one of those tasks that condones cutting corners, so don’t hesitate to switch to payroll software once you feel tempted to skip any part of the manual payroll process, especially the payroll reconciliation step.
When caught and remedied quickly, payroll errors shouldn’t cause concern. But before going out and running payroll without software, make sure a payroll professional helps you set up a payroll system.
Perhaps the strongest reason for favoring payroll software, however, is to ensure that your business avoids making payroll errors in the first place. If you're ready to worry less about mistakes and take advantage of the many other benefits, consider the following shortlist of The Ascent's top-rated payroll solutions:
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