When it comes to payroll there is a circle to be squared; how do you ensure your process is as efficient as possible whilst also building in flexibility for your people?
From the CFO’s point of view, having a set structure, with long cut-off dates means that work can be efficiently managed and errors are kept to a minimum.
From the employees' point of view, if they work overtime on Thursday they’d like to be paid on Friday.
So how on earth can you make sure your payment processes are quick and responsive but still efficient?
In this post, we're looking at some practical steps you can take to ensure that people get paid quickly and with the minimum of fuss including;
It goes without saying that pay is important.
Getting pay wrong is one of the biggest demotivators for employees and in the midst of a cost of living crisis, underpaying someone could cause them significant difficulty.
If you employ casual or temporary staff then being able to pay them rapidly is a great way to ensure that they will be keen to work with you again in the future.
And when people do overtime it is fair for them to expect to be compensated at their next pay date.
Of course, if you are paying people who aren’t permanent employees then you need to pay in arrears but last-minute overtime changes and unpredictable hours can mean that payroll processing is fraught with difficulty.
But it isn’t all about salaries and wages. If an employee pays their own money for business expenses then they are out of pocket until they are reimbursed.
So a speedy, efficient payroll and reimbursement process can make a big difference to the way that your people feel about your business.
For such an important business task it is always surprising how many finance heads don’t understand their own process.
Unfortunately, payroll isn’t sexy and there’s little credit in the boardroom when you tell people you have speeded it up or made it more efficient.
And yet there’s good evidence that payroll is one of the most inefficient processes in business and that when you get it wrong, it is the thing that upsets people the most.
So the first step is to really understand what you do now so that you can spot things that might be going wrong.
This is what highly paid consultants call the ‘as is’ map and it shows you all the steps that have to work perfectly for your payroll to be accurate and on time.
Map it out on a large piece of paper or your favourite spreadsheet. A really good choice here is to write each task on sticky notes and get your team to organise them in order on a whiteboard.
This is the point where things start to stick out. People start asking ‘why are we doing it that way’ and you start to see inefficiencies and tasks that are no longer needed.
Don’t feel bad though, this is quite normal, especially when you have a job that hasn’t been looked at for a while.
Remember that the number of tasks you have to do directly affects your cut-off dates and the effort you have to put in so this is a really valuable exercise.
Now you have your process map you can start to look at the tasks that people do to run your payroll.
Some might stick out like a sore thumb. Often they will be jobs that were done for good reason back in the day but that make little or no sense now.
Next, have a look at dependencies. This is where the process can’t continue until a task is completed.
For example, you can’t run payroll until you have authorised timesheets.
Speeding up one task will reduce the time the whole process takes but analysing which things take the most time and effort or that stop the whole process continuing will help with the next step.
AI is the latest buzzword in finance but you don’t need some fancy robot to make your payroll work better.
Most packages have a level of automation that can save time and effort and can leave your people to work on more important things.
You can set rules that carry out tasks based on the criteria you set. A good example here is linking your payroll system to your general ledger and automating your payroll journal.
Think about the systems you use now and investigate what is already available but that you haven’t yet implemented. Third-party apps are a great way to extend the functionality of your systems too as we’ll see in the next section.
One of the biggest disruptions to the payroll process is leaving your job to answer questions. Now we aren’t advocating that the finance or payroll team should refuse to engage with your people but you can slim down the volume of questions you get by using self-serve wherever possible.
All good HR and payroll systems have a self-serve option and this is where employees get their own log-in to view their own details.
Typically they can download previous payslips, view the make-up of the current pay, change their bank details and find out how much holiday they have left.
Third-party apps can automate and integrate the production and authorisation of timesheets and expenses, two of the biggest blockers to payroll.
And with online accounting systems, it is a simple matter to integrate these so that data entry is minimised.
Back in the day, BACS was a brilliant initiative. It made the payment process more secure and it meant that people got their money directly into their bank accounts.
But in truth, the process isn’t without its problems.
It can be a difficult method to use and typically we find that companies have to produce their payment file up to five days or more in advance of the actual pay date.
Unless you have an expensive system then it won’t integrate directly with your payroll and you can find people downloading and uploading CSV files with all the problems that this can bring.
And if you get one line wrong then you could find your entire batch rejected meaning that nobody gets paid!
If you want to reduce your time to payment and make the process safer and more efficient then you need to automate and integrate a Faster Payments solution.
Faster Payments are, as the name suggests ‘faster’. In fact, in most cases payment is almost instant.
You can do this directly from your bank account manually but when you are doing tens hundreds or even thousands of payments then that isn’t an option.
If you have a modern Faster Payments solution that is directly linked to your payroll that will be able to make payments with a few clicks then you are in the right place.
Choose an app that will be able to run payments from 1-1000 in a batch and can make local or international payments simply and quickly.
Not only will you find that it is quicker and simpler than using BACS but it could also be cheaper too.
Payroll is often the cinderella of the finance world.
There’s no credit for getting it right 51 weeks a year and then wrong on one occasion so there is a temptation to say “if it ain’t broke don’t fix it”.
But it can be an inefficient and difficult process and it can provide a significant demotivator for staff.
Mapping out your process and identifying the blockers is a great start.
Follow this up by using automation wherever possible and integrating your systems to reduce errors and processing time.
And of course, get yourself a modern and integrated Faster Payments solution like Caxton so that you can pay your people quickly and easily.
Why not book a demo now, and let us show you how Caxton can reduce your payroll processing time and make your life easier as a result.