Accounting Industry

The Most Common Payroll Errors And Tips For Avoiding Them

For a lot of accountancy firms, handling payroll is an unpleasant but essential task. The process can be a painful one, and sometimes leads to errors regarding HMRC fines, GDPR, data backup, late payments, and more.

Although businesses sometimes partner up with another accounting firm or bureau to handle payroll matters, the result can be bottlenecks that have a negative impact on long-term relationships. More and more these days, clients expect and demand that their accountant fulfils their payroll obligations within their overall service offering.

Therefore, even if you’re unwilling to take payroll on, failing to do so may have a significant effect on whether you win new clients and retain the ones you already have.

With this in mind, we take a closer look at the most commonly seen payroll errors as well as how you can use tools such as Caxton’s Payroll Payment technology to avoid them.

The Issue Of Human Error

One of the most common mistakes is the inputting error. Sometimes finance staff input incorrect values into the accounting software from the payroll software. Sometimes, payee details will be manually entered incorrectly at the time of payments being made.

Errors that are made at this stage may cause the employee to be paid incorrectly or even to not be paid at all. These errors create a mound of additional work when the month comes to an end, and also take a lot of effort and time to put right.

The Caxton Payroll Payment Tech tool, however, makes running payroll seamless with a connected workflow that minimises the chance of any human error since data will be pulled automatically from payroll software like IRIS and BrightPay.

Furthermore, clients are able to be established to give final approval for requests and payments, being able to confirm with a few clicks. This extra check further reduces the chances of human errors occurring since the final responsibility will ultimately lie with your client themselves.

Late Employee Payments

It isn’t too surprising that employees want and need to receive payment of their salaries on the correct day. Since they’re any business’s most vital stakeholders, it’s crucial to keep them happy. Yet, traditional processes for managing payroll that have a heavy reliance on Bacs, makes it challenging to pay workers on time since payments can take as many as three days, and even longer in some cases, to clear.

Also, Bacs is non-operational during bank holidays, and that creates further issues, especially when managing December’s payroll, and accountants must be even more organised than usually to ensure that all salary payments are made on time.

It’s possible to overcome the risks of paying workers later by using Caxton Payroll Payment Tech powered Faster Payments. These allow transactions to clear within 90 seconds, so you can make them on the same day that they’re due to be received.

Incurring Fines From HMRC

If you fail to settle your payroll taxation liabilities at the correct time, clients may receive a fine. As HMRC is introducing new penalties for filing late at the start of 2023, this is something that is set to become an even greater minefield. Initially, these payments penalties will only be applicable for VAT, however eventually, it is certain to be introduced for all other taxes.

Often, payroll taxation is paid later since it isn’t due until several weeks after running the payroll each monthly. It’s all too easy to overlook settling of those liabilities by the time the deadline rolls around, especially if an accountant provides the service for multiple clients.

Avoiding fines from HMRC is possible with The Payments Dashboard since it’s possible to schedule payments in advance. An accountant can set up salary payments and HMRC payments simultaneously for approval in advance.

GDPR Compliance Breaches

Although the UK isn’t an EU member state any more, the UK government has decided to maintain the GDPR legislation. As a result, accountants have to take great care when sending clients identifiable data via files that are unsecure as they may be misappropriated or intercepted by a third party.

Traditional methods of managing payroll can make it more likely that accountants will fall foul of the GDPR rules because of attaching, sending, and downloading payroll data spreadsheets to internal staff and clients. Although password protections can be applied to these files to restrict their access, most accountancy firms in practice don’t bother with this.

You can avoid the risks that come with non-compliance with GDPR by using cloud-based payments and payroll software such as Payments Dashboard. Sensitive data will not be sent on an unsecure file, and only software users who have been approved can access the data using their own credentials to sign in.

Failing To Operate Data Backup Policies

Payroll data that is processed and maintained on a spreadsheet may go missing. Alternatively, it may be hard to access when it is wrongly labelled or when it hasn’t been stored in logical and organised digital filing systems.

Reconciliation issues can be created as a result, and these can cause significant complications when it comes to audit requests at the year-end. Members of the finance team can become frustrated as they need to spend extra time trying to locate files, while failure to produce the source payroll information will delay the signing off of accounts.

Payments Dashboard eliminates this all-too-common pain point since it archives the historic payroll information, allowing it to be easily accessed whenever necessary, on demand.

Running A Profitable And Scalable Payroll Function

If accountants use Caxton Payroll Payment Tech when managing payroll, they can easily run a payroll function that is both profitable and scalable, and as an added benefit, it can help them to avoid all of the most commonly-seen payroll pitfalls.

Thanks to its automation-led abilities, payroll will take only a fraction of the time to finish, and once payee and client data is set up, minimal amounts of manual input will be needed.

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Caxton Payments is an alternative to traditional banks, established over 20 years, we help businesses make faster payments more reliably. We offer streamlined processes, automation through API and a collaborative solution to complex payment issues all from a single platform. Our payment capability extends from business expense management, to payroll payments, supplier payments, and currency risk management. We also offer personal prepaid travel cards and international money transfer.