Small Business Owner

The Importance of Payroll Software in Small Business

Smaller companies can struggle with what’s needed to run a business. This is particularly the case when some employees are performing double duty, or the founder is having to deal with too many administrative tasks. The National Small Business Association discovered in 2019 that some businesses saw 40 hours disappear to in-house payroll tax preparation. Their survey confirmed that the majority of small businesses that participated had fewer than six employees, making the payroll administrative burden even more troublesome. In this article, we discuss why using payroll software in an SME is worthwhile.

Reduce the Headache

One of the difficulties with managing payroll is coping with the different reporting requirements to various agencies or authorities. Each has different requirements that change unexpectedly. What needs to be reported and the deadline for submissions varies too. Keeping that organized and not missing anything important is more difficult when you’re a small business without a dedicated person working on payroll and nothing else. Pretty soon, things get missed. This can create a headache to deal with, with the resultant additional costs to contend with too.

Hire Contractors, Not Just Full-time Employees

An SME with only a handful of employees is likelier to periodically work with contractors or freelancers. However, the concern about how to ensure this is done in a compliant manner is not lost on small operators. The founder may worry that it will create more administrative problems than it’s worth and limit their use of people who don’t work for the business full-time. Taking this stance can inhibit business growth because of not involving the people necessary to move it forward. Payroll software that supports the increasing use of contractors, including mandatory tax paperwork and hires reporting features, can put these fears at rest.

Avoid Errors of Omission or Outright Mistakes

Trying to complete the payroll using outdated software or doing it manually leads to unforced errors or errors of omission. Making errors on the payroll side is no small matter. It can cause additional difficulties both for the company and the employee or contractor too. With the latter, the business will look both disorganized and inept should it occur. The people affected will not appreciate the mistakes or look kindly upon them.

Software in the cloud can be updated as often as necessary to remain in compliance with all state and federal payroll requirements. This avoids the majority of mistakes, including many potential human errors, that get caught by modern software tools.

Improved Data Security

One of the main issues with a manual payroll set-up or using inferior offline software is that it’s insecure. It’s too easy for a rushed executive to leave payroll paperwork out someplace where it can be found by an employee. This could lead to disgruntled employees who are unhappy to discover they’re not better paid than a colleague.

Also, data security with cloud-based solutions for payroll and other HR services is far more secure. A lack of software updates – perhaps because the IT software provider has since gone out of business or stopped updating the product – leads to new vulnerabilities. Data security is more important than ever.

While some small businesses will seek to avoid using payroll software, it can hold the business back. That’s especially the case when there’s a small number of employees.

About Ambika Taylor

Myself Ambika Taylor. I am admin of For any business query, you can contact me at [email protected]