Payroll software is the key to small business growth

Small businesses might be forgiven for not digitizing their payroll in the early days of their companies, when attention is paid to things like sales and customer service, whose digitization is more overtly critical to a growing company.

Yet, issues with payroll-related matters can cost companies more than they may expect: According to data from EY Quest, payroll errors cost companies hundreds of thousands of dollars annually.

Small businesses need to start leveling up their payroll game to curb the loss of revenue and lay the groundwork for upscaling. Here’s why:

Systems Assembled

It’s troublesome for a company to run its payroll off disparate pieces of software—understandably so, given its nascent days find owners simply trying to survive day-to-day and older methods, such as spreadsheets, often come standard on laptops. Too many payroll software options exist, many of which have issues communicating with others and build more silos than they knock down. As privacy and security become hotter-button issues, a system built on disconnected pieces of software starts to seem less appealing.

Small businesses concerned with accurate financials should consider shifting from a catch-as-catch-can approach to software and begin building systems mindfully, ensuring collaboration and communication.

Payroll can be integrated with software supporting adjacent disciplines, like travel management and expense reimbursements, to keep the books perfectly balanced and offer leaders visibility into where cash is flowing, enabling them to make decisions informed by real-time data. Initially, small businesses may not require this level of full functionality, but it ensures that when the time is right, they will be operating from a place of full visibility.

Best of all, integrated systems of finance apps work for businesses of all sizes, whether a company is scaling up or having to scale back to weather an economic storm, rather than needing to reach across vendors for every minor tweak.

Automated Compliance

Rules, regulations, and tax codes change quickly these days, and rarely do small businesses have much time to adjust processes as needed. These changes also vary state-by-state, which can present problems for companies doing business across multiple regions or employing a remote workforce.

The time for catching up on compliance’s moving target may be coming to an end. Modern payroll software is equipped with automatic updates to keep up with ever-changing compliance requirements, ensuring prompt tax payments and precise payroll deductions regardless of the state where a company is doing business. As new legislation is developed, these systems are automatically updated so not a single paycheck goes by without entirely accurate attention to the proper calculations.

These capabilities also encourage small business scalability, as they ensure a company won’t have to waste time reverse-engineering errors that may have occurred. Employees can focus on how money comes in rather than worrying about how it goes out.

Intelligence Design

Analytics and insights are core to any modern business, yet many pieces of small business-focused software have historically supplied only basic features, offering more advanced ones to enterprise-grade clients only. That has started to change. Competition at all levels is growing fierce, and even companies as small as "solopreneurships" can benefit from staying informed.

Analytics have become table stakes for small business payroll software. By understanding how a company’s financial health is being impacted, businesses can make subtle tweaks to workflows and priorities, stemming any ill tides before they get out of hand. Vendors are also offering the ability to generate financial reports automatically to prepare for audits and chart an accurate path towards achieving business goals based on data.

Recent trends include a democratization of data, as well. Through the use of customizable self-service portals, employees can view pay stubs and receive information about their finances from their mobile devices.

The Year Ahead

Small businesses often rely on manual processes for performing critical financial tasks—a holdover from scrappy upstart days—which can result in errors and inefficiencies when these companies can’t afford them.

In 2025, more small businesses will realize the importance of streamlining these processes and extracting valuable information from the results, all while maintaining a 360-degree financial view. Best of all, small businesses will continue simplifying taxes and compliance, easing a few complications in what is already a critical time in a company’s life.

Connect with an Old National Small Business Banker for more insights to help your business grow.

This article was written by Raju Vegesna from Small Business Trends and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.