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Payroll Processes Risks: How Using Outdated Payroll Hurts You

Payroll Processes Risks: How Using Outdated Payroll Hurts You

Payroll Processes

For all businesses, payroll is of utmost importance. It poses a big problem for business executives who want to increase their company’s effectiveness. All payroll procedures run the danger of being outdated. 

After all, employees expect their payroll to be accurate and timely at all times. At the same time, business owners want payroll to be simple and effortless so they can focus on growing their business.

However, a lot of work needs to be done behind the scenes to ensure that payroll runs smoothly from start to finish. Wages for each pay period must be calculated, federal, state, and local taxes determined and paid on time. You must also track voluntary deductions such as health insurance and 401(k) contributions, prepare and file quarterly reports, and submit year-end payroll records.

Outdated Payroll Hurts Payroll Processes

Are your company’s outdated payroll practices getting in the way? Learn how outdated payroll processes can impact your business.

Compliance Risks

Keeping up with current tax systems, rules and regulations can be difficult, primarily if you operate in multiple states. It’s easy to make payroll mistakes, especially when you don’t have time to deal with compliance issues. And those payroll mistakes can come at a high price.

Consider the current national movement to enact equal pay laws to eliminate the gender wage gap. Payroll deductions will continue to be impacted by the new laws. According to some experts, they should be kept on staff for at least three years before having the employee’s pay, job description, and explanation for compensation audited. To minimise legal exposure, it is crucial to check compliance with legal standards.

The Cost of Inefficiency

There are often costs associated with using traditional, outdated payroll methods.

Paper-based systems require information to be repeatedly transferred from one spreadsheet to another and then to the final record before being validated. This additional human process makes the situation even more error-prone. It also takes time to complete and organize the paperwork, which takes time that could be used more efficiently.

The time your HR department or team spends manually transferring data, checking (and correcting) errors, and updating paper records is an actual cost.

Remember that many problems can occur with paper checks. An employee may be sick on payday and not receive the money. You may print a statement by mistake. On the other hand, a disaster can strike your business. For example, a fire or flood could cause printed checks or records to be lost, or employees may not be able to retrieve (or mail) their statements.

With the many digital payroll solutions available, there is no longer a reason to keep paper records of employee attendance, records, and payroll. Increased efficiency, security, and convenience are the main reasons more and more companies are adopting payroll software.

However, that doesn’t mean the technology is perfect. If there are different digital platforms and they don’t communicate seamlessly, or if there are no trained professionals to maintain them, the outdated payroll process can be inefficient and error-prone.

A Break for Growth

As businesses grow and change, payroll processes must adapt. If you have 50 or 100 employees spread across multiple states, the same techniques you had during the start-up period when you had just a few employees will no longer suffice.

We know that these cumbersome systems and processes can waste time and money for companies and expose them to significant compliance risks. But there’s a bigger problem caused by these apparent issues. It’s the stifling of growth.

Spending critical resources on inefficient business processes and correcting the resulting errors can limit a company’s ability to reach its full potential. Instead of moving forward in the direction of the company’s vision, you’re constantly at a standstill, working hard to avoid sinking.

The distinction between tactical and strategic HR work is this. You create the conditions for the future expansion and success your company needs and merits when you go from working for the company to working with it.

You must make sure that your payroll procedures are efficient rather than impeding your HR procedures in order to guarantee the ongoing expansion of your company. It’s never a bad idea to periodically assess the system you employ to pay your employees’ compensation.

To ensure the continued growth of your business, you need to ensure that your payroll processes are optimized rather than being a hindrance to your HR practices. Regularly reviewing the system, you use to pay your employees’ wages is never a bad idea.

What is Effective Payroll?

Many growing companies benefit from investing in external payroll tools and support. There are several ways to go about payroll and getting rid of outdated payroll.

Hire an Accountant or CPA


  • If you already have an accountant or auditor, you can easily add payroll to their work.
  • This is a convenient way to centralize multiple financial functions.

The Downside

  • Higher costs compared to freelancers.
  • Due to a lack of auditing and balance, errors may happen.

Use of Payroll Software


A variety of software is available.

  • Cost-effective solution for small businesses.
  • 24-hour access to payroll and nearly error-free calculations.
  • The cloud-based solution provides seamless software updates, so there is no disruption to business operations.
  • A good provider offers dedicated payroll consultants, 401(k) plans, and compliance support.

A comprehensive, integrated HR technology platform facilitates payroll and streamlines HR operations into one system.

Negative Aspects

Requires some effort to learn the software and train employee’s

  • If you choose a fixed software solution over a cloud-based solution, software maintenance and upgrades are your responsibility.
  • The quality and extent of support vary from vendor to vendor.

Use a Professional Employer Organization (PEO)


  • A professional employer organization (PEO) offers a wide range of HR services as well as payroll services and access to comprehensive medical insurance and retirement plans.
  • A comprehensive approach to payroll can handle most payroll-related tasks, including tax reporting, tracking payroll changes, and processing tax returns and records.
  • This is a reasonable choice for businesses with up to 10 employees.


  • More expensive option (but can pay for itself by freeing you and your employees from the tedious administrative tasks associated with HR management, leaving you more time to grow your business).
  • Some PEOs offer more comprehensive services.
  • Consider your options carefully to choose the right solution for your business. If you’re looking for a PEO, consider the Certified Professional Employer Organization (CPEO). The IRS grants explicitly the CPEO designation to PEOs who voluntarily perform thorough audits of their financial statements and records.

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