10 Reasons You Should Do Payroll In-house – Reason #3: Compatibility

(3rd post in a series)

Integrating payroll with other business systems saves time, reduces errors, and gives you the flexibility to make business decisions based on your company’s needs, rather than on the system requirements of your payroll service. It’s true that some services are now offering more compatibility, but it’s shocking how many business decisions are being made to conform to vendor requirements instead of priorities set by the company’s own planning process.

Let’s take a look at a couple of examples of integration challenges, and see if they seem familiar.

Simple: Time Allocation

Your payroll service has a job to do, and it’s pretty straightforward: make sure that your employees and the government get paid their fair share for the amount of hours worked. All that’s needed to do this is salary information, the number of hours worked at each rate of pay, and where that work was done so that they can determine which branches of government will be looking for a piece in the form of taxes.

But is your business one of the many companies which tracks employee hours by job? This is common for:

  • Government contracts
  • Grant-funded projects
  • Long sales cycles
  • Complex services

Large clients like governments and corporations, as well as grant underwriters, may well require auditable job tracking as a requirement for doing business. It’s also essential for proper billing when you’re engaged in ongoing relationships.

Even if it’s not required in your industry, it’s likely that you track hours by job to some extent, because it’s also valuable to planning and budgeting. But this isn’t information which is necessary to process payroll, so your service provider may have no way to collect it. If that’s the case, entering information twice — in your accounting system and your servicer’s payroll system — is the only solution.

Some service providers are beginning to offer this option, but a customized in-house payroll system can be designed for job tracking from the ground up. That requires compatibility with your other business systems, to allow for the flow-through of data from one to the other. Services can mimic this to some extent, but because their systems are external to yours, there are limits to how compatible they can ever be.

Complex: Purchasing Authorization

Some solutions are simply impossible when using a payroll servicing agent. We have one client who wanted to be able to automatically determine an employee’s purchasing authorization limit based on his or her salary. It’s not an unusual way to calculate purchasing authority, but it’s not very practical if your salary information is locked into the service’s system, while purchasing clearly is not.

We built their in-house payroll system so that the salary information could be used to trigger purchase authorizations. Because our client controlled its own data and security, we were able to implement a solution which would be driven by salary data without actually sharing those data with other, unauthorized personnel. A bookkeeper who is reviewing purchases and reconciling accounts does not need to know what your CFO is making if your systems simply flag purchases that are near or exceed the limits. Auditing and security can exist hand-in-hand, and the flexibility of an in-house system makes it possible them to change purchasing levels quickly if needed.

Getting Started

Because payroll is integral to every business, an in-house payroll system is the cornerstone of the seamless compatibility scenarios illustrated here. Contact Pacific Data Marketing for an analysis of your present system and future needs; we will help you see how much more compatible your systems will be with in-house payroll at its core.

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