Zone & Co acquired Infinet Cloud in May 2023. Please be aware that any prior mentions of Infinet Cloud, including the content below, now pertain to the unified entity.
As September rolls around again, it should only make you think of one thing…April!
Let others worry about Halloween, Black Friday, and Christmas, the cool kids have a new tax year to be ready for.
As discussed in a previous article, the only thing which seems to move faster than technology nowadays is tax legislation, particularly where PAYE is concerned.
Since the introduction of RTI in 2012, the amount and specificity of information which HMRC requires to be submitted automatically and electronically has increased dramatically.
As CJRS ends this month and the government turns its attention to footing the bill for, and driving the nation out of, the Covid-19 crisis, we predict that this trend is likely to continue..
So, whilst April is still seven months away, our experience is that if you’re looking at an April 2022 go-live on a new payroll system then now is the perfect time to initiate your review. This gives you plenty of time to review, plan, implement, and go-live on a new solution in time for the new payroll year and ensure your business is ready for whatever comes next. In this article we look at three key elements you should consider when reviewing your payroll:
- Business Continuity & Accessibility
- Adaptability & Future-readiness
- Financial Reporting
Business Continuity & Accessibility
Payroll is about so much more than the pay-run and wages at the end of the period. It is the management and delivery of the most important cost in a business. This means that it has to run correctly and smoothly at all times.
We obviously don’t have to look too hard to find an example of a situation which changed the world overnight. A situation where staff were working from the office one day, with access to the computers, servers, networks, and software solutions they required to do their job, and the next day, forced to work from home, regardless of whether they had access to the technology they required or not.
There has never been a time in history like the last 18 months, where businesses have had to rely so heavily on their payroll department to provide the level, frequency, and depth of reporting, both internally for critical financial insights, and externally to HMRC for furlough claims.
In case there was any doubt regarding the importance of payroll as a business function, remember that payroll workers were instantly declared as Essential Workers by the government. This was the only way to ensure that as many people as possible were paid, and essentially keep the country running whilst we all worked out what to do.
In a survey shared by the Chartered Institute of Payroll Professionals (CIPP) in May 2020, 39% of businesses said that their business would look to implement stronger business continuity plans as a result of Covid-19.
Ultimately, this boils down to accessibility. Businesses must ensure that the right people have secure access to the right systems to keep things going, regardless.
Question to ask: If we were placed back into lockdown tomorrow, could my payroll, management, and executive team easily access our critical payroll software and information without either having to go into the office, or relying on one individual to access the information and distribute it?
Unless you are running a cloud-based solution, the answer is probably a little uncomfortable, at best. Whilst a VPN and remote desktop app can provide access to software installed on your server, it is often clunky, a little bit slow, subject to timeouts, and difficult to share information in a practical format.
For example, printers not being accessible from the server, the version of Excel on the server being incompatible with the remote machines, or just the fact that any reports generated on the server require someone to save them to a shared drive for everyone to download individually.
Whilst a lot of these challenges are surmountable, and ‘tolerable’ day-to-day, they can grind things to a halt when they are most needed. If you had challenges with the management and visibility of payroll information during the pandemic, think about how much easier it would have been to have had access via your phone, tablet, or laptop, wherever you were.
It’s simple. In order for your business to function, you need to have critical systems accessible to the correct people in your business, and cloud technology is the most effective way of delivering this.
Adaptability & Future-readiness
Future-readiness is probably a more realistic term for what people have previously classed as being future-proof. It’s impossible to be future-proof – things change – it's about being ready for those changes and having the ability to adapt whenever needed.
In the same survey cited earlier relating to the impact of Covid-19 on payroll, 40% of businesses reported that they were concerned about keeping up with the frequent, short-term legislation changes being introduced. 27% of businesses also stated that they would focus on accelerating the adoption of automation to reduce their dependence on manual work.
Like the points discussed regarding business continuity, these stats point to challenges which have been present in businesses, likely for years, but possibly the pain had never been enough to justify focus or investment.
Also, similarly to the topics covered for business continuity, adaptability ultimately relates to the technology you have.
Taking Covid out of the discussion for a second and referring back to our opening paragraph, payroll is one of the most rapidly evolving functions within a business. In the last 10 years, we have witnessed some of the largest legislation changes for a generation.
RTI introduced a framework which ensured businesses communicated with HMRC digitally, in a prescribed format via the Government Gateway to ensure that the core database pertaining to employees, National Insurance, and tax were centralized, electronic, and accurate.
From this cornerstone, HMRC have gone on to introduce new legislation annually, from auto-enrollment, to leave management, and most recently IR35, which all require more frequent, specific, and accurate data submissions than ever before.
We are sure that, like us, you are excitedly looking forward to next year’s update!
Question to ask: Does my current payroll set-up provide me with the flexibility to adapt in light of new legislation being introduced, or are we dependent on a number of moving parts to ensure our software remains compliant? Beyond legislative updates, does my current set-up provide me with any flexibility to improve the way we access, use, and analyze payroll related processes or information?
Most payroll software providers include some sort of annual update as part of their subscription or support service to ensure that, as a minimum, the software remains legislatively compliant.
We believe that software should deliver more than compliance. The whole point of implementing technology in general is to make things easier for the people in your business, to run your business. Any solution you use should be able to give you and your team everything you need, now and in the future. So, ensure whatever you use has the ability to include custom fields, workflows and generate tailored reports.
Financial Reporting
This is a big one for us, and it’s a good one!
Payroll is normally the biggest cost within a business, if not the biggest, it is always in the top two or three.
This then begs the question…why is payroll normally managed externally to the financial system?
If payroll is managed externally to the finance system, either in a standalone solution or via bureau, it usually means that payroll figures are entered into the nominal ledger as a fixed, summarized total. This means that the largest cost in the business cannot be dissected in the context of the business along with all other financial data (sales, purchases, expenses, operating costs).
Imagine for a second, at the next management meeting in your business where the sales figure is presented as a summarized total, and no questions are asked…
No, sales by product, by rep, by region. No, this month versus last month, and the same month prior year? That’s before we even get to the forecasting for the next few months.
Sales is an easy example, granted, so even taking a slightly less common example…if your expenses increased by 30% month on month. You’d want to know why. Who bought what? Who authoriszd it? Will it reduce next month or is this an ongoing cost increase?
Why then, is payroll not analyzed to line level detail as part of your core financial reporting?
Question to ask: Can I currently analyze my costs, and therefore margins, to the penny including labour costs? If not, how do I know that I am not leaving money on the table, or that I am making the best use of our biggest asset?
There is not too much else to say about this one. In our experience, payroll is often accepted as ‘just being payroll’. It’s not like you have the option to not pay salaries, therefore, they get paid, and the cost is accepted as is.
Whilst at a surface level, that is understandable, a quick look at the number of components which make up your payroll cost should identify at least one or two areas where visibility into the detail behind the costs may empower you to make much more informed decisions.
Summary
As well as normally being the biggest cost in a business, payroll is the definitely most important. If you don’t believe us, try not running your next pay-run and let us know how you get on the following day.
With that in mind, it is important to recognize payroll for what it is in your business, and how it is both made up by, and contributes to every part of your business.
Having a cloud-based solution which is unified with your financial management solution puts you in the best place to access and manage your payroll operations, but more importantly to view and analyze the information available to drive better strategic decisions across your business.
