The world of entrepreneurship is rapidly expanding, with more and more small business owners taking the stage. With innovation as the ultimate catalyst for success, it’s no surprise that small businesses in the USA are turning to technological allies to tackle complex and time-consuming business operations. One of them being payroll management.
The advent of payroll automation is reinventing how entrepreneurs cruise through the winding rivers of taxes, payments, and compliances. According to the WTW’s Dynamics of Work Survey, the number of companies that automate some of their work is expected to climb to 74% in three years, up from 65% this year and 51% three years ago.
Furthermore, small businesses embracing payroll automation are not just saving time but also unlocking myriad benefits, from boosted efficiency to minimal errors in financial undertakings. The 2021 Global Payroll Complexity Index published by Alight reported a surge in the use of cloud payroll tech to 62% — an increase from 34.8% in 2019. And why not? According to a study by the American Payroll Association, automation can reduce payroll processing costs by 80%. This exponential data underscores a growing recognition of the transformative powers of automation.
So, let’s delve into the multifaceted impact of payroll automation on small businesses to unlock the benefits of financial outsourcing.
The impact of payroll automation on small businesses in the USA
Running a small business can be a thrilling adventure, and with the advent of new tech, automation has changed the game’s name. Below, we list why payroll automation is revolutionizing how small businesses run.
1. File federal, state, and local taxes with ease
Tax season is enough to make anyone run and hide, and small business owners are no different. According to a report from QuickBooks Payroll, small businesses spend almost 5 hours calculating, filing, and paying payroll taxes each pay period, which works out to 21 days a year. However, filing federal, state, and local taxes becomes a cakewalk with payroll automation. Automated systems are created to stay on top of the latest tax regulations, ensuring compliance and significantly saving time and resources.
2. Effortless tracking of payroll information
Gone are the days of endless paperwork and drowning in files. Payroll automation brings everything to your fingertips, allowing you to efficiently track and manage payroll information, from employee details to payment history. This reduces the risk of errors and centralizes data for quick and easy access.
3. Precision in tracking timesheets and attendance
Manually tracking timesheets and attendance is open to ambiguous errors. Accuracy becomes your priority by outsourcing payroll and taxes through an automated service. These systems often have integrated time-tracking tools, ensuring that hours worked are accurately recorded.
4. Regular payroll reporting made simple
Many small business owners find financial reporting to be a significant challenge. These reports serve as a map for business owners to analyze and understand their financial standing. Financial data outsourcing generates detailed and customized reports with insights on expenses, taxes, and other crucial metrics.
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5. Efficient calculation of employee wages and rates
AccountingToday.com found that over 40% of entrepreneurs spend over 80 hours each year on accounting alone. Calculating employee wages and rates can be complex, especially when pay structures vary. Outsourcing finance operations ensures your employees are accurately compensated based on the agreed terms.
6. Accurate calculation of sick days, bonuses, raises and paid time off
The calculation doesn’t end at wages. Managing employee benefits and time-off requests can take a significant chunk of your time. Lucky for you, payroll systems seamlessly calculate sick days, bonuses, raises, and paid time off, leaving little to no room for miscalculations.
7. Simplified payments for freelancers
A study by Upwork in 2021 found that freelancers contribute $1.3 trillion to the US economy. And if you’re a savvy entrepreneur, you understand the importance of outsourcing work. Suppose your industry presents you the opportunity to work with freelancers. In that case, payroll automation also benefits them by streamlining payment processes and ensuring timely and accurate compensation.
8. Seamless processing and payout of direct deposits
Direct deposits lead the way in an age where paper checks are stale news. Payroll automation systems make the task of processing and paying out direct deposits easy, reducing the administrative burden linked to traditional clearance methods.
9. Ensuring compliant recordkeeping
You want the tax man off your tail as a business owner. Payroll automation, with its meticulous records, makes tax planning a breeze. It also ensures your business remains compliant with federal and state regulations. This reduces the risks of penalties and keeps you happy and smiling during audits.
10. Verification of tax documentation, including EIN, I-9, and W-4 forms
Ensuring your tax documentation is accurate and up-to-date is paramount. The US Citizenship and Immigration Services reported that errors in Form I-9 are pervasive. However, payroll automation assists employees in maintaining correct records and updating their tax forms when necessary, lowering the risk of outdated or incomplete information.
Bottom line
Payroll automation is a true game-changer for small businesses in the USA. From simplifying tax planning to ensuring accurate bookkeeping and maintaining compliance, these systems contribute to the efficiency and success of small enterprises.
As technology continues to evolve at the speed of light, entrepreneurs need to adapt to the new world’s ways and make them work to their advantage. Payroll automation is not a trend but a strategic move for businesses looking to thrive in a technologically competitive landscape. Let the machine crunch the numbers while you focus on growing your business.
Want to know more about accounting and HR? Since 2006, Escalon has helped thousands of startups get off the ground with our back-office solutions for accounting, bookkeeping, taxes, HR, payroll, insurance, and recruiting — and we can help yours, too. Talk to an expert today.
This material has been prepared for informational purposes only. Escalon and its affiliates are not providing tax, legal or accounting advice in this article. If you would like to engage with Escalon, please contact us here.
