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8 Min. Read

Payroll Automation: Definition, Benefits & Process

Payroll Automation

Payroll management is necessary for the survival of your business. What happens if you forget to update employee deductions? That is one of many unintentional mistakes you might make when managing payroll.

This is where an automated payroll system comes in. Although outsourcing your activities to a payroll manager can reduce mistakes and save time, they are often expensive. To receive good service without more expenses, businesses are choosing automated payroll solutions

Find out what payroll automation is, its benefits, and how to get started.

Table of Contents

What Is Payroll Automation?

Benefits of Payroll Automation

How to Automate Payroll

Automate Payroll With FreshBooks

Key Takeaways

Frequently Asked Questions 

What Is Payroll Automation?

Payroll automation is when software automates the payroll process for small and large businesses. It can help with all aspects of payroll processing. This includes setting up direct deposits and calculating tax withholdings.

It ensures you keep your payroll reports and records accurate. That way, you don’t get fined. And you can pay employee wages correctly.

Setting up an automated payroll system is well worth considering. It’s good even if your business has just a few employees.

The Accounting And Payroll Solution

Benefits of Payroll Automation

We will now look at the main areas of your business that can improve with payroll automation software.

Straightforward Payment Calculation

When it comes to accessing spreadsheets and calculating payments for employees, manual data entry can be tiring. Even in businesses with a smaller headcount, payroll calculations can feel complex. This is often due to the varying types of employee paychecks to submit.

Payroll is a significant monthly commitment, and manual payroll is time consuming. Managing employee data makes payroll processing more challenging. For instance, think of status changes that need extra compensation.

An automated payroll system will quickly calculate your business’s different types of payments. This includes basic and more intricate adjustments, like wage deductions and employee benefits. Your employees will feel valued and respected when they get paid correctly and on time.

Reduces Errors, Mistakes, and Risks

There’s tons on your plate, from essential tax payments to filing taxes to managing new or exiting employees. And processing this information manually requires careful review for accuracy. To make this task even more challenging, tax laws and regulations are always changing.

Automated payroll is often praised for accurate tax processing. It reduces the margin for human error, and in turn the risk of expensive penalties and mistakes.

Sound payroll software systems can automate tasks, such as running payroll to ensure you’re paying employees. Good software will also improve consistency throughout your business procedures.

Centralized Accounts

Payroll automation software offers a centralized accounting system. Here, all your payroll information is readily available at your fingertips. You can capture historical payroll information and use the data to support other business components. 

Payroll software also handles record-keeping. And it ensures your business complies with tax payments, regulations, and bookkeeping requirements.

Saves Time

One of the biggest problems a business owner will experience is limited time to deal with every component of their business. But payroll automation lets more small business owners spend time focusing on their expertise. They can also pay more attention to the company’s bottom line.

Automated payroll software reduces the manual processes your payroll and HR personnel undertake. In turn, this eliminates current HR software expenses.

You can free up your employees’ valuable energy and time by automating your entire payroll system. Allowing staff more time to focus on contributing to your business strategy can help boost employee morale.

Saves Money

Hiring a dedicated finance professional isn’t necessary if you get payroll automation software. Using a payroll tool will save you the money you’d otherwise need to spend on wages for a professional accountant. And experienced ones aren’t cheap.

Automation Software Is Easy to Use

Payroll software is generally easy to use and much easier to train employees on. Employees can use the payroll system without accounting degrees.

How to Automate Payroll

Now for the slightly tricky part. How do you automate your payroll processes? Here are 5 strategies to help you navigate introducing payroll automation.

Choose a Cloud-Based Payroll Provider That Goes the Extra Mile

Several automated payroll systems are available, so you won’t have a shortage of legitimate choices. But they may not all suit your business requirements.

Take your time. Narrow the choices by ruling out overly specialized providers that only manage payroll. Most businesses need a more comprehensive payroll solution. Look for one that offers related payroll services such as project management support and employee benefits.

Customize Current Paper Payroll and Record-Keeping Processes

Payroll is a complex affair with several components and processes that can fall through the cracks. Automating your payroll system doesn’t necessarily mean complete payroll automation in an instant. After all, it may be easier to keep some elements of the process paper-based.

Make a complete list of the any time-consuming record-keeping processes your business uses. Doing so will help you reap the benefits of an automated payroll. Next, create a plan of action to automate all these processes. The best solution is to migrate all your paper-based payroll to automated payroll.

Your business may have customized processes that the new solution cannot automate. So, you’ll need to decide how to manage these. The good news is there is software available to accommodate customization.

Integrate Your Accounting and Payroll Data

Finding one solution to manage your general business accounting and payroll is much easier and more efficient. We recommend it over using 2 separate platforms.

Payroll software providers tend to stick to payroll-only software. Meanwhile, other providers deliver accounting services.

If you cannot find a good fit, choose a provider that uses a different accounting platform. Search for one with finance automation integration. These areas are distinct, but they provide seamless integration when combined.

Automate State and Federal Tax Filing

Most payroll providers automate state and federal tax filing. Ensure the solution you choose offers monthly, quarterly, or year-end filing of returns and payroll taxes on your behalf. Settling for a cut-rate solution is a sure way of allowing tasks to slip under the radar, and you could end up in trouble.

Allow Employees Access to Their Payroll Records

While pay stubs and other records are yours to manage and keep, they also belong to your employees. Employee data should be available and easily accessible via an automated system. This is necessary for income and employment verification purposes and other reasons.

Good automated payroll platforms allow employees to access their payroll data. You can set up an internal database with pay stubs, W-2s, and other essential records.

Automate Payroll With FreshBooks

FreshBooks is an example of a reliable and comprehensive automated payroll system. It is an easy way to organize your business’s books. It integrates with solutions such as Gusto for unlimited payrolls, tax filings, direct deposit, and more.

The main features with FreshBooks include:

  • Professional invoicing (including automated late payment reminders)
  • Integration with over 100 apps
  • Accurate reporting for compliance
  • Client management options (including communication and tracking)
  • Business expense tracking
  • Proposal creation tools (including help with elevator pitches)
  • Project management and team collaboration
  • Small business financial reporting
  • Customization options
  • A free 30-day try-before-you-buy trial period

FreshBooks works across all devices and has had a mobile app for more than a decade. You can have your questions answered through their award-winning customer support.

Ready To Make Paying Your Team Easier

Key Takeaways

Automating your payroll process will help make your life a little easier. Initially, paying for automated payroll may not seem ideal for keeping business costs low. But you will quickly see a cost-benefit. And you’ll notice reduced time that is generally spent on accounting and HR.

FreshBooks accounting software offers a comprehensive suite of features, including a powerful payroll solution. It delivers the tools required to efficiently manage all areas of your payroll and stay compliant. 

Overall, FreshBooks is ideal for small business owners. It has an intuitive interface to support getting your accounts and bookkeeping requirements met. Best of all, you don’t need a finance background to operate FreshBooks.

FAQ on Payroll Automation

Why Is Payroll Automation Important?

An automated payroll system is important because it helps optimize your business procedures. It reduces the time spent processing employee wages, federal and state taxes, and more. It ensures your financial and HR business affairs are accurate, up to date, and compliant.

How Does an Automated Payroll System Work?

Payroll software helps you with everything from employee wage calculations to filing taxes. It also integrates with your core business areas. This ensures your employees receive accurate and timely compensation via an appropriate method. (For instance, direct deposit.)

Many payroll software programs are updated with tax law changes. These can remind you when tax forms need filing.

What Are the Main Features of an Automated Payroll System?

Here are the main features of a basic payroll system:

  • A pay schedule – Example pay periods include weekly, bi-weekly, semi-monthly, and monthly
  • Taxes – Employee and employer tax collection
  • Filing and paying taxes – Payment of state and federal income tax and other taxes
  • Law compliance – Federal, state, and local law compliance.
  • Timekeeping – Keep track of hours worked.