The true cost of payroll processing and 3 ways to save resources
Without automation and integration, calculating payroll and settling payments is an incredibly complicated end-to-end process that drains both time and money.
The complexity of traditional payment flows makes reconciliation difficult, which is further emphasised by outdated banking infrastructures that rely on manual processes and file uploads.
The bottom line: as payroll complexity increases, so too does the costs.
In the current economic climate, as a means of cost-saving, there may be a clear temptation to delay the technological upgrades required to streamline processes.
But, as recent research from Modulr has shown, by not shedding legacy technology, companies are adopting an increasingly risky strategy – especially when it comes to payroll processes that sit at the very heart of a business.
Hard and hidden inefficiencies
What’s clear from Modulr’s research is that payment processes incur both hard and hidden inefficiencies.
The biggest hard cost, as reported by 39% of businesses surveyed, is the hours spent on manual processes.
Often, payroll processes are error-prone and time-consuming, relying on:
- Manual entry of payee details, tax codes and reference numbers
- Archaic file upload systems
- Manual intervention to fix the file errors, payment rejections and incorrect value inputs
- Three-day cycle to payment completions
Measuring up the drain of hard and hidden costs
The hidden costs can often pack a bigger punch, with 65% of employment services companies agreeing that these actually outweigh the hard costs.
For example, the hard cost of payroll is the salary paid against the quantifiable hours spent on the process, while the hidden cost is where those hours could have been better spent and the impact they could have.
When looking at payroll costs, you need to take into account how the time required could be used on customer experience, competitor differentiation, brand reputation, business agility and team morale.
3 ways to reduce the hidden impact on payroll
1) Be responsive to the needs of the Instant Economy
The Instant Economy: an economy of instant experiences, instant information and instant services in both consumer and business lives.
Digital, real-time and responsive services are required to power the Instant Economy, and a fast digital payments solution must be at the heart of your business.
When applying Instant Economy thinking to payments, it’s not about making them happen quickly – that’s just the start – it’s about building innovative products on top of a real-time and responsive, digital payments infrastructure.
2) Automate to innovate
End-to-end automation is key to driving efficiency and reducing costs.
By replacing your legacy payroll software with a digital solution, you can utilise real-time data and digital processes to save a significant amount of time each month.
Digital solutions provide automation, so payments can be triggered, resulting in no more manual processing or checking.
But that’s not all, digital solutions ensure there’s no need to:
- Extract files to upload to banking systems
- Wait for Bacs payments to clear and errors to surface
- Worry about changes as they can be made last minute
Payments can be paid in seconds, even outside of banking hours and with full visibility for faster and easier reconciliation.
3) Use payment integrated payroll
We’ve partnered with Modulr to now offer customers an alternative to legacy systems, providing a more agile and reliable method of running payroll.
The new functionality integrates payment and payroll processes, removing the reliance on file uploads to provide a better end-to-end solution for both accountants and payroll bureaus.
The Modulr partnership enables us to offer more automation, reducing both the number of team hours spent on payroll and the number of manual errors made when processing payments.
What’s the rush?
There’s a high price to pay for those accountants and payroll bureaux that put off technological upgrades.
Not just in terms of the hard cost of the payroll processes, but also the hidden costs which are now shown to be more far-reaching.
But there are alternatives.
Digital technologies are evolving many of the traditional ways of doing things, including payroll, resulting in better end-to-end journeys.
Automation and systems integration are the key to realising digital transformation ambitions while reducing costs, and by partnering with Modulr, we can now offer customers a simple solution.