Your Options in Payroll Software, Packages, and Services

Let's take a look at a few of the vendors and products that typify the choices among payroll solutions.

Payroll Included in Software Packages

Payroll processing is included in many accounting applications. Payroll may be an integral part of the accounting system or it may be sold as an optional, extra-cost module. The primary advantage of this method is that payroll data can integrate with the accounting database for two-way travel, both in and out of the accounting system. Coming out of payroll and into accounting is information such as salaries and wages costs for various divisions or departments.

Data can also be captured in the accounting system and then transferred to the payroll system. This is most common in time billing systems. A repair technician or a lawyer often bills by the hour. So it’s critical that all time worked be recorded and allocated either to a customer job or a client matter or to otherwise unbillable time. The total time charged per employee should balance with the hours worked in the payroll system. If it doesn’t, somebody's got some explaining to do.

The disadvantage of the integrated approach is that the payroll component may not suit your needs. It may be either too simple to handle your requirements or too complex to work with efficiently, depending upon the nature of your business.

Some accounting software developers have recognized that problem and have developed a solution. That solution is more payroll options. Unfortunately you need to invest a little more time understanding what each option offers in order to pick the one that’s right for your business.

Intuit QuickBooks is one integrated accounting system vendor that offers a broad range of payroll solutions. All six primary payroll options integrate with the company’s QuickBooks small business accounting application, but the payroll elements and the delivery of the services vary.

The following is a brief rundown of the QuickBooks payroll solutions:

• Standard Payroll handles the basics of pay calculations and check printing.
• Enhanced Payroll Plus also helps businesses fill out federal and state tax forms.
• Assisted Payroll Plus includes some outsourced services, such as tax payments.
• Complete Payroll is a full-service package that includes managing human resources, such as benefit plans.
• Online Payroll processes payroll online for QuickBooks Online Edition customers.
• Payroll for Accountants is for those who process payroll for several businesses.
• Direct Deposit, an optional add-on to most other Intuit payroll options, electronically transfers employees’ pay directly to their bank accounts.

Stand-Alone Payroll Packages

The big benefit of a using a stand-alone payroll package is that you can select and use a best-of-breed application that delivers exactly what you require in payroll processing without regard to your business information needs in the general accounting areas.

Not too complex and not too simple is quite attractive to many businesses. That’s why some business owners use a custom-coded application to do the heavy lifting in payroll. Going to custom programming is not a recommended route though unless your requirements are very special. There are plenty of flexible packaged payroll applications available to meet your requirements.

Assuming the rest of your financial operations are also automated, you need to consider your integration options. How will you get the results of your payroll processing into your accounting system? Most stand-alone packages will allow you to create electronic summaries of payrolls in addition to a printed payroll register. At its most basic level, if you can get data in a CSV file, you will probably be able to import it into your accounting application, after a bit of electronic grunt work.

Some payroll vendors can create data files formatted to work with a specific accounting application. If yours is on their list, it should be easy to make it work. If yours is not, you may need to perform some supplemental work on the data transfer file to get it into the right form. This may include massaging data using an Excel spreadsheet or pounding it into shape with a custom-coded database program.

Outsourced Payroll Services

One of the most interesting trends in payroll software has been the rise of services available on the Internet. These Web services reinvent and update the concept of the outsourced computerized payroll service bureau first popularized in the 1970s.

A payroll service bureau allows you to submit payroll input data, such as summarized time sheets, to a central computer which then calculates the payroll and prepares the payments, payroll register, and other reports. You can submit data to a service bureau either by filling in paper forms, by using a touchtone phone to tap in some numbers, or by using a computer terminal hooked up to the central server by means of a private data network.

A Web service also takes advantage of a centrally maintained computer server to process payroll. However, it uses a standard personal computer for entering the payroll data over the Internet. Usually no additional software is required beyond a Web browser.

There are several advantages to the online services approach to processing payroll. First, the payroll program and tax tables are maintained centrally by the vendor. This means they are always up-to-date, without requiring any additional effort on your part, such as periodic installation of payroll tax table updates. Secondly, your payroll data is automatically backed up on the central server. If the computer you use to process payroll goes down, you can use another computer to access the online service and process your payroll. Finally, using an online service also facilitates entry of payroll data from different locations, such as a remote plant.

There are some potential downsides to a Web service, as well. The monthly cost for the service may be more than you would pay to purchase a packaged payroll program. If you are dissatisfied with the Web service, it may be more difficult to migrate your employee and carry-forward data to another program or Web service.

The Internet used by Web services is a public data network, unlike the private data networks used by service bureaus. Can other Internet users eavesdrop on the online data entry session and pick up sensitive payroll details? It’s unlikely but not impossible. A Web service should use a secure server, which is indicated in Internet Explorer by a lock symbol on the bottom of the browser’s display. The best Web services support a high-security version of the browser, one that provides a high 128-bit level of encryption that is virtually unbreakable.

How secure is this? It’s the same level of encryption required by major banks to access online banking services. Make sure both your browser and the service site support the 128-bit encryption rather than any lower security version. How can you tell? Go to the site and hover your cursor over the lock icon in Internet Explorer for details of the encryption method supported.

ADP Small Business Services offers an excellent choice of ways you might access its outsourced payroll processing services. You can use your telephone or fax, run ADP software on your computer, or visit the company’s secure Web site. After you are set up, you tell ADP how many hours each employee worked. It will calculate your payroll, including the deductions and withholdings and send you the checks and payroll reports in time for payday. You can also print your own checks in-house. Optional services include direct deposit and check signing. Yep, they’ll sign your checks and even stuff them into envelopes.