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Advantages and Disadvantages of Payroll Systems


Running a business requires a number of things that are very important for the success and development of a company. The first thing is having enough money to start your business. But money is useless if you do not have good organizational skills letting you have corresponding record keeping from the very start, do knot know the market demands, do not have strategic planning and qualified and professional staff, and are not ready to learn and teach.

One of the most important points is to have a qualified payroll team who are able to prevent fraud, maintain conformity and prepare important documents in a timely and proper manner. The functions of the payroll are very important in any organization, including business enterprises. They extend to a very wide range of administrative and labour matters and make analyses, prepare reports including salary registers, employee ‘s attendance reports, reimbursement, prepare and keep data and so on.

Employees of a company are its most valuable capital and the enterprises try to choose corresponding payroll system to ensure the health, development and future success of a company.  Having a proper payroll system lets you pay compensation and salary of your employees as required, promptly and under legislation in force, as well as regulates and controls working hours of employees.

Companies may keep employees for executing these tasks in the office or may outsource them by professionals on their behalf.

One of the most important parts of a payroll system is a software solution making possible to calculate and pay wages, as well as taxes and all kind of deductions for employees. Payroll tax software is to be used for accurate tax calculation under existing requirements and regulations, reducing the risk of fines and penalties.

Using payroll system, the owners understand the business needs and demands well, make the right decision weighing the benefits and risks.

There are 4 types of payroll systems:

1) In-House Payroll — is very suitable for small businesses with limited staff.  The payroll tasks are executed internally by the employees of the company using stand alone payroll software or integrated payroll software.

In-house payroll has its advantages, as it ensures privacy by keeping the financial data and documents with the staff of the company. It requires the company to keep the payroll employees to be aware of all changes and amendments to payroll tax and labor laws.  Being uninformed of other systems the possibility of error is a disadvantage of in-house payroll system.

2) Bookkeepers/CPA managed payroll — means hiring a bookkeeper or a CPA to manage the payroll process, when the employees of the company are unable to complete payroll needs who are not qualified enough to execute such tasks. These tasks of the payroll system are carried out by a professional and skilled bookkeeper/CPA in payroll.  While using a payroll software system it is monitored by the bookkeeper/CPA.

Hiring an outside bookkeeper or CPA for execution of the work has advantages for employees, as it lets the company accounting department to know changes and amendments made to labor laws and payroll tax regulations.  Besides, involving an outside bookkeeper or CPA raises knowledge of the company employees concerning possible errors in the payroll, taxes and deductions, as well as the company creates a system of checks and balances in the payroll.

It does not have only an advantage, this system has disadvantages too, because the mistakes that are made by outside bookkeeper or CPA are not made by an in-house employee. Besides, sometimes outside specialists are not able to complete the whole payroll process and they need the company worker’s help.

3) Agency managed payroll – is involving a firm which is only engaged with processing payroll and undertakes responsibility of your company’s payroll. This system involves experts in payroll bringing high level expertise to the company.  The agency takes responsibility of executing all payroll functions, including administrative work, deductions and bank deposits.

Agency managed payroll develops and broadens the knowledge of the company’s accounting department, increases expertise in payroll in the company, ensures correctness of the payroll process, decreases the risks of mistakes.

Agency managed payroll is more expensive than the other systems, but companies affording the price gain, as accurate, timely and professional work is worth it.

  1. Software managed payroll

Xero payroll software or MYOB payroll system or QuickBooks payroll software are computerized cloud-based payroll systems, which are automatically updated with information and can be used 24/7 with the company’s information from any location.

These are its advantages, but there are disadvantages, as it requires in-house employees to interact with it, as well as it lacks the checks and balances of other systems.

So, companies have choices and can use the most favorable and advantageous system for their work taking into consideration all advantages and disadvantages of these systems depending on the size of their enterprises. These were the main payroll systems that are used by companies.

Should a company have professional and skilled payroll employees it will be additional chance for a company, as employees are the most valuable capital of all companies, because none of the systems and programs can work without human beings.

If a company does not have professional payroll specialists they can apply to outsourcing companies.  Financial Chain Corporation is an international company providing a range of services to companies and entrepreneurs, including Payroll services. The qualified, highly-professional team of the Company renders high-quality services guaranteeing to meet the needs of its clients, and comply with all requirements and regulations.

“The secret of getting ahead is getting started”.Mark Twain (Samuel Langhorne Clemens, an American writer, humorist, entrepreneur, publisher, known by his pen-name Mark Twain).

So, start cooperation with Financial Chain Corporation and get ahead.







  • Author: Nargiz Mammadova

Public Relations Manager



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