Accounting Best Practices, Fifth Edition

17–28. Use Web-Based Payroll Outsourcing

Payroll processing has been the most common accounting function to outsource for many years. However, it suffers from several deficiencies, such as having to send information to the payroll supplier only on certain days, or (if the amount of information is minimal) waiting for a supplier representative to call, so that the information can be conveyed over the phone. In addition, any information that is verbally conveyed to the supplier runs the risk of being incorrect, since an additional person is involved in data entry. Yet another problem is that the supplier will typically run the payroll in a batch-processing run that evening, and then deliver the completed payroll to the company one or two days later, which is the earliest point at which the accounting staff knows the exact amount of its payroll liability, which it needs for cash management purposes.

To get around these problems, one can process payroll over the Internet. This involves accessing a supplier’s Web site, entering payroll and time card information on the spot, and gaining access to fully processed payroll information immediately. This approach also allows one to enter payroll information at any time of the day or night, and to avoid additional data-entry problems caused by the use of an extra data-entry person by the supplier.

A particularly fine benefit to this approach is the lack of any software that must be installed on a computer in the accounting department. This ...