Disadvantages of Payroll Software
Updated April 4, 2022
Before buying an expensive and complex payroll package, have you considered the many disadvantages of payroll software that you’ll have to contend with if you choose to go down this road?
On a surface level, running your own payroll system doesn’t seem all that difficult. You just buy some finance or payroll software like QuickBooks to figure out exactly how much everyone’s getting paid – and then you’re off to the races!
Right? Not exactly.
That’s why we put together this short overview, explaining each disadvantage in turn.
Disadvantages of Payroll Software
A lot of small business owners dive headfirst into the world of payroll without any prior experience. You can try to learn how to do payroll yourself – there are many different payroll packages out there today that can help.
But are they the best solution for the needs of your business? Let’s jump right in with a look at all the disadvantages of a payroll system, and why outsourcing payroll may be a better choice.
1. It Takes Time to Learn How to Use Payroll Software
As a self starting entrepreneur you may feel comfortable having a try at processing payroll yourself. Until you realize just how much you have to learn and how many hours a week you have to focus on this aspect of your business – time that could be better invested elsewhere.
One of the biggest disadvantages of payroll software, like any large software package, is learning how to use it in the first place! An official Intuit guide on using QuickBooks, way back in 2016, was already a massive 791 page book.
Do you really want to spend all your time and energy wading through a manual like that, trying to get to learn about the software and avoid costly mistakes? You may even end up having to hire a new employee who is a certified payroll specialist, with all the extra business cost that entails.
2. Payroll Software Can Cost Several Hundred Dollars Per Year
You may think that buying PC payroll software is a one off cost but, in many cases, it isn’t – you will often need to pay an annual subscription. As a typical example, the cost of two popular Intuit QuickBooks payroll packages for small businesses are compared below:
|(Prices as at December 2020)
|QuickBooks Pro Plus
(3 year license)
$199.99 in year 1
$299.99 in each subsequent year
|$399.99 per year
|$299.95 per year
While the Pro package appears to be a cheap option for 3 years’ coverage, would you really want to miss out on yearly upgrades that provide extra functionality or compliance with new payroll and tax laws?
And would you be happy to go without any vendor support – what if you needed help in the event of a software crash or if your company file got corrupted?
The Pro Plus package does include both these features, but at a cost of about $300 per year, after the initial discount. And that’s just the software cost – you still have to do all the hard work yourself.
3. You Can Only Install Payroll Software On a Limited Number of Computers
Most payroll software only grants you permission to install the software on a very limited number of computers. For example, in the case of QuickBooks Pro, you can install it on up to 3 PCs. But this would also create a separate company file on each PC so your data would not be synced between them.
Therefore, many users will only install payroll software on a single computer, which makes that device mission critical. What if it died just before you need to run payroll? Do have time to find your license details then reinstall, update and configure the software on another PC?
Then you’d have to import your last backup (if you have a recent one!) and update with any new data that has changed since the backup. That’s a whole lot of stress and time pressure to cope with, while your employees are clamoring for their pay checks.
4. You Must Secure and Backup All Your Payroll Data
Any software can have security vulnerabilities and payroll software is no exception. Not only do you have to secure your payroll data from the prying eyes of most employees but you have to put into place cyber security measures to protect against hacking, fraud and theft.
You also need to consider the physical and network security of the computer(s) on which the payroll software is installed, making use of strong passwords, antivirus and firewalls where appropriate.
To comply with data retention requirements it is recommended to retain payroll data for up to 10 years so you must backup on a regular (usually daily) basis. Payroll software often makes the task itself easy but where do you safely backup your payroll data to? Do you have a secure offsite backup facility or protected cloud storage?
It should also be noted that:
“Data retention requirements often force companies into paying for legacy system costs for 10 or more years due to broad Federal record keeping requirements”Source: Fuse Analytics
This refers to the fact that once you buy and use a payroll package, if you later switch to using different payroll software, you may be ‘locked in’ to maintaining your old software (and the computer it is installed on) for many years, simply to retain old records per Federal requirements.
For example, if you had started off using QuickBooks Pro you may have to keep paying for it and maintain that computer for years after you stopped using the software – just so that you could retain access to your old payroll and tax records.
5. Payroll Software Is Not Tailored to Your Specific Business
On top of the time commitment you have to make learning how to use payroll software, you’ll also find that the most popular choices on the market try to cover a myriad of business types and options.
Essentially they aim to provide a ‘one-size-fits-all’ solution and this blanket approach can result in generalized software that’s pretty useful most of the time for most businesses.
But it isn’t tailored to your business and your specific needs and requirements. It will never come close to learning how to deduct payroll taxes with detailed knowledge of the specific requirements of your own circumstances.
6. You’re Responsible For All Payroll Submissions and Tax Filings
If you use payroll software rather than outsourcing payroll, the buck quite literally stops with you!
All too often, clients come to us who have used their own payroll software and it worked great, until it didn’t. Recently we talked to a business owner who simply forgot to “click some options” when setting up a new employee and has now spent over 5 months trying to clean up the mess with the State and IRS.
We’ve also had new clients come to us because they had paid employees incorrectly and had been dealing with labor issues which are NOT easy to fix, nor are they cheap.
The reality is that when you use payroll software you are totally responsible for all your payroll records, data input and filings. So you have to spend time familiarizing yourself with local, state, and federal tax structure, benefits and a whole host of accounting principles.
Some of the things you will need to know about include overtime, 401(k) contributions, bonuses, sales commissions, pay accelerators, paid time off and coronavirus regulations – and that’s just the tip of the iceberg.
Whether you have one employee or one hundred, you have to get payroll done correctly if you want to avoid payroll tax penalties and interest.
It’s easy be overwhelmed and it’s hard to get everything right all the time unless your sole job is processing payroll for clients – all day, every day, like we do. Read on to see how we can help you by taking over all the hassle of payroll – safely, efficiently and economically.
Outsource Payroll to Save Time, Money and Energy
We have covered above just a few of the things that you will need to tackle to get your payroll right when using payroll software.
Double checking that you’re in full compliance with federal and state taxes, that you’ve covered all your local tax laws and regulations, and so much more.
It’s not hard to see why so many smart and savvy entrepreneurs and small business owners choose to hire a payroll service like us to handle all the heavy lifting for them!
But even so, you might still be on the fence about whether or not you should tackle your own payroll processing or hire experts to do it for you. Here are just a couple of good reasons why business owners decide to outsource their payroll to us:
- You won’t have to worry about how you run payroll software or learn how to do payroll yourself. Instead you’ll be able to focus all of your time, money, and energy on other high leverage (more profitable) areas of your business.
Our dedicated experts can handle all your payroll needs. You’ll be able to spend time on areas of your business you enjoy (marketing, sales, product creation, networking, etc.) while clearing your plate of a huge responsibility at the same time.
- You get all the advantages of a full payroll service without any of the disadvantages of a payroll system. Think of us as your own payroll department, without the excessive costs!
Paying yourself through a payroll service like ours means you deduct taxes as you go, avoiding a huge tax bill (that you may not be able to afford) in April.
We are insured and bonded for your extra peace of mind. We can take over your payroll, employee reporting and payroll taxes. We also offer many more services such as Direct Deposit, new-hire reports, Workers’ comp, Payroll Cards, 401k plans, Time Clocks and Labor Law Posters, to name but a few!
If you’d like to learn more about how we can help you save time and money, give us a call and we’d be happy to discuss all the options with you, tailored to your specific business requirements.
Just started out or not a small/medium sized business yet? No problem! It’s never too soon to offload your payroll to us – contact us for a free quote for your growing business.
Or check out how we provide payroll help for the Self-Employed, Sole-Proprietorships, Family-Run Businesses or Micro Businesses with only 1-2 employees.
At Pacific Payroll Group we’re passionate about payroll so you don’t have to be!