Do you need to get serious about payroll without getting bogged down?
For small business owners, juggling hats is par for the course. But payroll can be a particularly hairy situation if you let it get out of control.
Here’s what’s going on:
Wrongful payroll calculations aren’t just expensive. 50% of employees will begin looking for a new job after two payroll errors, per a study by NAWBO. Half the employees you worked so hard to recruit are immediately turned into flight risks by poor payroll practices.
What’s the answer? Choosing the best desktop payroll software for small businesses for your unique requirements and budget.
In this guide, you’ll find:
- The Definition of Desktop Payroll Software
- Why Desktop Software Can Outperform Cloud Solutions
- Essential Features for Small Businesses
- How to Choose a Solution
- Payroll Mistakes to Avoid
The Definition of Desktop Payroll Software
Desktop payroll software is an application you install on a computer, unlike cloud software that runs from a remote server.
The software is capable of computing wages and deductions, generating tax forms and reports, and storing data on the computer where it is installed. You can still use desktop software offline, which is useful for businesses in remote locations or without a reliable internet connection.
Here’s a simple way to look at it:
Cloud payroll programs are “rented” from a third-party service that maintains the software on a server somewhere. Desktop programs are “owned” by the end user, who controls everything installed on their own computer. There’s no ongoing monthly subscription, and business owners have full control over the payroll software.
Monthly savings on software costs, plus complete data control, add up to big advantages for businesses processing payroll on a regular basis.
Why Desktop Software Can Outperform Cloud Solutions
You may be wondering why a cloud-based payroll software isn’t better. After all, why not use a software-as-a-service program and pay the monthly fees to go with it?
There’s a few reasons:
Desktop payroll programs almost always involve a one-time cost to purchase. Once you pay, you have full rights to use and modify the software as needed. There are no monthly or annual fees, no price increases down the road, and nothing but upfront costs.
Data is also more secure with desktop software since there’s no reliance on external servers or third parties. It all stays on the local hard drive of the machine it is installed on.
Of course, the downside is the lack of remote access and automatic updates. A business that wants to use mobile apps, or assign payroll tasks to multiple users, would be better off with a cloud service.
Essential Features Every Small Business Needs
Selecting a software program to do your payroll isn’t a decision to make lightly. There are more options than ever before, and the price tag is not always reflective of value.
Tax Calculation and Filing
At a minimum, payroll software needs to calculate federal, state, and local taxes accurately and on time. This means updates when tax laws change. Tax filing forms like W-2s and 1099s must also be created correctly.
Why does this matter so much? The IRS states 40% of small businesses receive penalties for incorrect payroll tax filing. Desktop payroll software with up-to-date calculations helps avoid this fate.
Direct Deposit Support
With expectations for direct deposit high among employees, the software should be able to make electronic payments to a variety of bank accounts without charging a fee.
Reporting Capabilities
Managing labor costs and tax liabilities is a big part of the work. Customizable reporting features give business owners visibility into total costs and profit margin.
Employee Self-Service
Desktop software may also have an employee portal. This allows workers to access pay stubs, tax forms, and other records directly. Can save time for the owner by reducing administrative requests.
Compliance Updates
One benefit to desktop software is its focus on updates. The developer is more inclined to issue new versions of the software to patch security holes or update tax tables.
How to Choose the Right Solution
It can feel like there are dozens of small business payroll solutions when you start shopping. Different features and price points crowd the marketplace.
Don’t get overwhelmed. Approach this way:
Assess Your Current Needs
Running payroll for a half dozen full-time employees is very different than 500. Weekly, biweekly, or monthly payroll cycles also matter, as does the need for 1099 forms for contractors.
Write a list of must-have features, even if it’s basic to start.
Set a Realistic Budget
Desktop payroll software is much cheaper than cloud solutions. Options exist for under $100 and go up to several hundred dollars. The overall cost is usually only the one-time purchase price.
Budget for time savings when comparing features. A more expensive option that cuts five hours per month off payroll processing could effectively pay for itself.
Check System Compatibility
The last thing you want is to pick software that won’t run on your computer. Look for the required operating system and hardware.
Read User Reviews
Other business owners have bought, tested, and written about their experiences. Look for online reviews, especially from other small businesses in the same industry.
Test Before Committing
Payroll software vendors know customers will be reluctant to pay until they can try it out. That’s why so many offer free trials or demo programs. Take advantage of those free trials.
Common Mistakes to Avoid
You may pick the perfect software and still encounter issues down the road. Keep things on track by avoiding these common payroll pitfalls.
Skipping Regular Backups
Desktop software saves files to the computer it’s installed on. Without any backups, that payroll data is lost if the computer crashes.
Don’t forget to set up automatic backups to another location, like an external hard drive.
Ignoring Software Updates
Updates contain vital tax table updates and security patches. Ignoring these updates can lead to miscalculations and security issues.
Not Training Staff Properly
The most powerful software is useless without someone to operate it. Every person who will touch payroll data should be familiar with all features and workflows.
Forgetting About Year-End Tasks
W-2s, 1099s, and other year-end tax forms still have deadlines. The software can generate these, but human review and filing are required. Set reminders long before they’re due.
Choosing Based on Price Alone
The least expensive option on paper is not always the best option. Hidden fees, or software without key features, cost more in time than they save in money.
Wrapping It Up
Choosing desktop payroll software isn’t complicated. Keep the decision focused on must-have features, system requirements, and budget.
- Desktop software gives more control with one-time pricing
- Calculating payroll taxes accurately prevents penalties
- Backups and staff training secure the investment
- Free trials ensure the software is a good fit
Get payroll right, and you keep employees happy while dodging expensive fines. The right desktop payroll software makes that possible for a business of any size.
