Finding the right payroll solution can be a daunting process. This rings especially true for nonprofit executives, who are generally burdened by tight budgets, strict compliance requirements, and inadequate funding. Many nonprofits also make addressing their current payroll situation a low priority as they focus on addressing their organization’s core missions. While this may seem like an acceptable justification, operating with an out-of-date, inefficient payroll solution can have serious short and long-term consequences.
The Cost of Manual
First off, let’s start by talking about the cost of manually processing payroll. Many executives view this method as a cost saving alternative to investing in an actual system. However, according to the American Payroll Association, or simply APA, human errors caused by manually processing payroll cost organizations up to 8% of their total payroll. APA also revealed that manual processes cause the average employee to be paid 10 minutes each day. While these numbers may not seem high, for larger nonprofit organizations, this could lead to tens, if not hundreds, of thousands of dollars in profit loss due to an inefficient, manual payroll solution. These stats are also alarming as almost one in four organizations are currently processing their payroll manually.
Many nonprofit organizations refuse to upgrade their payroll process, citing a lack of funds to allocate towards such an investment. With that said, it’s been proven that neglecting this investment is just as costly, if not more so. Upgrading to a modern payroll solution can automate the process and eliminate expensive human errors once and for all.
The Risks of Outsourcing
Outsourcing payroll responsibilities to an external payroll processing firm may also be an option to nonprofit organizations. Not having to worry about paying employees on time or filing tax documents is undoubtedly appealing to some executives. However, this option is significantly dying in popularity among nonprofit organizations, and this could be credited to the great amount of security risk recently associated with such investments.
According to a recent study released by Software Advice, the amount of organizations outsourcing their payroll decreased dramatically, from 16% in 2014 to only 6% in 2015. This comes at a time where cyber-security breaches of large companies are growing in normality. Just recently, a large Pennsylvania payroll company was hacked, leading to a breach of personal employee information that affected over 200,000 individuals. Outsourcing payroll may reduce the stress of processing payroll, but the decrease in popularity among other nonprofits should put others on high alert.
A Software Solution
With human errors associated with manual processing and executives losing faith in outsourcing, all signs point toward a payroll solution that can save nonprofits time and money. Automation such as this would make processes simple and efficient, eliminating the risk of human error while also keeping employee information secure with encrypted, unbreachable storage centers.
Not only can payroll software save nonprofit organizations money, but they can also dramatically decrease the amount of time spent actually processing payroll. According to WaspBarcode, nonprofit organizations that invest in payroll software finish payroll roughly 70% faster when compared to a manual approach. This gives nonprofit organizations more time to spend on serving their clients.
While there are many payroll software vendors in the market, with what appear to be, similar products, it’s important that nonprofit executives don’t rush into the vendor selection process. There are vendors, like DATIS HR Cloud, that focus their HR and Payroll solution to specifically address the pain points and challenges of nonprofit organizations. These are the kind of vendors that will not only process payroll, but will also understand and apply nonprofit best practices moving forward.