How To Choose Payroll Software For Small Businesses
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Choosing the right payroll software for small businesses can save you time, ensure accuracy, and keep your team compliant.
Pick the wrong tool, and you risk errors, compliance issues, and wasted time. This guide is for anyone managing payroll in a small business who wants to make a smart choice.
I’ll help you navigate the options, so you can focus on what matters—growing your business and supporting your team.
9 Things to Look for When Choosing Payroll Software for Small Businesses
When evaluating payroll software, focus on features that enhance your team's efficiency and accuracy. Consider these key factors to ensure you choose the right tool:
1. Plan Flexibility
Plan flexibility is essential, especially if your business is growing or experiencing changes. You want software that lets you easily upgrade or downgrade your plan.
Look for vendors who offer clear, straightforward options without hidden fees. During a demo, ask about the process for changing plans and any potential costs involved.
2. Data Access and Reporting
Having easy access to data and robust reporting tools helps you make informed decisions, so look for software that offers customizable reports and real-time data access.
Test the reporting features during a trial to see if they meet your needs, and ask about exporting options and how data is visualized.
3. Integration with Your Tech Stack
Your payroll software should work seamlessly with your existing tools, like accounting or HR systems.
Check if the software supports integrations with the tools you already use and, during a demo, ask about the integration process and any potential technical support available.
4. Onboarding and Support
Proper onboarding and support makes a big difference in how quickly your team adopts new software.
Look for vendors that offer comprehensive onboarding resources and responsive support. Test the support by reaching out with questions during your trial period, look out for tutorials, chat support, and availability.
5. Role-Based Permissions
Role-based permissions ensure that the right people have access to the right data, enhancing security and efficiency. Look for software that allows you to customize access levels based on roles. During a demo, explore how permissions are set up and managed. Ask if you can easily adjust permissions as team roles change.
6. Industry-Specific Compliance
“Compliance is a huge factor,” says Crystal Pinney-Ramos, HR Technology Strategist at cClearHR. “The system should help you stay on top of changing payroll regulations and taxes, especially if you’re managing employees across different states or countries”.
Ask vendors how they stay updated with changing regulations and how often they update their software. Check if they offer compliance-related support or resources.
7. Customization Options
Customization options allow you to tailor the software to fit your unique business needs. Look for tools that let you customize workflows, reports, and user interfaces. Ask about customization during a demo and test how easy it is to make changes. Ensure that customization doesn’t require technical expertise.
8. Automation Features
Automation features can save your team time by reducing manual tasks. Look for software that automates payroll calculations, tax filing, and direct deposits. During a trial, test how automation features work and their impact on your team's workflow. Ask if the software can automate repetitive tasks you currently handle manually.
9. Mobile or Multi-Location Support
If your team is mobile or operates from multiple locations, look for software that supports mobile access and multi-location functionality. Test the mobile interface during a trial to ensure it's user-friendly. Ask about any location-based restrictions and how the software handles different time zones or regions.
How to Choose Payroll Software for Small Businesses: A 5-Step Framework
Selecting the right payroll software means focusing on your team's needs and the software's ability to meet them efficiently. By understanding what features matter most, you can make a decision that supports your business goals. Follow this step-by-step guide to find the best solution for your team:
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Step 1: Identify Your Needs
Start by defining your team’s needs to ensure the payroll software you choose will address them effectively:
Gather Stakeholder Input
Talk to key stakeholders like HR, finance, and IT to understand their payroll needs. Gather input from employees who use the system daily. Create a list of their concerns and expectations. This input helps you find a solution that works for everyone.
List and Prioritize Pain Points
Identify what's not working in your current system. Make a list of pain points like manual data entry errors or slow processing times. Prioritize these issues by their impact on your team. Focus on fixing the most pressing problems first.
Align Requirements
Ensure your requirements align with your company’s policies and regulatory goals. Check if the software meets your security protocols and vendor preferences. This alignment helps you avoid compliance issues and ensures a smooth integration.
Differentiate Features
Decide which features are must-haves and which are nice-to-haves. Must-have features might include automated tax filing or direct deposit. Nice-to-have features could be mobile access or advanced reporting. This differentiation helps you stay focused on essential needs.
Ask These Questions:
- What complaints or blockers come up most often?
- What needs aren’t being met today?
- What features would solve your top 3 pain points?
- What ROI are you expecting from this investment?
- How does the current system hinder your workflow?
Step 2: Research Payroll Software for Small Businesses Vendors
To find the right payroll software, start by researching and comparing vendors based on your team's needs:
Conduct Vendor Scans
Begin with high-level scans using review sites, rankings, and case studies. Look for feedback on user experiences and common issues. This gives you a broad view of available options and how they perform in real-world scenarios.
Compare Tools
Evaluate tools based on your business size and integration needs. Decide if you prefer outsourcing payroll or developing an in-house model. Consider how each tool fits within your existing tech stack and budget.
Identify Key Differentiators
Look for differentiators like implementation support, user experience, and flexibility for niche use cases. Check if vendors offer customized solutions or have strong customer support. These factors can significantly impact your team's experience with the software.
Document Findings
Keep track of your research by documenting your findings. Make notes on pros and cons for each vendor. Use this information to make informed comparisons and narrow down your options.
Ask These Questions:
- What does each tool do best?
- Does it fit your team size, budget, and stack?
- What support and documentation are available?
- How easy is it to implement and integrate?
- Are there any hidden fees?
Top Payroll Software for Small Businesses to Consider
Here’s my list of the top 10 payroll software for small businesses options available, to help you get started in your search:
Step 3: Make a Payroll Software for Small Businesses Shortlist and Reach Out
Narrow your options and start conversations with potential vendors to find the best fit for your team:
Shortlist Vendors
Based on your research, narrow down to 2-4 vendors that best match your needs. Consider their features, pricing, and user feedback. This shortlist helps you focus your efforts on the most promising options.
Send an RFI or RFP
Send a payroll software for small businesses RFP to gather detailed information. This helps you understand vendor capabilities and fit. Use RFIs for high-level info and RFPs for in-depth details.
Book Demos
Schedule demos with your shortlisted vendors and prepare focused questions. During demos, assess user interface, key features, and ease of use. Take notes and compare experiences to see which vendor stands out.
Use Consistent Criteria
Evaluate each vendor using the same criteria for fair comparisons. Consider factors like user experience, support, and total cost. Consistent criteria ensure you're comparing apples to apples.
Ask These Questions:
- Can you walk me through a real customer story like ours?
- What support or onboarding resources do you offer?
- What features require an upgrade?
- How long does implementation typically take?
- Are there any additional costs we should know about?
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Step 4: Build the Business Case
Turn your vendor research into a compelling business case that your leadership team will support:
Summarize Pain Points
Start by summarizing the pain points your team faces and the expected outcomes. Highlight how the new software will solve existing issues. Use real examples to show the potential improvements in workflow and efficiency.
Present Cost Estimates
Find basic cost estimates and present them clearly, along with implementation timelines (you can use payroll software pricing guide as a reference). Be transparent about costs to avoid surprises. Provide a timeline for when the team can expect to see benefits.
Articulate ROI
Explain the ROI and efficiency gains of adopting the software. Detail the financial and operational risks of sticking with the current system. Use specific numbers or case studies to back up your claims.
Ask These Questions:
- What business problem will this solve?
- What are the risks of doing nothing?
- What are the financial and operational upsides?
- How soon can we expect to see ROI?
- What metrics will we use to measure success?
Step 5: Implement Your Payroll Software for Small Businesses and Onboard Your Users
Ensure a smooth onboarding process by planning and communicating effectively with your team:
Communicate the Rollout Plan
Clearly explain the rollout plan to all users, detailing timelines and expectations. Use meetings or emails to share the plan and ensure everyone understands their role. This transparency helps reduce confusion and sets clear expectations.
Assign Internal Owners
Designate internal owners and points of contact for the implementation. These individuals will coordinate with the vendor and manage internal questions. Having clear contacts ensures accountability and smooth communication.
Ensure Consistent Training
Make sure your team completes training and adopts the tool consistently. Schedule training sessions and track attendance. Encourage users to explore features and functionalities, and provide support where needed.
Create Feedback Loops
Establish feedback loops during the rollout to gather user input. Use vendor resources like customer support or training videos. Regular check-ins help address issues early and improve the onboarding experience.
Ask These Questions:
- What’s the change management plan?
- Who’s responsible for rollout?
- How will you track early success?
- What training resources are available?
- How will you gather and act on feedback?
What’s Next:
If you're in the process of researching payroll software for small businesses, connect with a SoftwareSelect advisor for free recommendations.
You fill out a form and have a quick chat where they get into the specifics of your needs. Then you'll get a shortlist of software to review. They'll even support you through the entire buying process, including price negotiations.