The perfect payroll system would simply send employee hours and pay rates already entered in your PC-based accounting program over the Internet. Your payroll service would then authorize the necessary fund transfers from your bank account to your employees' accounts (and to government coffers, of course) just in time. You'd want the results of those transactions downloaded during the reporting phone call so you could update your accounting files with a few mouse clicks--much the way online bill-paying works.
Unfortunately, this end-to-end automation is only available to a limited number of businesses today, and not in every state. The technology is there, but so are implementation hurdles that a payroll service hoping to match all the different state-reporting regulations to variations in different PC-based accounting systems must face. Even where electronic alternatives are available, small businesses are often slow to take advantage of them. "A lot of businesses want to keep something as important as payroll in the top desk drawer and work on it in-house," says Gene Polisseni, senior vice president of marketing for Paychex."
Brad Smith, ADP vice president and general manager of ADP's e-business services, says electronic payroll services will eventually solve that objection by delivering greater efficiency with greater control than can be accomplished by doing payroll in-house. Both market leaders are committed to Web-based payroll solutions but are still getting their pieces in place. In the meantime, most customers report payroll the same way they have for decades: by developing a brief report of employee hours and other necessary information and submitting it by phone or fax to their payroll service two to three days before payday.
Paychex's Paylink software adds more flexibility by letting you transmit your employee hours to your Paychex branch office via the Web or make changes until the actual transmission of payroll data and then use any Web browser to surf over to the Paychex site and download a report of the transaction to your PC the day after payday.
ADP hopes to have a similar solution in place this month. EasyPayNet will let you log onto the ADP Web site using just a browser to upload hours and download payroll reports from any location with an Internet connection. Payroll can be submitted until 3 p.m. the day before payday with paystubs for direct deposit or paychecks downloaded electronically.
In both cases, employee hours must still be typed into the forms on the software program, although by the time you read this, both companies hope to be able to map their downloads to popular PC accounting programs like QuickBooks, Peachtree Complete Accounting and M.Y.O.B. Until the hook-up is electronic from end to end, it will be difficult, Polisseni admits, to lure small business away from the old ways.