Plan to succeed: Ignore the 3 myths of switching payroll software
Where are most accounting softwares hosted in 2021? In the cloud.
Where are most payroll softwares by accountants hosted in 2021? On their desktop.
This is an illogical difference when you think about it - especially when you consider:
- 18 months of COVID-restricted working practices,
- the number of mundane administration tasks that can be automated in the cloud (publishing payslips/AE notices, accepting timesheet data, sending data to HMRC and pension providers, payroll journal updates, P30 tax reminders to clients, reports etc.), and
- The additional self services available to clients that can be upsold (document uploads, qualification/right to work management, holiday management etc.)
Not all practices will want to move to a new payroll solution, but those that do, often have concerns about the time required to successfully migrate between systems. Here are 3 myths about switching payroll software that can be easily debunked.
Myth 1: tax year end is the optimal time to switch
The most consistent myth is that switching payroll should happen at the beginning of the tax year to avoid moving over opening balances.
This hasn’t been an issue for a number of years. One of the benefits of HMRC requiring RTI is that now all softwares have to report the year to date figures for each employee every pay run in a consistent format. Cloud software can take the data in that format to create the employee record and to add in the opening balances at the same time.
There are a few data items missing, but nothing complicated to add in afterwards.
Secondly, at tax year end there are so many other tasks to do, it’s never easy to switch all of your clients onto a new software within 2-3 weeks.
Finally, most large direct businesses switch payroll midyear to coincide with their financial year end or the end of their existing payroll contracts. Their payrolls tend to be far more complex than the average accounting practice (albeit there are only 1 or 2 of them) - but large businesses know that outside of the tax year end, payroll software providers have more time to spend on implementation support and training than at the peak time of year.
Myth 2: transition should be in a short period of time
If the payroll clientele in your practice is small and largely biased toward director only payroll then you may be able to switch all of your clients in one month.
We have even seen this strategy undertaken in an emergency for larger practices with a hundred or so clients (e.g. a licence coming to an end, a payroll software becoming extinct).
However, the switches that we have seen work best are those with a plan over a number of months - even if this means having 2 software costs for a time.
The benefit of this is a smoother transition for your clients and a less stressful transition for you and/or your payroll team.
Moving and fully automating the small and director only payrolls not only frees up time for the more complex payroll transitions, but it also builds in a period of training and familiarity which builds confidence in using the new product.
Myth 3: we don’t need to plan because we’re all excited by the change
Counterintuitively, the less enthusiasm for the switch, the more likely we are to see a positive transition.
This is largely because the practices that only do payroll as a “necessary evil” are motivated to move not by a love of software; but of a desire to spend less time doing payroll by automating as much as possible.
These practices don’t enjoy the transition, but they plan to get it moved over as systematically and quickly as possible. And they stick to those plans.
The least successful are the practices that want to move because they love new tech. They totally get why they are moving and they love the process of choosing the new software. But because of this, they imagine that the transition is something they will enjoy and therefore it will happen. Ironically, their enthusiasm is their undoing and halfway through they tend to get distracted by another new software in another part of their business and the payroll transition tends to drift a bit.
In between, are the practices that create a realistic plan (often discussing this with us) and then move through it - adjusting it as they win new clients.
The “ideal” plan
The key to planning is keeping it simple. Each plan differs on the size and complexities of the payroll portfolio and the staff available.
In essence, we normally see success in these 3 phases:
All of the director only payrolls and any static salaried payrolls that can be fully automated.
This has the advantage of quick migration, full automation and big time savings (it’s not just about running a payroll; it’s managing the payslips, any pensions, HMRC, the P30 tax payment reminders, the journal updates, the reports etc.).
Salaried payrolls (often up to 20-25 employees).
These are a little more complex and might have additional benefits or salary sacrifice and are more likely to have SMP/SSP ongoing.
They also take a little more explaining around how employee and employer portals are going to work.
These take a little longer to set up and might be slightly more sensitive as these are bigger clients.
Phase 3 (if you have these type of clients)
Hourly payrolls, large payrolls and more complex client set ups.
By this time the payroll team has gotten used to the system, knows how most of the scenarios work and has saved lots of time from the full automation in phase 1 and the partial automated tasks in phase 2.
Sometimes we see that phases 1 and 2 might be achieved in the summer and autumn and phase 3 at year end. For smaller practices, we might see all 3 phases completed in 2-3 months.
The key thing with any plan is that practices see efficiency savings from the first clients that are moved over and that makes some space to transition the others. It’s also common to see practices start winning new payroll clients towards the end of phase 2 because they now have something to show prospective clients that differentiates them from their competitors.
However you want to plan, why not try KeyPay for your practice and chat with us about the best way to approach your move? Get 60 days of KeyPay free as an AccountingWEB reader - all you have to do is sign up for a free trial, and enter code ACCOUNTINGWEB when adding your first business to the platform.
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