Bureaus, Third-Party and Zone & Co: The True Cost of Payroll for NetSuite
Managing payroll is a crucial task for every business, yet a recent study from Bloomberg showed that up to 63% of growing businesses in the US underestimated how long they were spending on payroll admin, with many having little to no knowledge of the time spent internally on each stage of the payroll process.
In our experience, this is often the case for NetSuite users, who despite having purposefully invested in the solution to drive efficiencies and provide a single source of truth for their business, often still manage payroll outside of the solution and lack true insights into both the admin and the financial impacts of one of, if not the, largest costs in the business.
In this blog, we explore the options available to manage payroll in NetSuite, discuss how involved the admin process can be, and how NetSuite users can gain crucial insight into their payroll costs. To do this, we will look at the most common payroll set-ups we see being used by NetSuite users, including:
· Payroll Bureaus
· Third-Party Disparate Payroll Solutions
· ZonePayroll (formerly Infinet Cloud Payroll)
Outsourcing to a payroll bureau is a popular option that many NetSuite users consider to alleviate some of the responsibility and administrative burdens associated with managing payroll.
Bureaus give businesses access to additional resources and expertise in payroll processing and compliance which they may not have, or want internally, particularly around taxation and legislation.
However, when looking at how much time is spent on managing payroll within your team, payroll bureaus can actually be rather time-consuming when it comes to admin.
At the risk of oversimplifying, there are four key parts of the payroll process: gathering/preparing data, approving, processing pay run (including submissions), and payment.
If you look at these four stages, everything apart from the pay run requires substantial administrative input from the client-side, and by requiring approval, ultimately means that you still have the majority of responsibility.
· Your team is responsible for gathering employee information to share with the bureau, which depending on your organization and payroll structure, can be quite a time-consuming task.
· Once submitted to the bureau, processing the information is where businesses can see some value. The bureau will process this information and deal with getting the data to a stage they believe it is ready to be submitted.
· The data is then sent back to your business to be approved and submitted. This can be time-consuming, essentially approving the work your own team submitted. Plus, by approving, the responsibility is ultimately transferred back to you.
· Finally, the payments, the most important part, are still processed completely by your team. That means more checks, more admin, uploading the payment files, and of course, manual journals and reconciliations.
Plus, as you will likely import a summarized journal, the detail behind your labour costs still won’t be visible within your NetSuite system, meaning it cannot be analyzed to the same depth as every other expense line on your General Ledger.
Overall, payroll bureaus can reduce the need for internal knowledge on payroll, however, businesses using a bureau need to consider these questions:
· How much time is my team spending on these associated payroll tasks?
· Does payroll admin cost deliver value?
· Does the output align with and/or enhance our investment in NetSuite?
For most, much of the admin is still on your team to manage, and as the data lives outside of NetSuite, bureaus can result in clear gaps within your core financial system. These are considerable concerns, especially when payroll bureaus can be an expensive investment as your team grows.
Third-Party Disparate Payroll Solutions
Alternatively, NetSuite users can manage payroll in-house using a third-party payroll solution which operates outside of NetSuite. This can provide businesses with a potentially cheaper option than a bureau but means every part of the process lives within the third-party solution. So, you have full ownership of the payroll process, but not the visibility within NetSuite.
However, with this increase in control comes the additional responsibility and admin that would otherwise be dealt with when using a bureau. This means someone or multiple people within your finance team must be qualified to, and capable of handling the payroll process and associated admin and submissions.
In addition to this, and perhaps most importantly, as (more often than not) the payroll figures will be imported into NetSuite as a summarized journal, you will not have the ability to drill down, slice, dice, query or manage the data as part of your financial reporting as well as you can with other costs, expenses, or income.
Whilst this can be an appealing, and often cost-effective solution, NetSuite users considering a disparate payroll solution should consider:
· How much time do we spend managing payroll internally?
· Could the processes be optimized if we had the same level of automation and configuration in payroll as we do with our core NetSuite solution?
· How do we truly calculate costs and margins of products and services if we can’t report in detail on labour costs as part of our financial reporting?
ZonePayroll – Native to NetSuite
Differently from the previous two options which exist outside of NetSuite, and as a result remove the power, automation, and control you have for other functions which are managed within NetSuite, Infinet Cloud's native SuiteApp gives NetSuite customers a comprehensive solution to manage payroll directly in NetSuite.
In addition to the advantages of managing payroll in-house already covered in the previous section, managing payroll as part of your NetSuite set-up offers two key advantages:
1. Improved efficiency (and therefore reduced cost): The efficiency improvements are two-fold, firstly the need to manage, finalize, export, and import payroll data is removed. Secondly, you can automate tasks such as approvals using NetSuite’s standard workflow engine and all journals are posted to your GL automatically with correct classifications (department, class, location, and custom segments).
So, referring to the initial statistic reported by Bloomberg – there is no mystery or hidden admin. Everything is managed in a visible, stage-based process which only requires users to carry out tasks once, in one system.
2. True visibility of financial impact of labour costs: A key point to address is that payroll is a finance function, not an HR function.
Whilst there is clearly a lot of shared ground between the functions, the fact that payroll ends with money leaving the bank means that it is a finance function.
Something we have discussed in previous articles is that no other area of financial reporting is accepted as a summarized total. If sales or expenses go up or down, you want to know why, specifically. Who did what? How did that happen? Was it the same this quarter last year? What about per department?
So, why do you accept summarized totals for labour cost when you could be examining it to line-level detail to make better decisions based on complete data?
Using Infinet Cloud means that all data is managed completely within NetSuite. This means that when journals are posted (automatically) they include all of the individual line-level detail behind the totals which means that costs can be allocated correctly and you can achieve to-the-penny analysis, including payroll, across your entire financial operation.
If considering Infinet Cloud, and comparing it to either of the alternatives discussed in this article, it is best to ask:
· Why are we managing and reporting on one of our biggest costs outside of our finance solution?
· How much work is required to manage payroll in a different solution, external to the business, and then get the information back into NetSuite?
· Do we have true visibility into all of our business costs, and therefore margin and profit, without including to-the-penny analysis of labour costs?
Managing payroll and the admin associated with it in NetSuite is a complex task, but there are options available to streamline and optimize the process. Although payroll bureaus and third-party payroll solutions do have their advantages, overall, they create a very manual process for finance teams to manage and provide little insight into payroll costs.
Our ZonePayroll (formerly Infinet Cloud Payroll) SuiteApp offers a native and comprehensive solution that alleviates almost all the unnecessary manual tasks associated with payroll by automating the process and providing one source of truth for all financial data live in NetSuite. This allows for more enhanced reporting capabilities within NetSuite and more time for businesses to focus on wider strategic business decisions.
If you want to understand the full capabilities of the ZonePayroll SuiteApp and how it can streamline your payroll process, watch this webinar:
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