Three ways in which analytics tools can help improve payroll processes Three ways in which analytics tools can help improve payroll processes

Three ways in which analytics tools can help improve payroll processes
31 Oct 2018

Because payroll is not only an essential function but often an organisation’s largest cost centre, performance reports are generally considered vital to help business leaders understand what is going on.

But providing an overview of key metrics and how many employees are paid what and when means that payroll reporting can prove to be a challenging and time-consuming business. While most payroll systems today make it possible to evaluate end-of-process snapshot figures, additional analytics tools can be used to gauge payroll’s efficiency and performance more effectively.

In other words, whereas traditional reporting activity only looked at the end-results, analytics tools help to examine the process. Here are three examples how:

  1. Accuracy versus first-time approval rates

Ensuring accuracy is a primary goal of any payroll operation, but also one of its greatest ongoing challenges. A variety of factors can cause inaccurate payroll data, ranging from valid late changes such as an employee leaving the company unexpectedly to more systemic issues like an error-prone manual transfer process. 

As a result, it is important to be able to determine what percentage of your payroll data is correct versus how much is incorrect, and to monitor that number from cycle to cycle. Doing so will give you an insight into how well placed you are to meet employees’ needs and, ideally, to spot any particularly challenging periods, such as holidays.

But although accuracy rates provide an important snapshot of final performance, first-time approval rates will also help you identify where there are any accuracy problems. If accuracy rates are equivalent to the final score on match day, first-time approvals equate to a training assessment in the weeks running up to it.

Put another way, an excellent first-time approval rate tells you that your data collection and processing is highly accurate from the outset. As a result, you know to look elsewhere for opportunities to make improvements. On the other hand, if you consistently require multiple payroll approval rounds, it could be time to look at your data collection methods.

  1. Error rates versus data input issues

Payroll error rates should also be explored. Whether you look at an overall percentage or the actual figure per payroll, error rates can help provide context for metrics such as timeliness and accuracy.

For example, a high error rate, which means your team has to spend a lot of time correcting problems, may help to explain why you have a long payroll cycle. Conversely, a low error rate could point to more accurate data entry, efficient calculations - or even a fault in your error reporting.

Whatever the case, payroll analytics tools help you to look beyond the final report numbers to pinpoint where and when in the process errors have taken place. Evaluating how many issues come about at the point of data entry can also help to shed light on the quality of your source data and how efficient the process of transferring information into your payroll system is. 

To address high levels of data input problems, it may be necessary to evaluate related processes in other departments to determine if any issues are being generated there. Conversely, if you are experiencing very few input errors but multiple approval rounds are still required, the problem is likely to lie in your processing or calculation activity rather than your data.

  1. Timeliness versus calendar window

After accuracy, timeliness is probably the most sought-after figure in any payroll performance report. In other words, the key questions that business leaders have are usually ‘did you pay people correctly and on time?’

For too many organisations, these questions sum up the payroll function – even though demonstrating a good performance in timeliness terms merely shows that your payroll team is able to meet deadlines. It offers no insight into the time and effort required to get there. 

Instead examining the payroll calendar window provides a broader view of process efficiency and can be instrumental when evaluating the impact and success of improvement initiatives. 

For example, once an organisation has integrated its global payroll and HR systems, it should see a reduction in its payroll calendar window as such integration work will eliminate the need to transfer data manually. Replacing tedious manual data checks with robotic data validation could be another way to cut days of work out of the payroll process in future too.

But also bear in mind that each change made to the payroll process will inevitably have knock-on effects elsewhere. A shorter calendar window, for example, will enable more data to be included in each payroll run, thereby improving accuracy and efficiency, and saving time and costs by reducing the need for supplemental runs.

This means that understanding how such changes impact your payroll activities and where further opportunities for improvement might lie will be key to improving not only your payroll processes, but also the related processes of every function you work with.

 Paul Bartlett

Paul Bartlett is CEO of CloudPay, which provides global payroll and payments managed services to multinational organisations. A global business expert, he has much experience in helping companies improve the efficiency and scalability of their operations using technology and services.

OTHER ARTICLES THAT MAY INTEREST YOU

A brief guide to payroll analytics

Predictive analytics: How to overcome the challenges

Ask the Expert: Making the case for analytics and global reporting

Because payroll is not only an essential function but often an organisation’s largest cost centre, performance reports are generally considered vital to help business leaders understand what is going on.

But providing an overview of key metrics and how many employees are paid what and when means that payroll reporting can prove to be a challenging and time-consuming business. While most payroll systems today make it possible to evaluate end-of-process snapshot figures, additional analytics tools can be used to gauge payroll’s efficiency and performance more effectively.

In other words, whereas traditional reporting activity only looked at the end-results, analytics tools help to examine the process. Here are three examples how:

  1. Accuracy versus first-time approval rates

Ensuring accuracy is a primary goal of any payroll operation, but also one of its greatest ongoing challenges. A variety of factors can cause inaccurate payroll data, ranging from valid late changes such as an employee leaving the company unexpectedly to more systemic issues like an error-prone manual transfer process. 

As a result, it is important to be able to determine what percentage of your payroll data is correct versus how much is incorrect, and to monitor that number from cycle to cycle. Doing so will give you an insight into how well placed you are to meet employees’ needs and, ideally, to spot any particularly challenging periods, such as holidays.

But although accuracy rates provide an important snapshot of final performance, first-time approval rates will also help you identify where there are any accuracy problems. If accuracy rates are equivalent to the final score on match day, first-time approvals equate to a training assessment in the weeks running up to it.

Put another way, an excellent first-time approval rate tells you that your data collection and processing is highly accurate from the outset. As a result, you know to look elsewhere for opportunities to make improvements. On the other hand, if you consistently require multiple payroll approval rounds, it could be time to look at your data collection methods.

  1. Error rates versus data input issues

Payroll error rates should also be explored. Whether you look at an overall percentage or the actual figure per payroll, error rates can help provide context for metrics such as timeliness and accuracy.

For example, a high error rate, which means your team has to spend a lot of time correcting problems, may help to explain why you have a long payroll cycle. Conversely, a low error rate could point to more accurate data entry, efficient calculations - or even a fault in your error reporting.

Whatever the case, payroll analytics tools help you to look beyond the final report numbers to pinpoint where and when in the process errors have taken place. Evaluating how many issues come about at the point of data entry can also help to shed light on the quality of your source data and how efficient the process of transferring information into your payroll system is. 

To address high levels of data input problems, it may be necessary to evaluate related processes in other departments to determine if any issues are being generated there. Conversely, if you are experiencing very few input errors but multiple approval rounds are still required, the problem is likely to lie in your processing or calculation activity rather than your data.

  1. Timeliness versus calendar window

After accuracy, timeliness is probably the most sought-after figure in any payroll performance report. In other words, the key questions that business leaders have are usually ‘did you pay people correctly and on time?’

For too many organisations, these questions sum up the payroll function – even though demonstrating a good performance in timeliness terms merely shows that your payroll team is able to meet deadlines. It offers no insight into the time and effort required to get there. 

Instead examining the payroll calendar window provides a broader view of process efficiency and can be instrumental when evaluating the impact and success of improvement initiatives. 

For example, once an organisation has integrated its global payroll and HR systems, it should see a reduction in its payroll calendar window as such integration work will eliminate the need to transfer data manually. Replacing tedious manual data checks with robotic data validation could be another way to cut days of work out of the payroll process in future too.

But also bear in mind that each change made to the payroll process will inevitably have knock-on effects elsewhere. A shorter calendar window, for example, will enable more data to be included in each payroll run, thereby improving accuracy and efficiency, and saving time and costs by reducing the need for supplemental runs.

This means that understanding how such changes impact your payroll activities and where further opportunities for improvement might lie will be key to improving not only your payroll processes, but also the related processes of every function you work with.

 Paul Bartlett

Paul Bartlett is CEO of CloudPay, which provides global payroll and payments managed services to multinational organisations. A global business expert, he has much experience in helping companies improve the efficiency and scalability of their operations using technology and services.

OTHER ARTICLES THAT MAY INTEREST YOU

A brief guide to payroll analytics

Predictive analytics: How to overcome the challenges

Ask the Expert: Making the case for analytics and global reporting