Page 122 - Essentials of Payroll: Management and Accounting

Payr oll Best Practices
payroll reporting purposes. For all these reasons, it is common practice
to consolidate payroll systems into a single,centralized location that oper-
ates with a single payroll database.
Before embarking on such a consolidation, however, you must con-

sider the costs of implementation. One is that a consolidation of many
payroll systems may require an expensive new software package that
must run on a more powerful computer, which entails extra capital and
software maintenance costs. Probably, too, a significant cost will be asso-
ciated with converting the data from the disparate databases into the
consolidated one. In addition, extra time may be needed to test the tax
rate for all company locations in order to avoid penalties for improper

tax withholdings and submissions. Finally, the timing of the implemen-
tation is of some importance. Many companies prefer to make the con-
version on the first day of the new year, so there is no need to enter
detailed pay information into the system for the prior year in order to
issue year-end payroll tax reports to the government. In sum, the cost
of consolidating payroll systems is considerable and must be carefully
analyzed before deciding to convert.

Cost:

Installation time:

Avoid Job Costing through the Payroll System
Some controllers have elaborate cost accounting systems set up to accu-
mulate a variety of costs from many sources, sometimes to be used for

activity-based costing and,more frequently,for job costing.One of these
costs is labor, which is sometimes accumulated through the payroll sys-
tem. When this is done, employees use lengthy time cards on which
they record the time spent on many of their activities during the day,
resulting in vastly longer payroll records than would otherwise be the

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