Spreadsheets, Online Payroll Software, and Eclairs

Most Indian small businesses rely on spreadsheets to process their payroll instead of using proper payroll software. Real, a spreadsheet is a giant leap forward from doing payroll with pen and paper, but it is not the best way to do things.

There have been enough research reports that have highlighted the drawbacks of using spreadsheets. There is a dedicated particular interest group in Europe related to spreadsheet risks. Here's just one story from the stories section:

$24-million spreadsheet "clerical error."

Story: //www.theregister.co.uk/content/67/31298.html

June 03, 2003, TORONTO (Reuters) -

[...] the company's computer spreadsheet contained mismatched bids for the contracts, it said. "It was a cut-and-paste error in an Excel spreadsheet that we did not detect when we did our final sorting and ranking bids before submission," TransAlta chief executive Steve Snyder said in a conference call. "I am disappointed over this event. The important thing is to learn from it, which we've done."

Risk: Huge financial loss

More problems of spreadsheets are highlighted in a paper called "STOP THAT SUBVERSIVE SPREADSHEET!" by David Chadwick of the University of Greenwich, London. An excerpt:

"The presence of a spreadsheet application in an accounting system can subvert all the controls in all other parts of that system" [Butler R. 2000]

In the payroll management context, there are many risks of using spreadsheets:

Clerical errors / cut-and-paste errors / formula errors
Fines due to wrong withholdings of statutory deductions like PF & ESI
Payroll fraud (see: Small Businesses Most Vulnerable to Payroll Fraud)

So why do people still use spreadsheets?

Excel is installed on the PC, and users are familiar with it.
It's free.
It's easy to work with and gets the job done.
They are not aware of the risks and quality problems.

Payroll software can help

Since payroll is a regular activity done month after month, using payroll software is recommended instead of ad-hoc methods. Payroll software cuts down the time taken to process payroll from days to minutes. It also guarantees the accuracy, robust audit control, and full statutory compliance of all government rules.

Yet, the total cost of ownership (TCO) of payroll software and a different set of risks of owning software have led to continued use of spreadsheets, despite threats.

An eclair a day

The Internet and recent advances in cloud computing have enabled small businesses to access quality software at affordable rates. Instead of spending capital on payroll software purchases, the SaaS (software-as-a-service) model provides online software on a monthly subscription basis. It's a switch from CAPEX to OPEX, which is better for cash flow management and has less inherent risk.

With the availability of online salary software, everyone can get the full benefits of a payroll system that automates most of the work. All this for less than a rupee (or an eclair) a day per employee.

The benefits one can expect from online payroll software are:

accuracy & high-quality results
full statutory compliance: accurate salary deductions and on-time reporting
significant time savings (save days of effort)
minimum data entry and manual effort
instant access to historical information (salary, leave, increments) of any employee
correct enforcement of company policies and rules (leave, reimbursements, etc.)
automatic daily backups
security and privacy of data

It also solves the problems of traditional licensed software:

free and automatic updates/enhancements
zero upfront cost, low monthly fees
no IT infrastructure costs
no need for IT support and AMCs

Of course, online payroll software works only for those businesses that are online. If Internet connectivity is not available or if you have an unreliable connection, it could lead to frustration. But with the ubiquitous Internet presence, rolling out of 3G network, and other initiatives by the government, it will soon be a nonissue.

Online payroll software offers a better business proposition than spreadsheets in all respects. A free trial will quickly tell if it works for you or not. As the ad goes, "melody Khao, khud Jan Jao...".