Labor is typically the largest expense for a business, often comprising between 50% to 70% of the company's budget. Unless you validate current wages, time and attendance, and market comparisons, your client’s company may be paying more than necessary.
Payroll is a tricky subject, but also the source of a great first impression. The following article is an excerpt from our webinar, Top 10 Outsourced CFO Quick Wins, where we help you onboard your new outsourced CFO clients quickly and confidently.
Should You Conduct a Payroll Audit?
The term “audit” may scare people, but its intent is simple: to verify that data is being correctly calculated according to existing regulations. A payroll audit is a way to ensure that employees are being paid correctly, according to federal, state, and local regulations and company policy. A payroll audit should also include verification of market compensation to ensure that your client is not under or overpaying for their most significant expense.
Today’s businesses must contend with a competitive labor force, so it’s important that companies do their best to attract, retain, and engage their employees in the company culture. This may also include incentives, bonuses, and other variable compensation that should be included in the audit, along with an analysis of actual to planned labor costs.
Do you have to be a payroll expert to conduct a payroll audit? No, there are third party services available who can make sure your compensation audit is accurate and provide market-based, valuable recommendations.
Does Your Payroll System Provide the Right Reports?
If your client is still tracking labor manually, it may be time for an automated time and attendance solution as well as an outsourced payroll provider. Not only will it ensure that employees are paid correctly, but the company will also be protected by ensuring that all taxes and garnishments are up to date.
Payroll systems provide a wealth of reports, including budget analysis, overtime, bonuses, and vacation accruals - all valuable data that your client will need to ensure their labor costs are in line and correctly accrued and paid.
Labor is the biggest expense that most businesses face, but you don’t want it to be the source of the biggest risk. An audit will ensure that employees are paid correctly, labor laws are followed, employees stay engaged - and your client mitigates both financial and legal risks.
Ready to Learn More?
Labor costs are just one of the pieces of your client’s puzzle you’ll need to solve. For more tips on how to make an impact as an outsourced CFO, watch our webinar recording, Top 10 Outsourced CFO Quick Wins, and leave us a reply below with your comments and experiences.