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Payroll Considers Its Cash Flow Influence

Data integration is climbing to the top of chief financial officers’ priority lists. Automatically looping information across various financial platforms — including accounts payable (AP), accounts receivable (AR) and expenses — is critical to achieving a real-time view of cash positions and developing more accurate forecasts.

When it comes to payroll, it may not seem that a steady, consistently timed outflow of cash to employees plays a prominent role in overall cash flow strategy. But the payroll landscape is evolving rapidly, with potentially significant implications for corporate finances.

“Payroll is not always as predictable or simple as it seems when you’re on the receiving end of the paycheck,” said Jamal Ayyad, head of product at SurePayroll.

In a recent conversation with PYMNTS, he discussed how various trends in how employees wish to get paid and how employers manage those payouts are driving more organizations to digitize payroll operations, with payroll data an increasingly valuable asset for CFOs.

The Value Of Integration

While payroll may appear to be among the least volatile areas of capital outflows, there are plenty of factors that cause fluctuations in how much money is issued to employees — and when and how they get paid. From new hires to departing professionals, to raises and bonuses, and to shifting tax laws, payroll can certainly change from one pay cycle to the next.

Those changes have an impact on a company’s overall cash flows, so it is imperative that businesses are able to automatically connect payroll data into back-office financial management systems.

SurePayroll recently announced its own integration with small business accounting platform Zoho Books, with a focus on ensuring that SMBs can automatically ensure that payroll data is accurate and connected into their financial management strategies.

Without automated technology in place, said Ayyad, the alternative is for businesses to conduct payroll calculations manually and then re-key that information into another system. “That whole process is time-consuming and difficult, and ripe for a bunch of errors,” he said.

Cash Flow Implications

Today, one of the biggest challenges in payroll is compliance, especially considering the ever-changing regulations around minimum wage, benefits and taxes on both the state and federal levels. But there are other shifts in the payroll space with significant implications for company cash flow.

Among them is the growing interest in the migration away from bi-weekly payroll and toward same-day payroll, or even early access to wages. Though this has not yet reached widespread adoption, Ayyad said SurePayroll is keeping a close watch on this trend, particularly as the gig economy expands and as professionals’ desire to more quickly access wages proliferates.

“There is a lot to consider for both employer and employee in models like this,” he noted. “An employer will have to be tuned into how their cash flow will be impacted by offering something like that.”

Employers must consider both the financial and the risk implications of connecting professionals to funds more quickly — and, in the instance of early access to wages, managing repayment of those funds.

Increasingly, said Ayyad, employers are also looking toward same-day and real-time payment capabilities as a tactic to enhance their cash management strategies and to enable more favorable time wage payouts, without delaying paychecks to the detriment of their employees. As these trends continue to grow, businesses will have to consider all of the cash flow consequences of a shifting payroll strategy.

“It’s important to give businesses as many options as possible, because it’s difficult to predict when you’ll cash and maybe not have cash,” noted Ayyad.

The Digitization Drive

As the payroll landscape continues to evolve, and as the effects on cash flow surface, it will become even more important for businesses to embrace technology that can automate workflows and integrate data into their accounting and other financial management systems.

With the Paycheck Protection Program (PPP) uncovering just how important it is for small businesses to have easy access to accurate payroll data in order to secure government aid, the demand for digital and automated payroll technologies has grown even larger.

“The rollout maybe wasn’t quite the smoothest, from a federal government standpoint,” noted Ayyad. “What we found is a lot of customers are turning to payroll providers to get all of their information in a usable format.”

Digitizing payroll data is a valuable first step to addressing some of the biggest pain points in the space today, from ensuring that paychecks are accurate to maintaining compliance with a variety of legislation. But when data can be integrated into back office platforms, not only can employers ensure that payroll is done correctly, but they can obtain a deeper view into overall financial positions and promote resiliency amid tumultuous times.

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