If you want to know how technology has changed the accounting industry, you only need to look at how payroll is processed.
Most business owners of today have no idea what payroll was like 25 years ago. An owner's life revolved around the weekly or biweekly payroll cycle. Small companies managed payroll manually, and even in large companies the checks were generally hand-signed. A week in advance, the owner had to verify workers and hours, then wait while a processing center cut paper checks and mailed them along with a paper payroll report to the company. As for vacations, whoever handled payroll -- usually the boss -- had to plan their life around this payroll cycle.
But the business of doing business has changed in just the past decade, in three important ways -- mobile computing, cloud computing and 24/7 access.
According to Steve Kania, vice president of product management at SurePayroll, "The most significant change in payroll technology in the past five years has been twofold. The continuous adoption of Software-as-a-Service-based solutions (even by traditional payroll companies) and the increasing reliance/dependency on mobile devices (smartphones and tablets) to do payroll and other business."
"The most significant change we've seen is that companies are moving away from the desktop to online and mobile solutions," said Karen Peacock, general manager of employee management solutions at Intuit. "Small-business owners have become more comfortable with sharing data online and now have the broadband availability to do so. When employees record their time, they no longer use time clocks or desktop programs, and instead, they're relying on mobile devices to automate and complete the same tasks -- that way they have anytime, anywhere access across devices for day-to-day activities. We've been seeing more employers using electronic methods to go paperless, like using direct deposits and e-filing to save time and money."
"Payroll has seen many changes over the past few years. Technology has been the largest contributor of this change, providing businesses and accountants with software that makes processing payroll easier, reducing time spent processing payroll, thereby enabling business owners to focus on their core business and not the administration of payroll," said Shelley Ng, vice president of product management at online payroll provider Ceridian Small Business Payroll. "That said, we still see a small percentage of business owners processing payroll by hand. What they may not realize is the opportunity cost attached to their precious time."
While most companies cite the emergence of mobile computing and cloud-based software applications, the greater changes may be in the makeup of the workforce and in the ever-mounting level of regulation aimed at small businesses.
"One of the most significant trends and changes we have seen is in the way small businesses expect to interact with the accountants. Adoption of cloud technology allows accountants to interact with their clients much more seamlessly and virtually. No more passing back and forth spreadsheets or having to be in the same room in order to work together effectively," said Peacock.
HARDWARE & SOFTWARE CHANGES
Most payroll companies point to mobile computing and cloud-based computing as the most significant changes in hardware and software, but in some surprising ways.
"Old-style paper checks and delivered reports are becoming a thing of the past," said Jim Paille, director of operations for myPay Solutions at Thomson Reuters. "Employees want to be able to pull up their transactions when they want, and track accrual balances without keeping paper records."
"We anticipate that fewer small-business owners will process payroll manually," said Scott Schreier, senior director of accountant channel marketing for ADP. "In addition, we are seeing a broader array of human resource tools and products being integrated with payroll. These HR tools, especially when integrated with payroll, insurance products, and retirement savings plans, can deliver solutions to small-business owners previously thought available only to larger businesses."
"Payroll has become another accounting workflow, and one in which the goal is to streamline the process for the client," added Dr. Chandra Bhansali, CEO of AccountantsWorld. "The whole idea is to make the processes streamlined within the client company. Everything needs to be done automatically, from the time a worker joins, through the options for payment, to the issue of a W-2 or 1099 at the end. Once all the processes are done, we should have minimized the work at every step by streamlining the central processes."
"Tablets and smartphones are empowering payroll clients and their employees," said Stephen Gregg, chairman and CEO of payroll technology provider Apex Payroll. "This allows a small company to have enterprise-level hardware that is sophisticated, fast, scalable and redundant. Because we can deliver enterprise-level computing to payroll businesses, they are able to focus on customer service and new business."
"Mobile smartphone capabilities have opened up the possibilities for business owners to process their payroll wherever they are, whenever they want to," said Ceridian's Ng. "They can now be at the front of their store, serving their customers and processing their payroll, instead of being in the back room on their personal computer administering their payroll. They can now process payroll anywhere - even while at their kid's soccer game."
"The hardware has gotten more complicated, and a lot of our role is to make those complicated technologies simple for our customers," Gregg continued. "The beauty of the cloud is that it makes this possible. It does pose some problems for developers - we have to have more sophisticated software engineers, and the platform is more expensive to build. But on the other hand, it creates a better user experience because it allows us to listen and respond more quickly to our customers."
"Rapid innovation in mobile and Web design the past few years has raised the bar for consumer expectations. People expect apps to solve any problem they have at the moment of need, and to deliver delightfully easy experiences across the board. The new normal for 'easy' means little to no data entry, a personalized experience and seamlessly integrated apps," said Intuit's Peacock.
"Employee and client portals have also improved the payroll experience," said Paille of Thomson Reuters. "It helps our product cycle by eliminating common carries like postal or UPS that may be affected by weather or other delivery problems."
INTEGRATION, NOT INNOVATION
While the technologies of payroll have evolved rapidly in recent years, most of the top vendors see the next few years as a period of integration, rather than innovation.
"In the next five years, we will not honestly see a lot of change, but rather the steady integration of trends we have already seen," said AccountantsWorld's Bhansali. "Currently the focus has been on the move to cloud and mobile computing, but soon the focus will be on helping accountants understand that payroll will be a very different thing than it has been in the past."
"Whether it is in connection with small-business banking or accounting or both, we'll see the market look to develop products that offer an integrated solution. We expect application integrations will trend in the next three years to drive a complete ecosystem for the user," said SurePayroll's Kania.
"As younger generations are entering the workforce, they make up more of accountants' client base. Having grown up on technology, they expect real-time interaction with their accountant and will increasingly rely on social and mobile technologies to deliver results," added Intuit's Peacock.
"Accounting professionals continue to see payroll as a business driver, creating new revenue streams and establishing ways to deepen client relationships as a complement to other services," added Schreier. "In addition, we are seeing a broader array of HR tools and products being integrated with payroll. These HR tools, especially when integrated with payroll, insurance products, and retirement savings plans, can deliver solutions to small-business owners previously available only to larger businesses."
"We're going to see more simplicity," added Oliver Furniss, vice president of payroll at Xero. "It's going to look more like the consumer technologies we use every day on our tablets and iPhones. But it will still have powerful technology under the hood that's making sure accounting professionals and business owners are compliant and meeting key deadlines. As part of this move to simplicity, we'll see businesses expect payroll to seamlessly work with core business applications, including their accounting software. At the same time, new technology providers will come in and disrupt older payroll technologies. These simple-to-use payroll solutions will target specific industries or solve specific business problems. They will tightly integrate with a variety of business apps offering best-in-class solutions without complex custom integrations."
PAYROLL IN THE FUTURE
Beyond the immediate future, payroll will be driven less by technological innovation than by fundamental changes in government, society and the social fabric of the small company.
"As things become more complicated, customers are looking towards having all of their payroll-related needs, including benefits, in one easy-to-access location," explained Intuit's Peacock. "We expect businesses will want a more flexible workforce - one with more 1099 contractors and work-at-home employees who will work when and where they want. The rise of the remote workforce will drive an increase in the use of mobile devices such as tablets and smartphones, and increased importance of cloud-based collaboration tools."
"Payroll solutions are continuing to move away from print to electronic media to maintain the environment and for convenience," Ceridian's Ng agreed. "In fact, the Gen Y and Millennial employees in the workforce expect this. In addition, self-service will continue to grow as more employees choose to read, update and manage information online."
"The growth of payroll and related services will follow the path of available bandwidth. The future will bring faster devices that handle more sophisticated applications," said Apex's Gregg. "Devices will be larger and more connected, with more available bandwidth. This, in turn, will drive the expanded use and functionality of employee portals that are interactive. With these employee portals, the entire breadth of the administrative and social tasks of the company can be taken online, virtually eliminating all of the paperwork. Some companies are doing some of this now, but small companies will be more aggressive embracing these powerful employee portals."
The greatest complicating factor may be compliance with an ever-growing list of local, state and federal regulations. "When major companies like TGI Fridays, Dominos, McDonalds and even NFL cheerleaders have been in the news for wage violations and college athletes are testing the very definition of 'employee,' it's easy to understand why it is confusing for our small-business customers," said SurePayroll's Kania.
Ceridian's Ng explained, "Business owners are realizing that payroll rules can be complex to manage because of ongoing legislative changes. Just as important, the state and federal labor requirements for overtime and meal breaks, along with compliance requirements for payroll reporting, quarterly filings, year-end filings, etc., require expertise that some business owners are not able or willing to hire staff for. How do business owners keep up with increasing compliance requirements?"
"There are proposals already under consideration to accelerate the distribution of W-2s in January," said Paille of Thomson Reuters, "and within a very few years paper W-2s and 1099s will be a thing of the past. Added to this is an increased emphasis on security that will drive the use of more advanced features like biometrics as a replacement for time clocks and even time sheets."
