For many manufacturers, keeping overhead under control remains an important part of maintaining operations. While most businesses try to focus on the tax side of accounting to make cost cuts, shops and factories have only their payroll to tighten with any significance. At the same time, a supervisor can’t just simply remove employees from the payroll in the name of belt-tightening, simply because that can greatly impact productivity. As a consequence, the key is to create better payroll processing practices. ERP Search, citing research from the Hackett Group, said companies that failed to follow best practices tend to spend $715 on payroll per worker, while those that do only use $85 per worker. Microsoft Dynamics NAV Time Collection can help with these improvements through more effective data capture of work shifts overall.

Consolidate and digitize
A common problem among small manufacturers is the continued use of payroll systems that don’t have any connection with the rest of operations. That includes time and attendance, taxes, human resources and finance. Without these critical components working in conjunction with one another, issues can appear where businesses may overspend on payroll simply because they paid too much in health insurance or the hours for certain employees are incorrect. As Business Finance Magazine noted, even the best-in-class payroll programs will be useless without proper connections to business processes.

It’s essential to provide integration between payroll and other accounting-related operations. Enterprise resource planning platforms such as Microsoft Dynamics NAV often offer a starting point for this form of interconnectedness. Still, it’s not an end-all solution. Such matters require applying software that takes operations into account such as time collection in a way that is conceivable.

Additionally, it may be in the best of small manufacturers to put their ERP software in the cloud. By running on a Web-based platform, there is less need for servers and other hardware infrastructure to perform payroll tasks. Some even have the option of running through an app on a mobile device.

Moving around the payments
Other best practices involving payroll process often revolve around payment procedures. Payment schedules in particular are often a great source of hidden expenses. The more frequent a company pays employees, the more expensive it is to cut the checks. A simple tactic may be reducing the number of pay periods from biweekly to monthly or even to bimonthly. However, this may be unpopular with workers, so pay careful consideration to their concerns. Another tactic is to simply use a single pay cycle, rather than multiple ones for different sets of employees.

This leads to another best practice, which is to understand how payroll fits into the shop’s culture. Sometimes, a company can benefit from understanding the types of workers it hires and how they bank when establishing check processing. For example, a large number of workers may not have bank accounts, so having a direct deposit system may not be in a manufacturer’s best interest. Instead, it should incorporate payroll debit cards that deposit the paycheck electronically.

Going further, a company should consider making employee payment flexible. That way, nobody on the workforce feels like they’re stuck with choices they’re not comfortable with in terms of getting paid. This is not always possible, especially since different methods require an effective coordination with the current payroll software and company accountants. However, by creating custom pay delivery for different employees, it makes payroll processing much more efficient, since it encourages workers to use something that it’s in their best interest.

For better ways to improve payroll, check out the Microsoft Dynamics NAV Time Collection data sheet today.