IS MY HR/PAYROLL MANAGER FINANCIALLY SAVVY ENOUGH?
- shneor fridman
- Sep 26, 2024
- 2 min read
If you’re running a service-based company where 70-80% of your budget goes to payroll, it’s critical to ensure that your payroll is managed correctly. But how confident are you that your HR or Payroll Manager has the financial understanding to make sure everything is accurate and compliant?
While HR and payroll managers are typically skilled in the administrative side of payroll, financial expertise is often outside of their wheelhouse. Without this knowledge, serious financial mistakes can go unnoticed, and the consequences can hurt your bottom line.
Here are some signs your payroll might not be handled with adequate financial oversight:
1. Incorrect Payroll Setup
A lack of financial understanding can lead to mistakes in setting up payroll. For example, they might not configure payroll to match your company's specific needs, such as tracking multiple cost centers, which is especially critical in larger or service-based organizations. Without proper setup, you might be looking at missed tax savings or compliance issues.
2. Not Following GAAP Standards
When backpaying employees or making adjustments in the current period, GAAP (Generally Accepted Accounting Principles) must be followed. HR or payroll managers without a solid financial background might not adhere to these principles, leading to misreporting or inaccurate financial statements.
3. Failure to Reconcile Payroll Mistakes
Reconciling payroll errors requires more than just correcting numbers. It involves a deep understanding of how financial transactions should flow through your accounting system. A payroll manager without this knowledge may struggle to ensure that mistakes are properly fixed and reflected in the company’s financials.
4. Inaccurate Salary Allocations
Without proper financial skills, salary allocations across departments, projects, or grants may be incorrect. Misallocations can lead to budgeting errors, incorrect cost reporting, and even issues with government grants if your business relies on public funding.
The Role of Financial Oversight
It’s important to recognize that having a financially savvy CFO or CFO service can ensure your payroll is not just processed, but handled with the financial accuracy it requires. By working closely with your HR and payroll teams, a CFO can establish internal controls, set up systems that follow accounting principles, and prevent payroll errors from becoming costly mistakes.
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