The Dangers Of Poorly Managed Payroll, And How They Can Snowball

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Written by Michael Foote, founder of Quote Goat, has over 13 years experience working in the finance, insurance and currency sectors.

To run a successful firm, all your departments need to be functioning well, and working with each other in a process known as ‘synergy.’ There have been many books written on the benefits of synergy, and on the practical effects that come as a result. Put simply; it is the ability of a department to fluently merge its departments of operation into one single cohesive unit, that as a consequence becomes more than the sum of its parts.

Unfortunately, this can also mean that if one department is functioning sub-optimally, it can have a snowballing effect on the rest of your firm, alienating employees, customers and your reputation alike. After all, much like a chain, your business is only as strong as the weakest link within it.

Every business has a weakest department. It is part of what makes a business. Even Coca-Cola have departments that are weaker in effectiveness than others, depending on how that department defines success. However, there are absolutely departments that can afford to be weak and then improved, as opposed to departments that cannot afford to be weak at all, never, no matter what the reason.

One of these is your payroll department.

Why is this? Well:


A missed paycheck, or incorrectly paid hours, can result in employees feeling like they aren’t valued within the company culture. This will, in turn, mean that they feel like they might as well not be there. This can be dangerous because if many employees start leaving or decide to do less hard work during their daily operation, your firm will suffer greatly and your effectiveness will be significantly impeded. This can lead to lower quality products, or lower quality client interactions, or lower quality marketing campaigns.

Over time, all of these add up to a firm that was a shadow of its former self. Be sure to avoid this by recruiting well through a service like Portfolio Payroll to reduce this feeling of alienation by ensuring you have competent people in control.

Affects All Other Departments

If marketing doesn’t function as well as intended, it might affect sales, but it won’t affect your human resources. This is true of many departments, but not true of payroll. An employee facing problems with their paycheck can come from any department, and thus can reduce the numbers of effectiveness of that department. This can lead to holes in the sinking ship appearing all around, thus letting more water in as you plummet in growth, sales, and employee satisfaction.

Affects Employability

Over time, you get a bad reputation. Skilled workers will not apply for a job known for not paying prospective hires on time. With websites like Glassdoor available online, people can see what a firm is like before they apply. Make sure you give no reason for negative reviews.

These effects can quickly snowball, and open you up to litigation. Make sure you’re not responsible for any of these issues, and you make payroll an absolute priority, preferably headed by one or a team of qualified professionals. This is one department where ‘no news is good news.’


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