The pros and cons of integrating your POS and payroll
The pros and cons of integrating your POS and payroll
These days, there seems to be a SMART device for everything. Think of all the appliances and devices made to simplify our homes, all of which can be controlled by that SMART Phone in your pocket. Technology has made our everyday tasks more convenient, efficient, and secure, giving us peace of mind that all of our systems will cohesively work together.
At my house, Amazon is that “behind the scenes” technology that has integrated everything in my life. Once you buy the video doorbell, you can’t miss out on the, garage door opener, electronic door locks, light switches, thermostats, vacuum cleaner, window curtains, lawn sprinklers, baby monitors… the list goes on. My wife loves that before we get home, she can know our package was delivered, adjust the house thermostat since we hit another record HOT day in Memphis, and then roll in the driveway with the garage door already opening – ALL from her phone. If we are hosting, the calendar alarms know we have family coming over, so it starts the vacuum in the living room, turns on the patio lights, and ignites the bug zapper so our grilling experience won’t be ruined by mosquitos.
Now, we could have done all those things once we got to the house. But we have become “so busy” these SMART integrations have made our lives easier. Because Amazon handles the backend technology, we can easily integrate their products into our lives to make comfortable living and hosting a breeze for us.
The Importance of Your POS
The function of a POS (Point of Sale System) is to manage the restaurant’s overall financial and operational data. It can be used to capture employees’ hours worked, communicate the customers’ orders to the BOH, accept payments, process the CC fees, categorize the sales numbers between food, beverage, alcohol, tax, tips, etc… All in all, the POS allows the manager and owner to monitor the labor and sales data in real-time collaboratively. If you elect to manage your employees hours through your point of sale system, each pay period you will need to ensure those hours get back to your payroll company.
Some point of sale companies offer payroll services but many restaurant owners will elect to work with a separate provider for payroll and tax services. So will you ask general managers to hand key hours into your payroll software? Will you utilize an import / export file? Or will you want to integrate your two systems?
Regardless of the functions you are currently using with your POS System, a Cloud-Based Point of Sale System is required to integrate your POS with your Payroll Software. Originally, all POS systems started “on-premise.” This means they were installed and run from your computer’s hard drive that is physically located in your building. In contrast, a cloud-based POS system is connected to the internet and hosted on the remote servers of your POS company which makes it possible to integrate with your payroll system.
Nowadays, just about all of the normal point-of-sale systems have the ability to be converted to cloud-based.
A few of the top national cloud-based, Point-of-Sale systems are: (in no particular order)
If you decide to outsource your payroll or already are working with a payroll company, there might be a real opportunity to continue simplifying your workflow by integrating that payroll system with your POS.
Integrating Payroll with Your POS
In the restaurant & hospitality industry, managing your payroll for your employees efficiently and accurately is vital to keeping your staff. It’s no secret that many are simply working for that paycheck at the end of the day/week. The industry’s diverse labor force includes a variety of moving parts:
- Part-time, Full-time, and Seasonal staff…
- People who perform multiple shift types hourly, as well as salaried positions. Tips, commissions, and possible bonuses…
All of these payroll management factors add an additional layer of complexity. Because of this, there are several benefits to integrating your POS and your payroll systems.
Reduces Manual Data Entry
A key benefit of integrating your POS with your payroll software is how much it cuts back on your need to duplicate information in multiple systems. Not only does this save you time, but it will help minimize the risks of costly payroll processing errors. The integrated systems can capture the employees’ hours worked and sales data per shift/day/week, review the information is correct (i.e. an employee did not forget to clock out after their lunch shift), and then accumulate the data into a spreadsheet to import that “timecard” directly into the payroll software.
Another time saver for you with this integration is the use of Electric Onboarding. When a new employee is hired, they can complete all their documents (W-4, I-9, Direct Deposit Information, Tax Information, copies of handbook being signed, WOTC form… the list goes on) and complete them digitally instead of with pen and paper. Once the employee completes these, their information is automatically uploaded into the payroll software and used to accurately get them paid and taxed at the end of the year.
Tip Management and Tracking
Integrating your payroll software with your POS system also simplifies the e tip management and allocation. In addition, it will allow you to track the 80/20 rule for Tip Credits that are available for the business owner as a tax deduction on your Year End Tax Return. In the restaurant industry, tips are one of the most critical components of the compensation for your wait & bartending staffs. By automatically capturing and allocating tips through the POS system, they can be managed in the payroll software to ensure employees accurately receive their fair share of tips.
Compliance with Labor Laws
No one wants to have a run-in with the DOL. Integrating your systems helps with this by keeping you up to date on the current labor laws and regulations that get automatically updated in the payroll software. Many payroll companies also offer HR services so it can be easy to consult HR experts about the local and federal regulations you need to manage. Additionally, a payroll software will provide analytical tools and reports that can help the business monitor their Key Performance Indicators for improvement and take action where changes may be needed.
Whether you are pursuing a direct integration between your point of sale and your payroll company or are working to format an easy import / export file to upload on payday, there are several ways to get hours and tips into your payroll software. Be sure to explore those different options with both of your partners and come up with a solution that works for you.
Should you integrate your POS and payroll?
There is an old adage that says just because you can doesn’t mean you should. Although we at Whirks are huge fans of technology and want you to run a lean and efficient back office, we would suggest NOT to integrate your point of sale with your payroll system, so allow me to explain why!
Why you might NOT want to integrate your POS and payroll
If you elect to handle your hours worked through your point of sale and you’ll need to get that data into your payroll platform each pay period, we would actually recommend a custom import file or an FTP file instead of a direct integration.
Although we integrate with many different point-of-sale systems, we have discovered that actual payroll mistakes (like overpaying a waitstaff because they forgot to clock out after a shift) or forgetting a new shift rate increase for one of your teams gets missed a lot during integrations. We never want you to hand-key or manually enter payroll details because the risk of keying $10000 instead of 1000 is high. The last thing a restaurant owner wants to do is claw back $10,000 from an employees bank account or worse not be able to get the money back when the mistake happens, HOWEVER, when we green light integrations, we find that more payroll mistakes are likely to happen because there are less checks to confirming accuracy on the actual dollars paid, on actual hours worked, and allocating those wages appropriately. Although integrations are easy, effective, and provide less manual work, owners may rely too heavily on the ease of use and miss the detailed eye that is required to bless and approve payroll.
Create a custom time card import with your payroll company
That’s why we would suggest asking your payroll company to create a custom time card import that can map onto your current point of sale. When it’s time to run payroll, you export and download the report, review for errors or miscalculations and then upload into payroll.
If your payroll company is diligent, they can create rules and alerts for you that can be another check at the time of import so you don’t accidentally overpay or underpay employees or miss an overtime wage requirement.
Creating this two step process is a tad more work on a weekly basis, but it can save owners thousands of dollars of the course of a year in caught errors. Overtime, your payroll company can help tweak this report so it gets more efficient for you as you grow.
Should You Be Outsourcing Your Payroll?
Similar to Amazon’s home technology, outsourcing your payroll can take a lot of responsibilities off your plate as a business owner. In short, outsourcing your payroll means that you have somebody else who is responsible for your company’s tax filings and ensuring accuracy with salary and hourly wage requirements as well as managing required and voluntary payroll deductions like worker’s comp, 401k, health benefits, HSAs, federal unemployment, and state unemployment taxes. Most business owners and restaurant managers have a ton of daily and weekly tasks to keep track of. Finding a trustworthy and cost-effective company to help streamline some processes can help take several of these “must-dos” off of your plate.
Once you’ve decided that you want to outsource your payroll, you will be required to make some important decisions to streamline your labor operations. Will you require employees to clock in and out of your point of sale system? Will you want to use your payroll company for time and attendance tracking? How will you handle tips? Will you pay out daily, through payroll? How will you track them?
The answers to these questions will depend on what payroll company you choose, which point of sale vendor you work with and the streamlining and optimization of those two workflows and processes.
Is It Worth It?
Our motto here at Whirks is: One Step Better. I like this mantra because it acknowledges that change moves slowly, but working to improve yourself is a worthy cause. As someone who has worked in the restaurant and hospitality industry for several years, I see using the integration technology between your POS System and Payroll Software as one way a business can seek to become “One Step Better.” While it may seem like a big, scary transition, the time it will save you once it is implemented will have you wondering why you didn’t do it sooner. Embracing this kind of technology in your business can streamline your operations, reduce manual entry, and keep your employees paid accurately. In an industry where margins are often tight and the success of the business can rely on its ability to operate efficiently, you’ve got to find ways to get one step ahead and maintain your profitability.
If you have questions about where to even start with this process, book a few minutes to talk with me about your options.
Whirks happily supports over 100 restaurants in their day-to-day operations and we love to create resources that help our clients thrive. Check out this article about what we believe is the best way to pay out tips to your staff.