Whether you are a new business that has just created a brand new payroll system or an established company that has been making some tweaks, it is important to test your finance system and payment methods before you hit the next payday.
If you can’t pay employees the right amount of money, then something is clearly wrong.
But how do you test a payroll system without actually hitting another payday? There are a few ways to check that your adjustments work and that the new version of your old payroll is still just as reliable as you had expected. But where should you begin?
Use Parallel Run Testing
Parallel Run Testing can sound complicated, but it is actually one of the most straightforward ways to see if your new payroll works in the same way as the old one. It should not impact your business operations, and it does not put your employees at risk of getting their money late.
This kind of testing works by having two simulation payroll systems, with the information from the old payroll system being transferred over to the new one. Running the old data through the new system allows you to compare the previous payroll to the new one, highlighting any inconsistencies.
A test like this offers two major advantages. First, you can see if the finished pay stubs look any different, allowing you to find places where a calculation might have been mishandled, or a certain field might have been formatted poorly. Second, it does not send the pay stubs out live to real employees.
This can still be quite a time-consuming process, so it is not a good idea to run it shortly before the next payday. Find a point in time where accounting or finance administration staff are available, then get them to handle the parallel run testing whenever it is most convenient.
Simulate Payrolls
In a similar vein, it is not a bad idea to ‘simulate’ a payday using your new payrolls. For example, you might decide to create fake pay stubs using an online generator to see how accurate they are, which could help you decide whether you want to use that generator as part of your overall payroll system.
It can also help to run little experiments relating to things like overtime pay, sick pay, or even waged employees. Even if you only have salaried employees at the moment, testing a wage system means that you will still be prepared if you do hire any wage-paid workers, saving you from issues later on.
The more you can test directly, the better the results will be, and the higher-quality your system will become. It is not a bad idea to create a set of fake test data that you can run through a payroll system each time you adjust something, especially if it can help you find errors or major issues.
It is not a good idea to test your payroll using actual employee payments, even if you are sure that it will work. At best, you will get a payroll that works decently well. At worst, you could potentially cause all kinds of financial issues by sending them incorrect payments or calculating their tax badly.
Handle Errors
If you notice discrepancies or errors in the data, then you need to be prepared to figure out where they came from. In most cases, it will be because of human error: incorrect data, poor calculations, an automated calculation that has not been set up properly, or a mistyped command.
Either way, it is very important to focus on the reasons for the errors rather than the errors themselves. Some of them may be a holdover from the original system that you used, while others might be because you have tweaked the new system too much.
Rounding errors are a very common example since they are easy to explain and can often be solved with only a tiny amount of effort. Identifying the point where the rounding happened is easy, and once you fix it, it will not usually be a problem again. Correct easy-to-fix mistakes as soon as you can.
If you notice inconsistent data or problems with errors that you can’t explain, then things get a lot harder to sort. Keep running tests until you can figure out where the error is happening – it might be at the very end of the process, the beginning when you input the data, or anywhere in between.
Delay the Payroll
Always delay your new payroll’s live release until you are sure that it all functions perfectly, even if that means sticking with the old system for another month. Serious payroll problems can be a major issue that could put a lot of employee paychecks at risk, so they should not go live on a whim.
Even if you think that everything looks fine on both ends of the payroll, you should not start handing out new pay stubs to your employees until you have checked it all over and over again. If something goes wrong and you are using the new payroll for live payments, then you waste even more time.
On top of that, serious issues with things like the tax calculations can become an HR nightmare and clog up your accounting team’s business operations. Finance information needs to be treated with a lot of care, and that includes employee paychecks being sent through an untested payroll system.
Only let the system go live if you are absolutely sure that it is all going to work and that there are no outstanding problems to deal with. Even a small mistake could have major repercussions when tax contributions are involved.
