Integrating global payroll with accounting systems

Multinational organizations with a global payroll face many challenges, including ensuring data quality and managing data exchanges between different systems, such as between payroll and accounting tools.

Manual data transfers are very time-consuming and error-prone which weighs down on operational efficiency and increases compliance risks. Integrating global payroll with accounting systems puts an end to manual processes by streamlining operations and automating data transfers.

Read here how global payroll and accounting system integration can improve efficiency, compliance, and financial data transparency.

Payroll is often one of the biggest expenses for businesses. Since it involves managing and recording all expenses related to employee compensation and payroll taxes, it is closely connected to accounting. All of a business’s payroll expenses must be processed and recorded in its accounting system so that they are accounted for in the profit and loss statements and other accounting-related documents.

With separate systems for payroll and accounting, the process of extracting payroll data and recording it in the accounting system is quite cumbersome, time-consuming, and error-prone. That’s where integrating payroll with accounting systems comes into play.

Payroll and accounting system integration is the process of connecting the different systems to enable the automation of data flows, expense recording, accounting entries, and more. For businesses with a multi-country payroll, connecting their payroll and accounting systems is even more important.

Integrating payroll and accounting systems is critical for multinational organizations because it offers a solution to various challenges that result from having disconnected accounting and payroll systems. These challenges include:

• Complexities in financial reporting due to multiple currencies and exchange rate fluctuations,

• Time-consuming processes for collecting payroll data for different geographies for reporting purposes,

• Error-proneness of non-automated data transfers from payroll to accounting systems,

• Compliance issues resulting from inaccurate global payroll reporting due to errors in data entry,

• Difficulties in payroll reconciliation, and

Decreased productivity and increased expenses due to inefficient processes.

Connecting their accounting and payroll systems can help businesses overcome these challenges. Plus, there are some additional advantages businesses can unlock with the help of integration.

Whether it’s HR and payroll integration or payroll and accounting system integration, automating data flows between different systems always offers numerous benefits, including:

• Enhanced compliance: Payroll and accounting system integration ensures data consistency across systems which improves the overall data and reporting accuracy and hence enhances payroll compliance.

• Improved efficiency: If payroll and accounting systems are connected, data flows can be automated which replaces time-consuming manual processes and increases efficiency because the payroll and accounting teams can dedicate their time to value-creating projects instead of wasting hours on repetitive, manual tasks.

• Fewer errors: Manual data entry is a highly error-prone process. Automating data flows between payroll and accounting systems solves this problem and eliminates data-entry errors.

• Better financial visibility: Accurate expense planning and budgeting are crucial for businesses. Integrating global payroll with accounting systems enhances data quality and transparency which, in turn, leads to better financial visibility for budgeting.

• Real-time financial insights: Another aspect to consider is the fact that accounting and payroll integration supports real-time data exchanges between systems and hence provides accurate financial insights that are always up to date. This significantly enhances the quality and the value of the generated reports.

• Simplified payroll reconciliation: Reconciling payroll is the process of ensuring that the payroll records produced at the end of the respective payroll cycle match the journal entries in accounting. Automated data flows and high-quality data significantly simplify this process.

Before venturing into a payroll and accounting integration project, businesses should take several aspects into account to ensure project success. Here are some key considerations for integrating global payroll with accounting systems.

• Data integrity: Maintaining data integrity throughout the integration project is key. In this context, businesses should think about aspects like data back-ups, data audits, and data cleaning. This ensures that the data is ready to be migrated from one system to another.

• Multi-currency management: Global payroll management also involves issuing payments in multiple different currencies and managing currency exchange. Exchange rate fluctuations pose challenges for global payroll reporting and accounting in multinational organizations. Before integrating global payroll with accounting systems, businesses should think about how to manage multiple currencies and fluctuating currency values when transferring global payroll data to the accounting system.

• Integration security: Since payroll data is highly sensitive, it must be protected from unauthorized access and data leaks. This means that the integration interface must be secured to guarantee security during data exchanges between systems.

• Scalability: Both the accounting and the payroll system should be built in a way to allow for scaling as the business grows. Having to change payroll systems just because the current system is unable to process payroll for a growing number of employees is quite annoying.

• Customization options: Customization might not be a top priority on the list of requirements for an integration project, but it’s definitely a nice-to-have. The more the integration is adapted to the needs of the organization and the people that use it everyday, the higher the efficiency gains and the higher the satisfaction with the solution. For instance, the integration could be built in a way to allow for customized reporting.

• System compatibility: If the different accounting and payroll softwares used by the business are not compatible, the integration project is set up for failure right from the beginning. In a multic-country payroll set-up, the easiest way to ensure compatibility is to use a global payroll solution that not only enables global payroll consolidation, but also offers the necessary integration capabilities.

Integrating global payroll with accounting systems is a process that requires several distinct steps. Here is an overview.

Step 1: System assessment

The first step towards integrating global payroll and accounting systems consists in a thorough assessment of the current system landscape the organization works with. This includes analyzing system capabilities, process inefficiencies, and potential gaps as well as looking at possible ways of connecting the systems one with another.

Step 2: Definition of goals

After assessing the current system set-up and data sets, the next step is to define the desired outcome of the integration project based on the business’s needs and requirements. In other words, what are the key goals and objectives that should be achieved by integrating the different systems? This sets the general framework for the entire project.

Step 3: Project team appointment and distribution of roles

Integrating global payroll with accounting systems requires a dedicated project team that consists of employees from the payroll, accounting, and IT departments. Every team member should have a clearly defined role and responsibilities that are outlined in the project description. This ensures that everyone knows what they have to do and that the project runs smoothly.

Step 4: Integration set-up and data mapping

Once the preliminary work is done, it’s time to tackle the integration itself. This step starts with choosing the right payroll integration tools. For businesses that work with a global solution that also provides an API for integration with other workforce management tools and systems, this step is not needed. In other cases, this is where a suitable solution needs to be found.

The second part of this step is to determine which data needs to be migrated and to complete the necessary data mapping, i.e. matching fields from one database to another in order to automate the data flows between the payroll and accounting systems. Third, it’s time to set up and implement the integration itself.

Step 5: Integration test and optimization

Once the set-up is completed, the integration needs to be tested to ensure that it works as intended. This includes the general functionality of the integration as well as the accuracy of the data transfers that take place. Any mistakes or bugs that are discovered during the testing phase should be resolved before going live. This is also a good opportunity to review the requirements that were defined in the beginning of the project and optimize the integration.

Step 6: Employee training

Changes in an organization’s tech system landscape typically require specific employee training. Whether it’s just the integration or whether a new payroll software was introduced in order to enable the integration, as soon as the workflows change, it’s necessary to provide proper training to the employees who will be using the integration.

Step 7: Go-live of the implementation

As soon as all the precedent steps have been completed successfully, the integration can go live. From there on, it’s all about maintenance and continuous improvement.

Payroll and accounting system integration can help organizations streamline processes, reduce errors, enhance compliance, and maximize efficiency. Given that there are several considerations which businesses should keep in mind, integrating global payroll with accounting systems is best done via a global payroll solution that has the necessary integration capabilities.

Lano offers a wide range of payroll integrations, including integrations with popular accounting tools, such as CANDIS, DATEV, QuickBooks, and Xero. Not the accounting system you are using? We also offer custom integrations. Book a demo with one of our experts to learn more.