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Human error causes companies to overpay wages by between 1% and 8%, according to the American Payroll Association. With wages making up a significant portion of a company’s cost base, this should set alarm bells ringing, especially in the procurement department.
There probably isn’t a chance that finance will hand over control of payroll to procurement, neither would they want it, but there is an opportunity for the function to offer its advice and experience to try and help stem the leak.
In the first instance, it is important to understand the type of payroll system that finance has in place. It has to match the needs of the business and it has to be the type of system that the finance function is comfortable using.
Procurement can play a part here by helping finance carry out a deep audit of the system to understand where money is being lost and then getting a sense from suppliers in the marketplace about the types of systems and technologies that are available and the benefits they may bring. The function can then work with both finance and the chosen supplier to implement that system.
But procurement’s role does not stop there. It can and should play a part in the continued audit of the system as well as the changes in the business itself. A business growing on a global scale will need a very different payroll system than one that has its operations focused in one or just a few countries. Those changes need to be consistently considered and the system needs to be agile enough to take those into account.
Beyond that, the function also has a role to play in developing the relationship with the supplier to ensure the system is delivering on its promises and can change and adapt as needed.
Regular audits will also provide greater visibility and create the opportunity to examine the functionality of existing systems. Outside of audits, there should also be an increase in control as well as further layers of authorisation and verification.
While procurement may not have, nor want, any direct involvement in payroll, with such a great deal of spend being lost, it should take it upon itself to build relationships with finance and offer its expertise to help stop this significant leak.
This article is a piece of independent writing by a member of Procurement Leaders’ content team.