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With a plethora of calculations and deductions that accompanies each payroll computation, it was almost inevitable that payroll processing became one of the important functions to be automated by businesses. Of course, there are businesses that still seem to make to do with computing payroll with basic spreadsheet software like MS Excel, but that can really work only for very small organizations with few staff. Not to forget the security and compliance considerations when looking at an application like MS Excel.

Now, many small business software application providers have integrated payroll software into their accounting packages to help these businesses save costs on using multiple software applications. In addition, there are several standalone payroll software solutions that are compatible with the accounting packages. Several of these applications are available online or web-based. In addition, there are managed payroll services, wherein a third party service provider takes over the payroll function and manages it for you. Service providers like your accounting firm could in fact take on this function quite well.

A payroll application can perform a range of functions including calculating the pay, computing the various deductions including the deductions, printing the cheques, deduction statements and the payment slips. These days, companies often use a combination of services wherein they choose the specific functions to outsource such as allowing the calculation of payroll internally while the printing and delivery of cheques is done by the third party.

In an increasingly globalized world, it has also become quite important to cater to remote employees and have salaries credited directly to employees' bank accounts. The ability to do this is now a much sought-after feature of payroll software solutions. Equally important is the ability to manage information for tax reporting purposes. This can be quite a task by itself.

Payroll processing is now no longer limited to these, as the scope of this area has expanded to include other aspects of human resource management and administration. Obviously, the ability to handle more functions can be immensely beneficial in terms of both cost and time savings and improving overall efficiency.

In addition to the different additional requirements of a payroll processing solution, another important attribute is flexibility and the ability to accommodate changing requirements of an organization.