Small businesses rushing to go digital as STP deadline approaches

New research by global small business platform Xero reveals that nearly one in five Australian small businesses are processing payroll without using any software as the implementation of Single Touch Payroll (STP) gets underway.

STP is a new way of reporting tax and super information to the ATO in real-time from an employer’s payroll software each payday. The law change is now compulsory for employers with 20 or more employees and is expected to be extended to all employers from 1 July 2019.

Trent Innes, Managing Director of Xero Australia, said, “Australia is racing towards digital connectivity – and with good reason. Increasing small businesses’ digital connectivity is a boost for the nation’s economy and for small businesses themselves. Our own Xero data shows that businesses leveraging digital the most are seeing significant benefits with increased revenue and employment growth.

“The ATO’s introduction of STP is a huge step to help reduce the compliance burden on small businesses. I’m excited that this will be boosted by more businesses using dedicated payroll solutions, which will help save them even more time so they can focus on what matters – running their small business,” Innes said. “However, we need to be supporting these businesses, many of whom are transitioning from outdated spreadsheets, paper-based systems, or even faxing this crucial data.”

Xero’s research reaffirms that many small-business owners will be moving from a paper or spreadsheet solution to a payroll provider or platform, increasing the potential stress of this transition.

“The numbers show that 37 per cent of small-business owners haven’t thought of moving to a digital payroll program to prepare for STP. These individuals are facing a significant change as they move to a system they’re familiar with, that might be a spreadsheet or a paper-based system, to a new platform,” said Innes.

Room to automate and digitise

Xero’s research also highlights how many Australian small businesses still take a manual approach to backend accounting and payroll processes. One in three employers provides payment summaries (previously called group certificates) to their employees via mail or fax.

According to Innes, this reinforces how much room there is for Australian small businesses to embrace automation and digitisation.

“As a nation, it’s important that we help small-business owners understand that digitising and automating their backend processes can provide a huge competitive advantage. Of course, it saves time, but most importantly it frees up the headspace needed to move beyond administering a business and start developing it,” he said.

Meanwhile, 54 per cent of small-business owners said they would prefer to outsource or automate their payroll and tax processes – more than HR and recruitment, sales and marketing, and IT management combined. This isn’t surprising considering more than one in four (28 per cent) spend over two hours a week on payroll, with eight per cent spending over five hours weekly just on payroll documentation and processing.

“Doing business today means there’s so much more that technology can do to take the pain points out of running a business so that owners can concentrate on what they’re most passionate about,” Innes said.

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