The global phenomenon of taking business functions out of the head office and hosting them with third parties in the public cloud has extended to the most sensitive department — finance and accounting.
But South African businesses remain stoically resistant. On submitting his tax return, Albert Einstein was quoted saying: ‘This is too difficult for a mathematician. It takes a philosopher.”
The role of accounting, payroll and tax software has been to improve efficiencies. But while companies at an enterprise level have entire departments administering this, many small and medium-size enterprises (SMEs) continue to muddle through the quagmire of associated rules and requirements.
The logical solution is to outsource this business function, making use of the internet and cloud technologies. The main inhibitor to outsourcing or taking these functions online comes from within the company.
While most SMEs will happily outsource their web hosting or call-centre requirements, they are far more circumspect about trusting their financials to a third party.
‘Payroll and accounting are seen as confidential; many companies, especially in the SME environment, are determined to keep these functions at a desktop level. While we readily accept and trust online banking, the mind-set remains firmly against taking the financials offsite,” says Sandra Swanepoel, sales director at Softline VIP Payroll.
Swanepoel’s comments are borne out by World Wide Worx’s recent South Africa SME survey which shows that while 87% of SMEs use online banking services, a minority of companies surveyed use online accounting services.
Keeping privileged information, such as data found in a company’s ledger, is of great concern to all organisations. But what many of them don’t realise is that they are also obliged to protect their employees’ information.
‘We feel that one of the biggest issues for many companies is the security of data — especially if you consider the confidential nature of accounting, tax and payroll data. We also have to ask what influence the proposed Protection of Personal Information Bill will have if it were to come into law,” says Dave Philp, operations director at CRS Technologies.
‘This is an even bigger concern for companies using cloud-based services and companies would be wise to ensure that their service provider understands the various Acts and has ensured that its solution is compliant.”
Even if companies did decide to keep their financials onsite, changes in software packages are a fact of life, and keeping pace with upgrades can be an administrative nightmare.
Smaller companies can be slapped with as hefty a fine as large enterprises should they fail to meet government compliance and, unfortunately, this places a huge burden on small companies which often don’t have the manpower or the skills to
Fortunately payroll software has evolved to take care of large parts of a company’s legislative requirements including tax deductions, UIF payments, pension and provident fund deductions, skill development levy (SDL) contributions and rebates.
‘Features and functionality that simplify the process of legislative compliance have already been incorporated into payroll packages and this has alleviated much of the burden that used to be the responsibility of human resources.
Almost 80% of the information required for the legislative HR reporting lies in payroll software,” says Grant Lloyd, managing director of payroll software specialist Softline Pastel Payroll.
Whether because of security issues or general lack of awareness, many companies choose to keep their accounting and human resources functions in house. But, like it or not, they may be forced to change.
Lloyd warns that the South African Revenue Service (Sars) is serious about its conversion to a fully electronic system and companies should make sure they are able to comply.
‘Employers paying PAYE will have to be aware that Sars is enforcing electronic submission of the monthly EMP201 PAYE returns using either the internet-based eFiling or the desktop [email protected] system. From April PAYE submissions will have to be done electronically, like it or not,” says Lloyd.
And it seems South African SMEs do not like the thought of relinquishing control — especially when it comes to mission critical data. How long they are able to cling to their proprietal attitude in the wake of global change and government requirements though, remains to be seen.
The South African Business Process Outsourcing (BPO) market was worth about $885-million in 2007-08, according to analysts Frost & Sullivan.
Of that, human resources outsourcing in cluding payroll, tax administration and recruitment services accounted for only $69-million. Financial and accounting outsourcing was worth $30-million.
‘The reason so few local companies outsource their payroll, financial and accounting services is because we have a severe shortage of competent service providers,” says Frost & Sullivan’s ICT industry analyst, Spiwe Chireka.
She says that while it is true many companies are concerned about security issues, interviews with a number of local companies highlighted a
serious lack of confidence in the quality and maturity of our outsourced offerings.
‘Local companies could be providing service-level agreements ensuring business continuity and security, addressing the concerns of hesitant companies they could also look at private cloud offerings.” But it is not all the fault of the private-sector companies.
Chireka says the government has played lip service to promoting the BPO sector for years. Chireka believes that encouraging SME growth should be viewed holistically.
We should be educating small business on the efficiencies to be gained by outsourcing business processes, as well as encouraging local BPOs to cater for local needs.
‘The Philippines has a government incentive available to all companies. If an organisation outsources any part of its business process to a Philippine BPO they can benefit from this scheme. It encourages business growth from all angles.
‘Our government is still fixated on growing the BPO sector to service the international market. That’s fine, but you can’t do it at the expense of our own companies,” says Chireka.