Companies need to do more to get ready for mandatory Real Time Information (RTI) reporting of payroll data to HMRC or they risk paying penalties, according to research by KPMG.

A survey of 42 large businesses found that 86% say they are currently planning for RTI, which becomes mandatory in April 2013. KPMG says this is a significant increase from a similar survey conducted in March this year when two thirds of employers said they had yet to begin to prepare.

However, KPMG says the signs are that few organisations have so far translated thought into action.

Only 21% of those polled had conducted a payroll data cleanse, a process which KPMG says is one of the first and most basic actions to take when preparing for RTI. Nearly two thirds (65%) said that they had not considered the cost of RTI to their business and less than half (44%) said they were confident that their current payroll could cope with RTI's requirements.

Steve Wade, director at KPMG, said: 'It's very good news that so many businesses are starting to plan for RTI but our data suggests that they really are at the very beginning of that process and they quickly need to translate thoughts into actions if they are to be ready in time.'

KPMG's research identified poor employee data as the most common issue facing companies switching to RTI.

Matthew Hunnybun, partner KPMG, said: 'Under the current PAYE regime, it's not that much of an issue if a date of birth is wrong or an employee's name is misspelled. Under RTI however, such errors can have serious consequences if HMRC is not able to match the data the employer submits with the information it holds for the employees because this can lead to penalties being charged.'

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