Many accountants struggle with payroll, either because they have too much of it or they don't want to do any of it. Either way, they are at odds with the needs of their business clients. Most clients are looking for a one-stop accounting solution and will look elsewhere if you can't assist them with timely and accurate payroll. Fortunately, if handled right, outsourcing payroll can be a strategic initiative for your accounting firm—and payroll processing can build client relationships.
Typically, accountants are dealing with some or all of the following challenges when it comes to processing payroll for their clients:
- It is time consuming and doesn't add significant value to the accounting practice.
- It is essential to client retention; however, clients won't pay additional fees for it.
- Knowledgeable staff may leave, leading to internal inefficiencies.
- Client information is not always timely, accurate, or complete.
Payroll Processing is Complex
Indeed, payroll processing is not just about calculating and preparing paychecks. Clients also look to accountants and bookkeepers to:
- File government reports and forms.
- Withhold and submit employee taxes.
- Manage health and pension plan contributions for employees.
- Notify the government when employees are hired or leave the company.
- Ensure compliance with all relevant payroll legislation.
I advise accounting firm clients to either avoid commodity work like payroll or find a way to streamline it to the point that the work is automated and doesn't cause pain in your practice. Finding a way to make payroll profitable will help you grow as it builds additional opportunities to market your professional services. On average, a firm can charge an additional $3,000 per year in fees per payroll client if they implement the right processes. If you want to increase your firm's revenues, I am certain you could find at least 10 clients that need payroll services.
Typically, I find that very few accounting firms are fully leveraging payroll to build their revenue stream. In fact, I often see accounting firms not charging at all or undercharging for their payroll services, in effect using more profitable services to subsidize the cost of payroll processing. I helped one of my clients increase their bottom line by $50,000 simply by evaluating the true amount of work that went into their payroll and properly charging for the service that they were offering. In that case, outsourcing was key as it permitted them to anticipate their costs accurately and charge clients accordingly.
Why Outsource Payroll?
Assuming that you have processed payroll in any quantity, you have likely encountered the challenges that inevitably come with it:
1. Payroll Audits
You can wait until your clients have been through the pain of a payroll audit to reach out to them about payroll. However, since building relationships with your clients is crucial to your accounting firm's success, it would benefit you more if you reached out proactively—before there are any problems.
2. Payroll Errors
Errors calculating payroll can have unexpected and unwanted costs associated. To clients, it is not a simple error. Their staff will be upset by an error if it impacts them directly, often destroying the trust that you have worked hard to build. In addition to disgruntled employees, you will cause penalties and undue stress for your client.
3. Keeping up with Legislative Changes
Can you name all of the legislation that pertains to payroll in your jurisdiction? The highly complex legislation requires payroll compliance across some 6,500 federal, state, and local jurisdictions. It can be as simple as changes to deduction or tax rates, or more complex such as Affordable Care Act compliance. As accounting professionals, we have a very broad range of legislative material to follow. Do you want to take a chance that you are on top of everything related to payroll? Consider working with a third-party party provider, such as Ceridian.
If your clients have had any of these issues, odds are good that they have approached you to resolve the issue. If you bring payroll in-house, you can take a lot of stress off your clients, but you end up bearing the risk and the stress yourself. This is your opportunity to step in and help them find an excellent payroll service provider. In fact, you should approach them before they have issues. They will value your opinion and it gives you a chance to learn more about their business needs. Your clients will value your proactive approach and will recommend you to their colleagues and associates.
The Benefits of Outsourcing Payroll
The benefits of handling outsourced payroll far exceed any associated costs. More importantly, you can use payroll outsourcing to enhance your client relationships.
Using a good payroll service provider will give your clients peace of mind and allow you to build your business with payroll as an essential service. Doing it right should bring the following benefits to you and your clients:
- Improved efficiency
- Accurate and timely processing
- Risk mitigation
- Expert advice
- Best practices implemented on your behalf
- Management of human capital
- Scalable solution that will flex and scale with your clients needs
- Predictable costs
However, don't do what most accountants do: simply introduce your clients to an external service provider and step away, undercutting the value that you can provide the client in the process. Clients will pay more for peace of mind than anything else you can offer them. By working as an intermediary between your clients and an external provider, you can offer a higher level of service at a reasonable price, while still profiting. In addition to increasing fees, accountants that embrace payroll are able to attract new clients, as it brings one more thing under the same roof.
Payroll is something that most clients have to deal with on a regular basis. Integrating payroll outsourcing into your accounting practice will allow you to reach a wider business audience and add to your bottom line. Review Ceridian's Small Business Outsourcing Evaluation Checklist to help your clients evaluate whether outsourcing their small business payroll is an effective solution for their organization.
About the Author:
Jeff Borschowa, CA, began his career in accounting in 1991. He has spent his career exploring ways to improve operational efficiency and effectiveness for his small business clients by leveraging technology and innovation. He has narrowed his business advisory focus to work mainly with accounting firms and bookkeeping practices as they discover the cloud and build their Dream Practices. He is a guest blogger for Ceridian's Big Ideas for Small Business blog and an advisor to Ceridian (www.ceridian.com). He can be reached at: Twitter.com/dreampractices.