Tax & Accounting Blog

Time to Check Your Payroll Strategy

Accounting Firms, Payroll March 29, 2016

Many years ago, a seasoned CPA told me that providing payroll is like running a dairy farm —they both require a great deal of repetitive, day-in, day-out chores. And if you can’t keep up, you will have a bunch of sick cows and won’t be in business for long. This analogy still resonates in the back of my head during most conversations I have with the leadership of accounting firms. Delivering payroll requires a very different approach than other services offered, requiring many customer touchpoints—which explains why firms differ so much in their strategy surrounding payroll services.

Some firms are resistant to getting involved, and feel somewhat forced to offer payroll out of fear that they may lose the business of an important client because they are not a one-stop shop. They see payroll as a complex business that involves many customer touchpoints, long hours, high risk and low margins.

However, more and more firms are realizing that new technology and partnering opportunities are rewriting the rules, making payroll one of the fastest-growing service offerings in the profession. Times are changing, and much of the pain associated with offering payroll services is now only false perception. Today, firms have an opportunity to expand their services with the level of material participation they are comfortable with.

The Opportunity

If you’re reading this, you already know that industry publications, blogs and webinars are flooded with payroll-related topics and discussion.

Why? With the Affordable Care Act, Mandatory Sick Pay and rapid changes in legislation, it is getting increasingly difficult for business owners to keep up—and your guidance is needed. Firms have also found that customers who come on board for payroll are more likely to buy additional services in the future as trust is earned. The convenience of a one-stop shop simplifies your clients’ lives and makes it less likely that they’ll take their business elsewhere.

At Thomson Reuters, we’ve seen increased demand for both payroll software and our payroll processing services.

For example:

  • More than 74% of participants in our 2015 customer survey reported offering live payroll services. 92% offer payroll tax form processing services (after the fact).
  • Over the past five years, payroll services have grown as a proportion of industry revenue, as stronger economic conditions support job creation and increase the demand for payroll services. Full-service payroll services have also increased as companies seek to outsource all administrative functions.*
  • Private businesses are increasingly outsourcing payroll services to specialized companies so they can focus on core operations.

*March 2016 IBISWorld Industry Report 54121b: Payroll & Bookkeeping Services in the US

It’s clear that more firms are investing in the marketing of their payroll services and positioning their firm to take advantage of the opportunity. So why are so many firms changing their payroll strategy? For many firms, it’s a combination of two main factors: new flexibility and new technology.

New Flexibility

Today, there are far more ways to offer payroll than in the past. You can choose to process every payroll in-house, outsource every payroll to an outside service or anything in between. You can even vary your level of involvement from one client to the next. Many firms are now enjoying hybrid strategies that make it possible to meter the firm’s workload and leverage payroll processing services with a strategic partner for some or all of your clients. This puts your firm in a position to aggressively market your payroll services and then strategically decide which payrolls you process in-house and which you pass on to a payroll processing service.

New Technology

New technology is dramatically changing the face of payroll by reducing the cost of entry, which enables firms to wow their clients with sophisticated online and mobile options. Today’s tools make collecting customer payroll data more efficient, more accurate and far more convenient than ever before.

It’s surprisingly simple to offer a completely paperless payroll process that enables clients to enter data remotely and handle many other parts of the process themselves. Clients can print their own checks and employees can update W-4s and view W-2s and other information online. Another nice perk is the convenient ability for the client’s employees to enter time remotely.

These technologies are a great way to impress clients, particularly those with offsite employees or multiple offices. Best of all, these new tools make payroll more profitable for the firm and provide firms with more opportunities to create more strategic and long-lasting relationships with their business clients.

New technology is also making it easier for firms to find and manage the staff required to process payroll. Cloud-based software makes it easier for staff to work remotely and we’re seeing that happen at more and more firms.

It’s true that technology is the great equalizer in the payroll business. It’s the game changer that enables small to mid-size firms to compete successfully with the big service bureaus.

Where Do You Go From Here

Start by saying YES to payroll! Of course it takes more than technology to build a successful payroll business—the first step is to identify and adopt a sound business model that considers all aspects of supporting payroll. These considerations include building the proper staff and client base, marketing, branding and pricing. Only when all of these areas are considered can firms expect to make payroll a successful service offering. Even if payroll no longer has much in common with dairy farming, it’s fertile ground for growth.

Which payroll strategy is right for your firm? I welcome you to comment on your firm’s view of payroll services, or if you are planning to expand your offerings. Happy payroll, all! 

Learn more about our payroll software and services.