For as long as accountants have been involved in the payroll process, the only consistent theme has been a love/hate relationship. In fact, many practitioners have flat-out avoided the constant treadmill of payroll services since the early 1980s. This, consequently, led to the creation of the payroll and HR service giants we know today, not to mention agile competitors.
On the one hand, firms do enjoy the income from added services outside of compliance work (like payroll) and seeing clients easily pay their employees. Still, many practitioners don’t like all the tedious programs and tax filings required of employers or the perceived risk of compliance errors returning to haunt them in the form of fines and even lost clients.
Yet despite the trepidation, no other practice area gives firms as much ongoing, year-round face time with clients in such a critical area of operations as payroll services do. Those who abandon payroll to others will always be less informed about the current state of a client’s business than the firms who do payroll and client accounting. As for firms who have any ambition of growing their advisory practices or their business in general, avoiding such an essential service like payroll work is not a good place to be.
So, why all the fear and hesitation around it?
Are you really “doing” payroll?
Much of the hesitancy about payroll work tends to be more about perception than reality (and possibly some personal experiences that have done some damage).
Over the last decade or so, payroll technologies and services for practitioners have improved significantly, and pricing has become more favorable as well…but offering payroll and “doing” payroll are not synonymous, as much of the payroll work is “done” by technology and services offered by a trusted provider.
It is important to note at this point that payroll services offer a variety of much larger, lucrative opportunities and engagement for a firm and its clients—with scopes like basic compliance services, management consulting, or full business advisory.
At its core, payroll is a must-have for your clients rather than a nice-to-have. As such, you can consider having a strategy for meeting for your clients or referring them to a trusted partner with whom you work well and share information about the client’s ongoing needs.
Today’s “payroll work” consists of a highly automated, relatively low-risk recurring revenue service clients want to buy from someone they trust. The remaining duties can almost always be delegated to a staff person.
At the same time, despite their automation improvements, many of the “do-it-yourself” payroll options on the market today have increased their prices, in some cases by double-digit rates—once again leaving your firm to do much of the work.
Value over volume
Another compelling reason to reconsider offering payroll services is that payroll data provides a window into how a business operates. When providing this service, your firm’s team can monitor the client’s turnover and hiring throughout the year.
It can alert your firm’s client accounting services, tax, and advisory teams to opportunities noted because of payroll changes. For example, the payroll team can inform the income tax team if a major expansion is planned into another state or country so that appropriate tax planning can be done.
Creating a payroll client base not only makes your firm more embedded in your clients’ operations but also increases its value to the client. Payroll provides your firm with a large base of recurring, year-round revenue, which can be sold if you decide to exit payroll services or the firm generally.
The bottom line here is your bottom line; for all of what payroll services can lead to, there is less of a need to work with as many clients, leaving you with the ability to earn more per engagement because of the higher value services you can offer.
In this market, the value of your firm's payroll relationships with clients can easily exceed the firm’s market value base of traditional services like audits, reviews, compilations, and tax compliance. This increase in market value can make the difference between just getting by and living your dreams in retirement.
Final thoughts
If you still have questions or concerns about payroll work, talk to colleagues who are having success with their services. Ask them what more they’re able to do because of it and, moreover, how they themselves were able to overcome their own hesitations to offer it.
There are also a number of national payroll service providers in the market today like Justworks, which offers payroll services and more.
Do you have questions about this article? Email us and let us know > info@woodard.com
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