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. A few of the tax and accounting
professionals I talk to still feel this way and it explains why some are resistant
to getting involved. They see payroll as a complex business that’s long on
labor and short on profit potential. But
more and more firms realize that new technology and a changing environment are rewriting
the rules, making payroll one of the fastest-growing areas in the profession.
If you’re reading this, you already know that industry
publications, blogs, and webinars are flooded with payroll related topics and
discussion. Here at Thomson Reuters, we’ve seen increased demand for both our
Accounting CS Payroll software and our myPay Solutions payroll processing
service. For example:
- The myPay Solutions business has grown 16% YTD compared to 2012.
- New sales of payroll software have grown 35% in 2013 compared to 2012.
- Over 89% of participants in our 2013 customer survey reported offering payroll services, significantly greater than in past surveys. In addition, the average number of payroll clients per firm is trending up.
It’s clear that firms are investing in payroll. So what’s
the driving force behind this trend? For many firms, it’s a combination of two
main factors. The first is a new level of flexibility in how payroll services
are provided. This enables firms to build a business model that’s tailor made
for their capabilities and goals. The second factor is new technology that’s
lowering the cost of entry to payroll and making it easier to turn a profit.
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 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 more timely, 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 even print their own checks while client employees can update W-4 information, view W-2 and other information online.
These technologies are a great way to impress clients particularly those with off-site employees or multiple offices. Another nice perk is the ability for the client’s employees to enter time remotely, increasing convenience. Best of all, these new tools make payroll more profitable for the firm, and providing firms more opportunities to create stickier and more strategic 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.
Many firms have also found that customers who come on board
for payroll are 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.
Where do you go from
It’s true that technology is the great equalizer in the
payroll business. It’s the game changer that enables mid-size firms to compete
successfully with the big service bureaus. But it takes more than technology to
build a successful payroll business.
The first step is to identify and adopt a sound business
model—one that considers all aspects of supporting payroll. This includes
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
What payroll strategy
is right for your firm?
In September 2013, we asked firms about their payroll
strategies. Here’s what they reported:
- 25% process
all payrolls in-house
refer all payroll to a service bureau
perform after-the-fact tax compliance for clients who process payroll
provide some combination of the above services
- 9% do
not offer payroll services
These stats show that the question isn’t whether to provide
payroll; it’s how to provide payroll. You can begin to answer that question
right now by taking advantage of resources available to define your strategy.
For more information about our payroll software and services,