Payroll is Trending Up
The payroll space is evolving rapidly, and is one of the fastest-growing opportunities in the profession. The atmosphere is perfect for those already in the business, yet it’s not too late to take advantage of payroll as a new product offering in the coming year. If you’re on the fence about offering payroll services, review the industry trends below and make time to talk with your peers who have tapped into the power of payroll – they will share that the rewards far outweigh the commonly-perceived pain points.
So what are the environmental factors that make a terrific business case for you to get involved in payroll?
Fewer barriers to entry
Emerging technologies, such as cloud-based software, APIs, and Internet connectivity, have changed the rules, dramatically reducing the cost of entry and allow accounting firms to compete with national payroll service bureaus. Time clocks, remote time entry solutions, mobile apps, and secure client portals are all basic features included with payroll software and are available to your firm. These solutions level the playing field for those who aim to build a payroll client base.
You can now obtain professional-grade, production-oriented payroll software with an initial technology investment of as little as $5,000 to $10,000. Even with this minimal investment, firms can offer service that rivals or even surpasses the big service bureaus. Perhaps even more importantly, you can often be profitable in your first year.
New staffing demands
Technology and work-life balance initiatives are increasing the number of remote staff and employees
with flexible work hours. Cloud-based software solutions have given firms new ways to meet clients’ demands. The cloud not only helps you meet your clients’ payroll needs, but also enables you to access anytime-anywhere software that makes it much easier to ensure that staff is available when needed for all service offerings. As you seek solutions to facilitate virtual employees, you can be confident with your payroll offering and be ready to capitalize – both in client satisfaction as well as in increased revenue potential.
An established client base
When it comes to attracting payroll customers, accounting firms have an important advantage over the national service bureaus: an existing client base with deep, established relationships. Many of your clients may have already expressed interest in having you manage their payroll; you may be surprised at how many would be interested if they knew it was an option. You and your staff have trusted relationships with your clients and can easily position your payroll solutions whenever you identify inefficiencies and inaccuracies in your clients’ current payroll processes.
Need to shift from compliance to advisory
In a profession that’s becoming increasingly commoditized, payroll is a rare bright spot for accounting firms. Firms are discovering that having control of the client’s payroll is the best way to understand the health of the client’s organization — it provides much needed transparency into the business. These insights are needed to properly consult the business. The high number of touchpoints in the payroll process, the insider’s view of cash flow, and increased staffing activity help your firm provide immense value and position itself as a trusted adviser. In fact, many accounting firms discover excess capacity that can be put to use processing payroll or areas that clients value more — such as interpretation of the client’s financials and providing guidance.
A growing segment
Demand for professional payroll services continues to grow for a variety of reasons, including:
Unemployment rates continue to beat multi-year lows as the US economy continues to grow. Employers outsource payroll services at an increased rate to focus on the core competencies of their businesses.
In times of economic growth, many business owners/sole proprietors are time-strapped and very busy. This is when they hire their first employees and will reach out to their accountant for advice. Be ready to leverage that opportunity!
Increasing government regulations that make payroll too complicated for many employers and contractors to process in-house. The 2017 IRS Data Book reports that compliance with employment tax requirements continues to be a problem area, and in 2017, the IRS assessed 5.36 million civil penalties that amounted to almost $7 billion.
Poor customer service from many national and regional payroll service companies.
Business clients’ desire for a one-stop-shop for all of their business needs.
New opportunities in traditional areas
Just as your existing client base is a source of new payroll clients, you can often cross-sell new payroll
clients on your other tax and accounting services. Clients see real value in receiving a wider variety of services under one roof, and offering a more complete suite of services will attract new prospects who might not have considered your firm before. Plus, payroll is a great counterbalance to declining 1040 revenues.
Payroll services offer several unique advantages that can significantly improve your firm. They include increased cross-selling opportunities, a more consistent flow of revenue from month to month, better utilization of your staff’s work capacity, and improved cash flow. A thriving payroll service can also increase the value of your business should you decide to sell or transition it in the future. Payroll services are traditionally sold at higher multiples than traditional accounting and tax services.
Stronger client relationships
Payroll is a powerful tool for increasing client loyalty. It offers you a plethora of opportunities to interact with clients and demonstrate your value. This makes it less likely that clients will look outside your firm -- not just for payroll, but for other services as well. And because of the complexity of payroll, clients tend to stick with the same payroll provider for a long time. When you bundle your payroll offerings with other services, client loyalty for those services tends to increase as well.
Partnering for success is a new approach
While implementing in-house payroll services is a well-charted path, it has its challenges and requires an all-in commitment. There is more than one way to successfully offer payroll services. Partner-sourced payroll is growing in popularity because it allows you to focus your resources on marketing and selling your payroll services, while your partner does the heavy lifting when it comes to payroll delivery and compliance. Under this model, you can focus on your core services and still enhance client satisfaction by offering all-inclusive services.
Payroll: are you in or out?
To make payroll a viable option, you’ll need to assess your current skills and time obligations along with those of your staff. It is possible to experiment with the concept of providing payroll services without completely committing. But if your goal is to be successful and grow your payroll business, an all-out commitment is much more effective – whether you take an in-house approach or partner with an external provider.
Thomson Reuters Payroll Solutions
From processing payroll in-house to referring processing to a trusted partner, and anything in between, our payroll products and services can help you increase profits, strengthen existing client relationships and attract new clients. We've built two core payroll offerings: Accounting CS Payroll and myPay Solutions that are designed to work together, enabling you to optimize your payroll service by choosing one or combining both to dial in exactly the right level of involvement. For more information, visit cs.tr.com/payrollcentral
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