Hank Berkowitz

Payroll and HR Solutions

Payroll is a large portion of the financial outlay of any business. How CPAs can benefit by expanding beyond tax preparation and filing.

September 22, 2008
by Hank Berkowitz

Payroll and human resource administration is one of the fast-growing practice niches for CPAs and a key client retention tool. However, as technology continues to make its imprint on the vendor landscape, the variety of solutions on the market — not to mention the risks of making the wrong choice — have never been more pronounced. To help CPAs understand the benefits and caveats of managing payroll and HR administration solutions for their clients, the AICPA CPA Insider™ team invited top thought influencers and solution providers from the marketplace to share their insights. In my last column, our experts revealed what were the most significant changes they’d seen since we last talked about Payroll & HR Solutions and what makes a CPA ideally suited for helping clients with complex payroll and HR administration tasks.

Joining us this year (listed alphabetically) are: Michael Alter, president of SurePayroll, Inc.; Dr. Chandra Bhansali, president and co-founder of AccountantsWorld, LLC; Robert Digby, CEO of PayChoice, Inc.; Jim Heeger, CEO of PayCycle, Inc.; James Paille, director, payroll business strategy & development of myPay Solutions (Thomson Reuters); Walter Turek, senior vice president, sales & marketing, Paychex, Inc.; and Don Weinstein, division vice president, strategy and marketing, ADP Small Business Services.

Panelists, from the 30,000-foot level, where is Payroll and HR administration headed over the next three to five years?

Don Weinstein (ADP): Accountants today are looking for ways to diversify their service offerings. By offering additional services, the practice benefits by expanding beyond tax preparation and filing. When considering what additional services to offer, payroll is a logical progression of the accountant/client relationship.

As trusted advisors to their small business clients, accountants are often asked about all financial matters by their clients’ business owners. Payroll is a large portion of the financial outlay of any business and there are consequences if an error is made. By outsourcing payroll, small business owners manage the risk and free up time that can be focused on business growth.

Dr. Chandra Bhansali (AccountantsWorld): There are three well-established facts: 1) CPAs are well-qualified to offer payroll services, 2) most clients would prefer their CPAs to offer them payroll services and 3) payroll solutions exclusively designed for CPAs like Payroll Relief have turned payroll processing into a highly profitable client service, by offering accountants the same level of automation available only to large payroll processors until a few years ago. Do we need to say any more?

Walter Turek (Paychex): With the well-publicized shortage of accounting staff today, CPAs have an opportunity to be selective with the services they offer and position their firms as providers of value-added and higher revenue-generating services. By partnering with a best-in-class provider such as Paychex, CPAs are free to focus on enhancing trusted-advisor relationships, while resting assured that client payroll and HR needs are expertly managed.

Robert Digby (PayChoice): In many cases, CPAs are already preparing tax returns and performing full-charge accounting for their clients. Providing payroll as an ancillary service is a natural extension of these services. CPAs who provide payroll generate additional revenue from their existing client base, as well as enjoy the high retention rate common for payroll services.

Jim Heeger (PayCycle): Payroll and HR services, such as Workers’ Compensation, provide income year round which is a plus. Most CPAs know that the more services they provide a client, the better the odds are of retaining that client. One CPA customer told us that the chances of losing a client are 70 percent within three years if the client’s only service is income taxes once-a-year. However, if offered payroll, then the client has an ongoing relationship that increases retention.

Michael Alter (SurePayroll): Payroll isn’t the sexiest accounting offering, but it’s an integral part of every employer’s business and it needs to be addressed by a CPA practice on some level. By recommending or reselling a payroll solution that helps the client avoid payroll tax errors and the risk of fines, a CPA can prevent a negative impact on a client’s pocketbook and leverage their time to focus on providing more consultative services. Additionally, the right payroll solution will make it convenient for a CPA to access payroll reports that can make general ledger work easier and allow for more insightful business decisions.

James Paille (myPay Solutions/Thomson Reuters): Payroll is a very “sticky” service. Once a firm begins providing payroll service for a client, the client will almost never leave. Payroll is also a highly valued service, so true “full service” firms should offer payroll processing. Additionally, when firms take advantage of online technology and integrated systems, payroll processing is simplified and efficiency skyrockets because payroll data transfers seamlessly into write-up and tax software.

What are the most important issues for CPAs to consider before offering Payroll and HR solutions to their clients?

Weinstein: Furthering the trend discussed above, accountants are going to continue to look for ways to expand their practices. With a payroll structure in place, many accountants may begin to explore HR administration as a new revenue source. Already, some accountants have begun to offer advice on retirement plans, workers’ compensation and SUI (State Unemployment Insurance) management and we expect this trend may grow in the coming years.

As trusted advisors to their small business clients, accountants will also evaluate other HR solutions that can help solve clients’ challenges. Both HR Outsourcing (HRO) and Professional Employer Organizations (PEOs) are emerging as good solutions for small business owners who do not have time to manage HR internally. PEOs establish a co-employer relationship with their clients and deliver a comprehensive suite of value-added services including Fortune 500 quality benefits, workers’ compensation insurance, HR administration, payroll and tax services, recruiting, training and much more. As a co-employer, a PEO also provides legal protection from certain employment-practices related liabilities. An HRO provides payroll, benefits packages and other human resource services to employers who are not interested in a co-employment relationship with a PEO.

Bhansali: Over the next three to five years, a majority of businesses will be doing their payroll and HR administration online and a sizable percentage of payrolls will be processed by CPA and accounting firms.

Digby: Cost reduction and self-service are the names of the game going forward. Larger payroll and HR providers with large sales forces are going to find it tough to maintain CPA relationships as the cost of gas, delivery and overhead find their way into the sales mix. In the small business segment, inflation is going to handicap traditional payroll providers who don’t offer self-service platforms enabling CPAs or their clients to self-enroll. The traditional payroll model will be under pressure going forward and self-service web products will likely own the traditional micro and small business payroll and HR segment.

Heeger: Payroll and HR administration will continue to be needs for which small business owners will look to their CPAs. CPAs will continue embracing payroll and HR assuming they can meet their clients’ needs effectively and in a way that is easy, convenient and profitable for the CPA.

Alter: Software as a Service (SaaS) payroll and HR solutions will continue to evolve, capitalizing on the speed, convenience and flexibility the online platform offers. People have grown accustomed to getting whatever they need instantaneously and payroll services need to continually innovate to provide more tools and resources that can be accessed quickly and easily.

SurePayroll has integrated a suite of HR tools and resources into our payroll offering to make it easier for businesses to stay in compliance with changing regulations. Now, instead of searching for mandatory labor law compliance posters, our customers can download a customized version right from their payroll account. When the minimum wage law changed, posters were automatically updated and available to customers. If they need to complete an I-9, W-4 or other business forms, SurePayroll offers these forms pre-populated with relevant information from their payroll account. These innovations were made to take SaaS to the next level and we will continue to focus on innovations that make payroll and HR simple and affordable for our clients and their CPAs.

Paille: The flexibility and convenience of portal technology is making online Payroll and HR services the preferred method of interaction and delivery. Advanced technology is also making employee self-service commonplace. Completely paperless models will replace traditional hard paychecks and rekeying of data from paper input sheets.

Next week our panelists divulge what CPAs should consider before offering payroll and HR solutions to their clients and what benchmarks they can use to demonstrate the ROI of offering payroll solutions to their clients.

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Hank Berkowitz is the former publisher of AICPA’s Insider™ electronic newsletter group.