Estimated reading time: 7 minutes, 12 seconds

After accounting and bookkeeping, payroll is the service small business owners want most from their accountant—more than one in three put it at the top of their services wish list. This isn’t much of a surprise since they also told us they spend an average of 18 hours every month on payroll, but still feel uncertain about whether they’re getting things right.

*Twenty-five percent don’t feel confident they are deducting and submitting taxes correctly.                                                                                                                                                   *Forty-three percent aren’t sure they’re correctly categorizing contractors and employees.                                                                                                                                                       *Fifty-seven percent don’t think they’re doing a good job getting their people paid on time. 

And that uncertainty is understandable: 28 percent of them have received a notice from the IRS or have been audited. 

As they look for smart solutions, it makes sense for them—and you have one trusted partner take care of accounting, bookkeeping, and payroll. So let’s take a look at how adding payroll services can work for different practices. 

Why offer payroll services?                                                                                                                                                                                                                                                                 It’s a natural extension to your current services and expertise to offer payroll. Plus, the more you’re involved with a company, the better you’ll know it, giving you more insight into their operations. With a finger on the payroll pulse, you’re better able to spot risks before they come up, keep on top of cash flow, or even advise on what salary to offer that next new hire. 

Models for offering payroll services                                                                                                                                                                                                                                          Whether you want to help clients choose a provider or manage payroll on their behalf, here are three ways you can make payroll part of your practice: 

Model

How it works

Pros

Cons

Refer

Refer your clients to a payroll service provider you recommend, but let your clients manage payroll themselves.

• Reliable 

payroll calculations and filings mean clients avoid notices, fines, penalties

• Be seen as a knowledgeable advisor offering helpful advice.

• Payroll data seamlessly syncs to the GL. 

• Less revenue

• You likely won’t have the visibility to anticipate problems or answer questions.

Monitor

Monitor their payroll, but stay hands-off

• You own the books, but payroll is managed by the business owner

• You can review each pay run or just map payroll data into the GL

• You can keep an eye on cash flow

• Make sure the GL is right without getting involved in the day-to-day management 

• Client maintains responsibility for making sure payroll is approved 

• Increased revenue opportunity

• Clients still control the process and can make mistakes

Run

You run payroll with full ownership of the process

• Give the business owner or management permission to run payroll, but everything passes through you

• Option to hire on staff or choose a payroll service provider as your partner

• Most insight into your client's business

• Highest visibility into cash flow and business operations

• Highest potential revenue for your practice 

• Higher responsibility and risk 

 

How do you choose?                                                                                                                                                                                                                                                                       Start with a conversation. Ask your clients how they’re currently handling payroll and if they’d like some help. Providing high-quality payroll can also go a long way to strengthening your reputation with them and opens the door to providing additional services. 

Once you know what your clients expect, you can start thinking about how you want to deliver it to them. Do you want to hire people to build an in-house payroll team? Or does it make sense to refer clients and take a commission? Or could you fold payroll into a monthly fee you charge clients to allow you to move away from a top-heavy billing cycle that can cause you uncertainty and tax flow problems?

By weighing what your clients want against the needs and capabilities of your firm, the right approach should reveal itself pretty quickly. Doing the client research might even presell some clients on payroll services.

Getting started with payroll – and more                                                                                                                                                                                                                                              In our survey, we learned that accountants are the advisor that owners and managers trust most for advice relating to their business for advice relating to their business – even more than lawyers, friends, and family – so expanding your services is a great opportunity to build on that confidence. 

Getting started with payroll services has never been easier. Look for payroll software that easily integrates with QuickBooks or Xero with the flexibility to send information on how you want to see it. Also look for a company that prioritizes timely, accurate, and up-to-date tax calculations, payments, and filings.

However you choose to approach it, adding payroll to your services can be a big win for both you and your clients. Your clients get hours back that can be focused on growing their business, and you have the opportunity to expand your practice. 

Last modified on Tuesday, 05 November 2019
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Katelyn Sullivan

Katelyn Sullivan leads the partner development team at OnPay, a payroll software for accounting firms and their small and midsize clients. Prior to joining OnPay, Katelyn spent seven years with Ernst & Young focusing on technology adoption and process improvements for business clients. Katelyn is a licensed CPA who earned her master’s in accounting at the University of Georgia.

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