Additional comments from this roundtable discussion can be found in your September 2007 issue of Journal of Accountancy.

To help CPAs deconstruct the benefits of managing payroll and human resource administration functions for their clients, we invited top thought influencers and solutions providers from the marketplace to share their insights on the opportunities, considerations and caveats facing CPAs who are considering this fast-growing practice-building niche. In last week’s column, our expert panelists disclosed key factors that CPAs should consider when deciding whether to refer a service or offer payroll as a service to their clients. They also deconstructed the broadest misconceptions many CPAs seem to have today about offering payroll management solutions to their clients (and doing so profitably).

Joining us (listed alphabetically) are: Michael Alter, president of SurePayroll, Inc.; Jon Baron, president of Professional Software & Services, Thomson Tax & Accounting; Dr. Chandra Bhansali, president & co-founder of AccountantsWorld, LLC; Jim Heeger, CEO of PayCycle, Inc.; Don McLoughlin, vice president of Marketing, ADP Small Business Services; Vincent Mottola, senior vice president, Ceridian Small Business; and Walter Turek, senior vice president — sales & marketing, Paychex, Inc.

Gentlemen, what factors should CPAs consider before selecting a Payroll & HR Solutions partner?

MICHAEL ALTER: In his book, Winning, Jack Welch wrote that cultural fit is the most important factor in business acquisitions succeeding or failing. I think selecting a business partner should be viewed the exact same way. If a potential partner has a company culture that’s similar to yours, the chance they’ll deliver the type of service your clients are used to receiving from you is higher.

Make sure any partner you choose places value in the same areas you do. For example, if your firm places high value on personal service, and you partner with a company that places high value on being a price-leader, your clients may end up very disappointed in the service they receive, and therefore, your recommendation. You don’t want that. A thorough vetting process up front will prevent that from happening. Select a few companies that value the same things as you. Pass their names along to your clients and let the clients make the final decision. Based on your clients’ feedback, you’ll be able to determine which partners you should keep and which you should fire.

JON BARON: What are the total services that the CPA firm will be offering to their clients? And how can that Payroll & HR Solutions partner assist them with their overall service offering to their clients?

CHANDRA BHANSALI: Besides the important universal factor — whether the solution is sufficiently comprehensive to meet the CPA’s needs — here are some additional factors to consider: For one, is the solution designed specifically for accountants, or it is just a generic system really designed for end users? For another, does the solution let CPAs and their clients work collaboratively? This important factor lets CPAs offload routine work to their clients, thus making payroll services both cost-effective for their clients and highly profitable for themselves. By using this approach, CPAs have turned payroll processing into a $100 to $200 per hour service.

JIM HEEGER: We recently surveyed our customer base of accounting professionals. We learned that the most important considerations were ease of use, cost, availability of direct deposit, electronic payments and filings and convenience. Direct deposit and the ability to pay and file electronically really make the CPA’s job much easier.

DON MCLOUGHLIN: When selecting a payroll provider, it’s important for accountants to align themselves with an organization that has the same service values. This helps ensure that the partner provides a level of comfort and best practices that is a reflection of the accountant. Accountants should ask for references and ask their peers for advice. By understanding the experiences of others, an accountant can understand the perceived benefits of working with the solutions provider.

Once they have developed an understanding of their partner’s services and best practices, accountants can work with the provider to determine the role that each will play in providing services. This is an important step, before the work begins, to ensure that expectations are met and the relationship moves along smoothly.

VINCENT MOTTOLA: Price, functionality and reliability are all relatively standard among the major providers, so the differentiator is customer service. In a referral relationship, ask a potential partner about their service model — are clients assigned to a named representative who is familiar with their account, or a random call center environment? How satisfied are clients with their service experience, and are they willing to recommend the provider? In either a referral or re-marketer relationship, ask what the provider’s service commitment and model is when working directly with you.

WALTER TUREK: We think the most important factor is the reliability and integrity of the service provider. Paychex, as a publicly-traded national entity in business for more than 36 years, is fully bonded, insured, financially sound, and assumes liability on behalf of our clients. In our opinion, no other consideration should be more important than this trust.

In addition, CPAs should consider the depth of breadth of the services offered. For instance, does the provider offer payroll tax filing, workers’ compensation administration, retirement services, health insurance, etc.? A provider that offers a variety of payroll and human resource services will ultimately give CPAs a one-stop resource that their clients can benefit from.

How are today’s “macro-technology” trends — mobile computing, security, paperless office and ASP models and the like — affecting enhancements to your own suite of payroll and HR solutions?

Alter: I think we’d all agree that being able to send and receive data at anytime from anywhere can be very helpful, especially for busy business owners. That certainly was the thought when we created SurePayroll in 1999. We’ve had customers call us and excitedly relay how they just ran payroll from their mobile phone in a jungle. That’s just cool! Our payroll technology is very flexible and suitable for a variety of platforms.

But with all of the modern tools that provide these great conveniences, small business owners (and all people for that matter) are in danger of being bogged down by way too much — too much time spent organizing data, too much money spent on cool new technology gadgets.

At SurePayroll, we try to stay focused on providing information and tools that are relevant to each customer — so they are time- and money-savers, not just a bunch of new tools waiting to be used by busy business owners. For example, when creating our SureAdvisor HR and compliance resource center, we built in tools that take the leg work out of researching state’s and the federal labor law posters, and provide access to all posters in a fast and easy one-click download. We also created a customizable business forms library that pre-populates fields with information pulled from the client’s payroll account. Additionally, we just released our Sure401k online 401K product, which automatically integrates with their payroll. These services were built for speed and ease — at price points that suit the budget of even the one-person businesses.

Baron: Today, we offer the ability to achieve a completely paperless payroll process. The client enters the payroll information through a private client portal. The data flows seamlessly into the firm’s payroll software and the firm “processes” the payroll. They can then provide the client with PDF versions of the pay stubs, or the pay stubs can be placed into private portals for each of the client’s employees, and the employees receive their earnings through direct deposit. And because all of our software is offered in an ASP version, the payroll can be processed anywhere that an Internet connection can be established.

Bhansali: Payroll Relief is the first Web-based ASP solution that’s designed specifically for CPAs and accountants to offer payroll services to their clients. The system is virtually paperless, and lets CPAs and their client’s process their payrolls anytime from anywhere there is Internet access. The next logical enhancement to Payroll Relief is mobile technology.

Mottola: As one of the first national providers to offer a Web-based, hosted payroll solution, Ceridian has extensive experience with Internet security and has dedicated extensive resources to assure the integrity of our systems. We’ve applied that expertise in the development of employee self-service and paperless data solutions that drive employee productivity and streamline business management. These Internet solutions also accommodate the hectic schedules of small business owners, who often need to access information on the go and during off-hours, and have little time to maintain and secure software.

In addition to technology trends, what other trends in the Payroll & HR services marketplace cause you to be concerned?

Alter: Any time payroll is seen as a commodity, I get worried. Until there is a payroll mistake, people forget how emotional payroll is. If a business owner chooses to rely on the lowest cost payroll processing option, they could end up with more than a problem that just affects the books. They could end up with hours of time spent away from core business issues fixing payroll mistakes, unhappy employees who lose trust in the business and unnecessary worries about IRS fines. Payroll is not just math. Payroll is not just tax law. Payroll is not just a money-transferring game. Choosing a payroll method or provider should be a question of choosing a provider who is going to own your worries and your clients’ worries — from start to finish.

Bhansali: CPAs have a tremendous opportunity to regain control of payroll processing, but it appears most are going to miss this opportunity. Even more important than the financial loss, there are the lost opportunities to offer clients personalized payroll services and to enhance client relationships.

Mottola: A number of companies with expertise in other industries, such as banking and insurance, have made forays into the payroll/HR service bureau business, usually to try to increase adoption of their core products. I would be wary. Stick with companies whose expertise and core products are their payroll and HR management services.

Next week we’ll take a closer look at how CPAs can make more money, solidify client relationships and better educate themselves about which payroll products and services are best suited for different size businesses.

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

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