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.

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.

Gentlemen, it’s great to see so many familiar faces returning to our panel. What are the most significant changes you’ve seen since we last talked about Payroll & HR Solutions?

Dr. Chandra Bhansali (AccountantsWorld): The biggest change in payroll is the growth of online payroll. And this growth rate will continue to accelerate.

Jim Heeger (PayCycle): Agreed. It’s the shift to online payroll and HR with advantages that software simply cannot match. One advantage is that CPAs can give their clients access to the online service. Clients can now enter employee hours, print their own checks, view payroll reports and more. This saves CPAs significant time each month.

Robert Digby (PayChoice): We’ve seen increased acceptance of the Web for secure transactions and Software as a Service (SaaS) products. These trends are radically changing the way small businesses communicate with and manage employees.

Michael Alter (SurePayroll): The adoption of SaaS payroll and HR solutions has increased as people get more comfortable with — and reliant upon — running their businesses online.  They’re taking advantage of the flexibility and cost-efficiency that enables them to take care of business from anywhere at anytime. There’s no need to download software or keep on top of software updates. All the vital information is accessible without relying on someone else to retrieve it. We even have customers processing payroll from their iPhones. 

James Paille (myPay Solutions/Thomson Reuters): Another big change is the growing acceptance of advanced technology tools. It’s now possible to implement a completely paperless payroll process, from initial data entry to electronic delivery of pay stubs.

Don Weinstein (ADP): The introduction of new, affordable technology has many accountants taking the do-it-yourself route again after many shied away from the task in recent years. 

Walter Turek (Paychex): We’ve seen a dramatic shift among small and medium-size businesses that are looking beyond your basic payroll service to a more comprehensive suite of services, including integrated HR and benefits.

What makes a CPA ideally suited for helping clients with complex payroll and HR administration tasks?

Alter: 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 CPAs on some level. By recommending or reselling a payroll solution that helps the client avoid payroll tax errors and the risk of fines, CPAs can prevent a negative impact on a client’s pocketbook and leverage their time to focus on more consultative services.

Digby: The “Two Ts” — Trust and Taxes. CPAs are the most trusted advisor to many business owners. They interact with senior management frequently and understand the small to mid market business environment better than anyone else. CPAs can also navigate the regulatory tax landscape for their clients so business owners can focus on their core activities.

Heeger: CPAs find their clients will often ask them to handle their payroll regardless of the level of complexity — even if the CPA is not a payroll expert. Turns out 38 percent of our accountant customers had never done client payroll prior to using our solution. 

Weinstein: As trusted advisors to their small business clients, accountants are asked about all manner of financial matters. 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. 

How does payroll fit into a well-rounded CPA practice?

Turek: With the well-publicized shortage of accounting staff today, CPAs have an opportunity to be selective about the services they offer and can position their firms as providers of value-added and higher revenue-generating services. 

Paille: 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. Payroll is a very “sticky” service. Once a firm begins providing payroll service for a client, the client will almost never leave.

Digby: In many cases, CPAs are already preparing tax returns and performing full-charge accounting for their clients. Payroll is a natural, high retention, extension of these client services.

Weinstein: 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.

Heeger: Payroll and HR services, such as workers’ compensation, provide year-round, rather than seasonal income. Most CPAs know the more services they provide a client, the better their odds of retaining that client. One CPA 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, with payroll, the client has an ongoing relationship that increases retention.

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

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