Academic journal article Journal of Accountancy

Payroll: A Tie That Binds; Offer Payroll Services to Position Your Firm as an All-Service Provider

Academic journal article Journal of Accountancy

Payroll: A Tie That Binds; Offer Payroll Services to Position Your Firm as an All-Service Provider

Article excerpt

EXECUTIVE SUMMARY

* EVERY BUSINESS HAS TO PAY ITS STAFF and its taxes. Many CPAs are addressing those twin needs by offering to help their small-business clients, not just with taxes But also with the many chores that go into payroll processing, from after-the-fact tax filings to benefits administration.

* IMPROVED TECHNOLOGY HAS MADE offering payroll services easier in the past five years. It's a good fit with services such as pension work that must be in a prescribed electronic format.

* A FIRM CAN HANDLE THE ENTIRE PROCESS for most payroll clients--prepare checks, arrange for the deposits and make sure the clients' payroll taxes are paid on a timely basis and their quarterly and annual returns are correctly prepared and filed.

* USING A CPA FIRM OFFERS CLIENTS confidentiality plus the advantage of personalized service. Clients like to deal with only one provider and know the individual who answers the phone.

* CPAs NEW TO THE PAYROLL NICHE WILL FIND that there is an abundance of software and Web-based providers to choose from. Start-up costs for software and training start at $1,500 but can go much higher. Firms can control staff costs By hiring $15- to $20-per-hour workers to do basic data entry.

* PAYROLL SERVICES CAN BE AN ADJUNCT to other recurring CPA work that can give a firm a high return on investment relative to the amount of time they take.

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Every business has to pay its staff and its taxes. Many CPAs are addressing those twin needs by offering to help their small business clients not just with taxes but also with the many chores that go into payroll processing, from after-the-fact tax filings to benefits administration. Payroll services is not a huge niche--most of the CPAs with whom we spoke for this article say it accounts for less than 5% of their total billings. But its value is larger than that figure implies. Having it on the menu, they say, positions a firm as an all-service provider and helps cement client relationships.

Horovitz, Rudoy & Roteman (HR&R), Pittsburgh, has provided a complete proprietary in-house payroll service (FlexPay) for about 10 years, says Gordon Scherer, CPA and managing principal of the six-partner firm. It represents about 3.5% of the firm's income, and the partners have earmarked that money for funding the cost of their retirement (see "A Payroll Services Retirement Fund," page 31). Here's information to help you decide whether payroll could be a good business for your firm, whether you're a sole practitioner or a managing partner.

A GOOD WAY TO GROW?

"Payroll services are about 3% of my practice, but offering them is part of being a full-service accounting firm," says Daniel M. Ukestad, CPA, a Carmel, California, sole practitioner who does after-the-fact payroll for about a dozen small business clients. He provides those clients with tax and consulting services, not audits (see "Independence and Service Issues," page 32). He also does domestic-staff payroll for older individuals with household help.

At Faulk & Winkler LLC of Baton Rouge, Louisiana, principal Monica Waller is responsible for client accounting services (CAS). "Payroll services is a small part of our business, but it works hand in hand with CAS, including general ledger, financial statements, accounts payable and accounts receivable, tax and pension work," she says. When tax partner Denise Carvalho, CPA, sees a client who might benefit from payroll services, she brings Waller in to discuss how to help. The firm has handled payroll since 1984 but says improved technology has made it easier in the past five years. It's a good fit with services such as pension work that must be in a prescribed electronic format. "It has become a real selling point for pension administration clients to transfer their payroll to us" she says.

Principal Joseph Maloney, CPA, of four-partner firm Maloney, Reed, Scarpitti & Co. …

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