Payroll processing was one of the first major accounting applications to move to the Web, proving the business model for ASP applications of its type and creating a sustainable revenue stream for software vendors. While online processing clearly is not going to replace desktop and service bureau applications in the immediate future, the benefits are substantial enough that online processing is here to stay.
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The benefits work to the advantage of all parties concerned. Software vendors are able to make instantaneous changes to the software. This means they are no longer reliant on the end user to apply fixes and patches, which significantly reduces the number of support calls the vendor must field.
The end user benefits from the ability to manage payroll at any time and from any location, and the accountant benefits from enhanced tools for review, tax filings, and collaboration with the client, now that growth is steady. Four trends have become clear:
Online payroll processing has become more accountant-centric. In the past, payroll services were marketed not only to accountants but to their clients as well, creating an adversarial relationship. Now vendors focus on building accountants into the chain and creating new tools to make payroll a better profit center.
Online Payroll is more attractive to mid-size companies. In the initial years, target firms were small businesses that needed the flexibility, had fewer payrolls to process, had fewer security concerns, and could rapidly adopt the new technologies required. But with the ASP model proven, companies in the mid-range are expressing interest. Here are some trends.
Online payroll processing is expanding to other areas. Many vendors are looking to expand their online offerings with research, communication and relationship management tools, and even online versions of their bedrock accounting and tax programs.
Tweaking is the major order of business. Most programs have gone through a shakeout period, leaving little to do except update tax tables, and fill out the rest of the state forms for electronic filing as they convert from paper. In the year ahead, look for a round of interface redesigns as companies struggle to differentiate their services.
However, these trends are less important than the re-emergence of payroll as a major profit center. Using fast and reliable online tools, an accountant can manage payroll for dozens of clients simultaneously-review trends, file taxes, and build value-added services-for a very modest cost. Firms that have taken the payroll plunge report that they derive 25 percent or more of annual revenue from payroll clients.
The work is steady and not particularly time-intensive-weekly payroll reviews, monthly, and quarterly tax filings, and a quarterly trends analysis to provide the client with a better understanding of payroll costs and potential trouble spots.
PayNet Data Access Suite
Automated Data Processing introduced its online payroll service in 1998, targeting businesses with fewer than 50 employees. In December 2003, the company expanded into additional services via a new Data Access Suite.
"Over the last two years, we have done a lot to broaden our solutions set so that it is about flexibility and choice," says Rich Watson, vp, product management and accountant services for ADP Small Business Services. "The changes were aimed at facilitating the accountant-client relationship, and building stronger solutions such as the Data Access Suite."
The Data Access Suite includes the InfoLink general ledger interface, which transforms gross-to-net payroll and employer tax information into pre-formatted journal entries that are then imported electronically into QuickBooks; Data Export, which lets users access and download payroll data into Excel; and Electronic Reports, which gives users the ability to view and print payroll and tax reports online.
Critical features embedded in the program include 128-bit SSL encryption for security of the data online; a sophisticated online help system that includes frequently asked question files; and systems for electronic tax reporting; tax payments; MICR-encoded check printing, direct deposit, and extensive payroll reporting.
New for 2005 is a wholesale solution for accountants, providing tools for accountants to process the payroll and cut checks for clients, with tax filing handled by ADP. Using the Fast Track Payroll service, accountants can obtain payroll results and print checks and reports within an hour of submitting the information to ADP.
ADP sees the future of its online product as bridging the gap between desktop solutions and the service bureau. To back this effort, it will redesign its user interface this year, and further expand its tools for accountants. Even in its present form, though, ADP EasyPayNet offers a convenient, secure, and flexible online solution for payroll that is well-positioned for the accounting industry.
ADP Small Business Services
Florham Park, N.J.
Pricing: About $24 for bi-weekly payroll, five-person firm.
Paychex Online Payroll
Paychex Online Payroll, a tightly-integrated suite of Web-based services first introduced in 2001, wins high praise for its accounting-centric focus and its ability to present multiple clients in a single view, including annual state returns and W-2s.
In the past year, Paychex has upgraded reporting capabilities to make it easier for accountants to access client reports without physically picking up paperwork at the client's site. In addition, the site has been re-branded from Internet Report Service to Paychex Online Reports, consistent with the company's push to deliver an expanded set of branded online products.
Paychex Online was built to be flexible and scalable. Data for up to 1,000 employees can be entered or viewed en masse or by individual employee, with the ability to handle complex as well as simple payrolls. It offers integration with a number of other essential programs that include a paperless reporting service, online time sheets and an interface to post payroll data into popular general ledger programs. Supported ledger programs include Accpac, Creative Solutions, MYOB, Peachtree, and QuickBooks in addition to manual integration with other accounting programs. And it has live, technical support from 8 a.m. to 8 p.m. Eastern time.
On tap for the site in 2005 is the ability to set flags so if a client has specific payroll issues or falls below an established minimum the accountant will have time to respond before the situation becomes critical.
Aimed at accountants and their SMB business clients, Paychex Online Payroll is a straightforward, flexible payroll service that effectively combines secure payroll and transaction capabilities with the reporting and analysis accountants need.
Paychex Online Payroll
Pricing: $33.73, average cost for weekly payroll, 10 employees.
Payroll Relief AC
Payroll Relief AC was designed to bring the simplicity and economies of scale associated with payroll service bureaus to accounting firms. Part of the AccountantsWorld online service, it defined the accounting-centric movement, combining steeply discounted pricing with features to transform payroll into a collaborative client engagement. The result is a system is helping accountants boost their revenue by $1,000 to $5,000 per client.
Key features of the system are the Payroll Center for accountants, which offers reminders of pay and filing dates as well as payrolls in progress and helpful links; and the Employer Activity Center, which provides a detailed overview of the active employer's tasks, including current payroll status, pay-day reminders, tax-due dates, taxes paid, forms filed, general reminders, and critical diagnostics if any.
The site handles calculations and payment coupons for all states and localities, District of Columbia and Puerto Rico. It has the ability to handle multiple pay schedules and multiple states, including multiple unemployment states; fast data entry either via a spreadsheet format or one-employee-per-page format; the use of 18 pay types, including tips and reimbursement; and support for third-party sick pay, dependent care benefits, health insurance for 2 percent shareholders, and handwritten checks.
If a client has multiple locations/ offices, Payroll Relief AC allows each location to enter its payroll information only. The corporate office or accountants can then complete the payroll for the entire corporation and print the checks for all locations. Franchisees find it very useful.
With continuing improvements in efiling and data management, Payroll Relief AC remains one of the strongest and best-designed programs in its class, standing at the heart of the revolution that is bringing profitable payroll services back to accounting firms.
Payroll Relief AC
Pricing: Full-service weekly processing, $5.95 for up to five payroll checks. Others are $9.95 for up to five payroll checks. Per check charges range from $1.00 per payroll check for 6-10 checks to as low as fifty cents each for over 100.
PayMaxx, the seventh-largest nationwide payroll processor, serves companies with one to 150 employees through its suite of Internet payroll products. Other PayMaxx payroll products can service clients with up to 10,000 employees.
The core Internet-based payroll and tax filing service, PowerPayroll, introduced in 1999, is aimed at the needs of companies with 11 to 150 employees. As PowerPayroll grew and improved, it became more suitable for mid-range companies than for smaller companies. So in 2003, XPressPayroll was introduced as a streamlined service able to process a payroll in seven mouse clicks to handle the needs of these smaller companies.