Offering payroll services to clients has long been seen as either a reluctant necessity or an essential service for CPA firms.

And, in some cases, even the bane of their existence due to the potentially costly and time-consuming nature of the work.

But lately, more firms are discovering that the reality of using payroll software or outsourced services can be a significant revenue source or at least, a strategy to add to their overall service offerings in an increasingly competitive environment.

Here, several firms discuss their recent selections of either payroll software or services and the results they've seen thus far.

Cost-effective services

Firm: The Latte Group/Glen Ellyn, Ill.

Size: 10 staff

Product: ADP

Commencement date: Early Q4 2010

On record: Mike Krueger, president and CEO

Challenge/objective: The group, which has an accounting/business process outsourcing practice, wanted to add HR services to its offerings and decided to start with payroll, but needed it to be cost-effective.

Amount spent: $60 per client fixed, plus $1.25 per transaction (i.e., direct deposit, check).

Process: The firm didn't want to conduct full payroll services and sought out an outsourced solution. It knew ADP had the name recognition it thought its clients would trust. Krueger had been in contact with ADP in the past, but it was, in his view, "too cost restrictive" to take on until fairly recently. He claims ADP approached his firm a little over a year ago with a new, "more reasonably priced" offering for accountants. The firm took a few months to evaluate ADP and decided it was time to move forward with them.

"The real tipping point for us was that many of our clients using us for payroll were growing and had multi-state operations and ADP can handle that, we also found ADP's tax administration component was far superior than other providers'," said Krueger. "The fact that we had been offering some payroll before meant the primary focus of the transition was to get our people familiar with ADP's workflow and user interface. They provided training, we tweaked the onboarding process and within one pay period it was as if we'd always worked with them."

Krueger also noted that he was impressed by the fact that ADP's account representative was physically in the office assisting his staff as their tech support was on the phone, working through any questions they had.

Results: The firm mostly sees payroll as a value-add client retention offering and complement to its other services as well as a future revenue item.

"If I am working on a new client and not charging as much for payroll services, I am going to make a proposal that includes other areas of outsourcing services and fold payroll in so I price payroll in the context of a bigger deal," said Krueger. "If we have a payroll-only prospect with no ability to grow into what we consider a 'B-level,' client I will price [the service] higher and they may go away but that's OK."

Next steps: The firm would like to evolve its payroll practice into full HR services and is currently working directly with ADP to help do so.

A well-rounded solution

Firm: Livesay Group/Lexington, Ky.

Size: 9 staff (full and part time)

Product: Payroll Relief (AccountantsWorld)

Commencement date: January 2010

On record: Bobby Livesay, partner

Challenge/objective: The firm needed a more "well-rounded" payroll solution that it had used in the past, particularly one that was easy to manage, had a dashboard to help with workflow, as well as one that could ultimately help grow the firm's limited payroll practice.

Amount spent: Began at $1,000 for unlimited payrolls during the first a year, now $6,000 for the year (based on 7,500 paychecks processed). Charges decrease as paychecks processed increase.

Process: The firm had read about AccountantsWorld and became familiar with their offerings. The price was right and they were able to start using the product relatively quickly Payroll Relief is a cloud-based offering with no installation.

Livesay started slow, setting up a "dummy company" at first to get accustomed to the program. Within two weeks, the firm's payroll administrator took a few small clients and entered them into the system, first processing five payrolls in the first quarter of 2010, five more in the second quarter and more throughout the year.

"We were using dual systems for the first six months, but it helped that we didn't have a huge variety of scenarios since we mostly do smaller businesses, not 150-person payrolls," said Livesay. "AccountantsWorld has online tutorials on video and their support is very good too, we just made simple phone calls with their tech support to work through any questions or issues, but there were few."

Results: The firm currently 40 payroll clients but Livesay was more impressed by the "piece of mind" offered by the payroll solution than the amount of payroll clients he has.

"We've almost tripled our client load and we picked up tax and bookkeeping work because they like and trust us with the payroll work," said Livesay. "Once you do that well, it will lead to other things. Firms today find it hard to sell someone on tax work or bookkeeping, but that's why I think so many people need payroll, it opens the door to more things."

Next steps: The firm would like to continue to grow its payroll practice as it sees the offering as "the first step in the process of establishing a long-term relationship" with its clients, according to Livesay. "We want to be a one-stop shop for our businesses."

A smaller vendor alternative

Firm: Sum of All Numbers/Fremont, Calif.

Size: 12 staff

Product: Intuit Online Payroll (Intuit)

Commencement date: 2009

On record: Holly DeVito, CEO, founder

Challenge/Objective: The firm conducts other business process outsourcing services, from basic bookkeeping to CFO-level duties. Clients were asking for payroll and the firm needed an alternative to "the big vendors."

Amount spent: Approximately $400 month based on payrolls processed and client size.

Process: Prior to selecting a payroll vendor, the firm acquired a bookkeeper who once used PayCycle (now Intuit Online Payroll). She recommended the solution and the firm was trained "very quickly" on its use and began marketing payroll service, offering clients the first three months free. Within "a few days," the firm began entering small clients into the system.

"The system was so easy to use, our payroll person had done some payroll by hand in the past, so this was a breeze," said DeVito. "[Intuit has] online training, an online resource center with answers to most questions as you set up a client. The help is incredible, you usually could call right away and get someone."

Results: The firm currently earns a 50 percent profit on its payroll service alone, after paying for the service as well as its payroll person. DeVito anticipates her overall business will grow by being able to offer payroll.

"We get a lot of bookkeeping clients simply because we also offer payroll, they like everything in one place," said DeVito. "We don't actively market payroll now; it is an add-on service, but if we do get recommended for that it's great."

Next steps: Sum of All Numbers is starting a joint venture with two other companies to offer deeper payroll services, one is a third- party administrator that does 401(k) administration and the other is a 401(k) advisor.

"We can't compete with big payroll [services] separately, so we are joining up to where we can be a one-stop shop, keep our companies separate and can collaborate on this level of payroll work."

Time savings

Firm: Trudy Durant and Associates/Edison, N.J.

Size: 17

Product: Paychex

Commencement date: 2009

On record: Trudy Durant, partner

Challenge/objective: The firm wanted to offer clients payroll services, but found it "too time- consuming" to do in-house.

Amount spent: $60 per employee payroll processed.

Process: For the firm, Paychex had a "trusted name" in payroll outsourcing and when they approached the company, they had a CPA-firm offering that "made sense" to use, according to Durant. She claims that getting the firm and its clients set up on the service did not prove too difficult.

"It was easy for Paychex to work with us to figure it all out. When we first set up the account we talked to a representative. The paperwork is completed by the client and once an account is set up, our bookkeepers go online and process," said Durant. "Then an email comes back indicating it's done and money comes out of the client's account to pay their employees. Very simple."

Durant claims that when they first informed clients they were moving to Paychex there was some hesitancy about "the outsourcing aspect" of the service, but she explained that they would not charge them.

Results: Durant said the payroll service has reduced her staff time as well as the work that used to be done to process payroll.

Next steps: Durant says she plans on looking into offering workers' compensation as well as 401(k) services.

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