In a tough economy with a highly competitive market for accounting talent and the ever-increasing complexity of state and federal regulations, it is more important than ever for accounting professionals to examine their service offerings and clients' needs and expectations to find the best solution for their clients and their firms.

Today's business owners are interested in more than just payroll processing; they want and need a comprehensive HR offering for their employees. Because small businesses never have enough resources to do the things they need to grow and succeed, they turn to their most trusted advisor - their accountant or CPA - to outsource the tasks that are necessary, but not directly tied to their business. It isn't uncommon for accounting firms to find it challenging to provide the functionality clients have come to expect - including retirement services, pre-tax benefits, health insurance and workers' compensation administration. By choosing to outsource the payroll/HR functions, accounting professionals can be assured that the clients' needs are expertly met, while they are free to provide greater value to their client relationships.

In a recent national survey of more than 2,000 accounting professionals, Paychex found that accountants who refer payroll services to their clients also tend to be highly consultative in nature and proactively engage in referring ancillary HR and benefit services. By playing this consultative role, accountants can deliver even greater value to their clients, in turn facilitating greater client retention through a strengthened relationship.

When making the outsourcing vs. in-sourcing decision, it is critical to consider the increasing complexity of state and federal regulations - particularly in today's economic climate. From the economic stimulus plan's payroll tax credit and COBRA subsidy requirements, to the pending changes surrounding health care plan administration, the payroll and benefits regulatory changes happening this year alone can be overwhelming. Most business owners - and perhaps accounting firms - simply don't have the time or personnel to monitor and quickly implement the continual changes and compliance requirements. On the other hand, a payroll, HR and benefits provider has the knowledge, resources and expertise to interpret the changes and guide businesses on how to stay in compliance.

In addition to the regulatory and compliance changes brought on by the current economic conditions, there are numerous tax law changes each and every year. Each law change brings more complexity to the payroll process and has the potential to result in significant penalties if companies do not comply with the changes. By outsourcing payroll, businesses can be confident that their employee administration responsibilities are met in a timely and accurate manner, and costly penalties are avoided.

Payroll tends to be an added service offered by accounting firms. But payroll providers have trained personnel who dedicate thousands of hours to following changes in regulations and making sure clients are in compliance.

 

THE SEARCH FOR REVENUE

As clients continue to demand more from accounting firms that face a shortage of accounting recruits, accountants may need to be more selective in the services they provide their clients - focusing on those that generate greater revenue for their firms. Our survey results showed that of those accountants who currently prepare payroll for clients, only 39 percent cited the service as a good revenue opportunity. This lack of revenue was also the No. 1 reason accountants not processing client payrolls choose not to perform that function.

Of course, there are other reasons accountants opted not to process payroll in-house, including increased risk and liability, and a lack of staff capacity. With payroll, it's not as simple as just having a large-enough staff. Because payroll will always be there, accounting firms offering it as a service need to plan for the inevitable situations that will interfere with the process - whether it's illness, a snow storm, a natural disaster, or any other variable outside of their control.

With a third-party provider, that plan is built in. Though not all accountants want to offer payroll services to their clients, having their clients handle their own payroll isn't their preferred option either. Of the accountants that responded to our survey, 84 percent prefer that their clients don't do their own payroll, but rather outsource it to a payroll provider.

Accountants who decide to process payroll for clients can potentially jeopardize their bigger, more valuable - and often lucrative - relationship with the client when issues arise. Just one payroll issue may cause the client to question the entire accounting relationship. However, when a client who uses an outsourced payroll provider encounters a problem and then informs their accountant of it, the accountant can reinforce their role as trusted advisor by working with the payroll provider to resolve the matter. From our perspective, the benefits of partnering with a payroll provider significantly outweigh any value gained when accounting firms take on the potential risks of processing client payrolls.

When partnering with an outsourced payroll provider, accountants are able to provide their clients with a comprehensive suite of payroll and HR services. This solution allows the accountant to maintain the role of trusted advisor by identifying and recommending the solution that best meets each client's needs, while ensuring that the client receives the highest-quality service. By no means does working with a payroll provider mean a "one-size-fits-all" solution.

As businesses demand more from their accounting partners, so should the accountant of its payroll partner. There is a growing demand from accountants who have chosen to outsource for a single-source solution that delivers comprehensive, integrated payroll and human resource services. Accounting professionals want one provider that can efficiently and effectively accept, process and retrieve the information required to manage their clients' employees - information such as salary data, benefits selections, and job performance history.

Advances in technology are also driving development and delivery of payroll and HR solutions, with services ranging from online benefits enrollment for employees to on-demand payroll reports. Accountants who choose a vendor that provides both payroll and HR administration can then offer their clients a "one-stop shop" experience that provides seamless integration of payroll and HR administration and helps them better manage their business.

 

Delbert Humenik is the senior vice president of sales and marketing for Paychex Inc., a provider of payroll, human resource, and benefits outsourcing solutions for small-to-midsized businesses.

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