[IMGCAP(1)]Providing a payroll service is a labor-intensive, tedious and potentially risky task.
It’s not uncommon to spend more time on customer service issues that arise from payroll than you spend actually processing payroll and handling the payroll taxes. After all the time involved and meager profits, it hardly seems worth it.
But it is. Despite all the difficulties and liabilities, you should offer payroll. First, payroll offers a unique opportunity to stay connected to your clients and attract new ones. Second, new technology means you no longer have to spend the time or incur the risks associated with providing payroll services. Essentially, all of the burdens associated with processing payroll have disappeared with new online services.
Building Loyalty and Generating Business through Payroll
With payroll, you have the opportunity to be in front of all of your clients without spending much extra time. Once your clients see your name on their online payroll every time they process payroll, you’re top of mind when they’re ready for services such as financial analysis or estate planning.
And the client turnover rate with payroll is low. As many banks have recently discovered, payroll keeps customers loyal to a business longer and provides opportunities to offer other higher revenue-generating products and services such as audits and reviews, and trust planning.
If getting more from current clients isn’t enticing enough, tapping into the small business market through payroll may be. According to the Small Business Administration, 64 percent of small businesses process payroll in-house. There’s a big opportunity to convince in-house processors that the time they spend processing payroll will be much better spent focused on building their businesses. If managing payroll takes 16 hours per month and your clients’ time is worth $100 per hour, savings will average out to more than $1,000 a month.
Leveraging Online Solutions to Eliminate Payroll Hassles
Many online payroll services offer you the ability to brand or co-brand an online payroll solution with you firm’s name, and sell the service to clients. And several drastically reduce the hassles of taking on a client’s payroll by performing the calculations and deductions, paying employees through direct deposit, generating reports, creating W2s and 1099s, and offering employees online access pay stubs and W2s.
With online payroll, you can be the main point of contact, or you can allow the payroll provider to fill that role. As the main point of contact, you would enter payroll online on your clients’ behalf and work with the payroll provider to resolve any of their issues. This opportunity to directly communicate with clients on a regular basis deepens your relationship.
If you’re short on time, your clients can directly enter payroll into the online system branded or cobranded with your name. They will call the payroll provider directly with any customer service issues, and most payroll providers will answer the phone or emails using the branded or cobranded name. You may even save the time of billing clients, as some payroll providers will do this on your behalf.
Types of Online Payroll Services
There are basically two types of online payroll services for accountants: full service and partial service.
With a full-service solution, the provider takes on the tax liabilities, handling the payments and filings of quarterly and annual payroll taxes, and working with tax agencies directly if any issues arise. Your clients turn over power of attorney to the payroll provider to perform this aspect of the service. You simply sell the service, set a cost structure, and collect a paycheck.
With a partial service, you handle the tax liabilities. While the payroll provider will generate 940s and 941s, you’re responsible for filing the taxes and handling clients’ IRS issues. You’ll also have power of attorney for the client. You’ll have the ability to offer direct deposit and easily accessible reports, but you’ll still take on much of the risk.
In most cases, you can expect to receive a discount off the sticker price—10 percent to 25 percent. Then you can mark up the service at least that much to generate a small profit. And the discount typically grows as you bring more clients onboard. A reseller with 30 clients receiving 25 percent off the standard cost of payroll could potentially generate an additional $22,000 to $25,000 a year. Not bad for spending 30 seconds to two minutes per client, per payroll.
Marketing Online Payroll Services
Many online payroll services will provide all of the marketing content needed — including online demos that can help promote the payroll service. You can simply add payroll information to the e-newsletters, webinars, social media and Web site updates you’re already making for cost-effective marketing.
Whether it’s your Web site or any online social networking site, be sure to include that link in all of your marketing tools.
Questions to Ask Potential Online Payroll Service Partners
Make sure an online payroll service meets your needs by asking these questions of every vendor you consider:
• Do you offer a full-service solution, partial-service solution or both?
• Will you bill the client or do I bill the client?
• Do you charge for direct deposit?
• Do you offer customizable marketing collateral, tools such as online demos, and marketing support?
• What software integration functionality do you offer?
• Will you market your other services to my clients, or is my client list kept confidential?
• What are your security standards?
o Are Social Security and account numbers encrypted?
o Is information backed up constantly?
o Do your Web servers use the strongest available security?
o Do you use firewalls, intrusion detection and anti-virus measures?
o Do you have fraud monitoring and production service?
• May I have references from other accountants using your service?
• Do you offer a guarantee, to refund payroll fees if tax filings and deposits are late or incorrect?
Michael Alter is president of SurePayroll, the online alternative. A nationally recognized spokesman on small business issues, he regularly appears on Bloomberg TV and other national business programs. He received an MBA from the Harvard Business School and holds a bachelor's degree in economics from Northwestern University. He resides with his family in the Chicago area.
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