Once viewed as an unwanted stepchild within the CPA profession, now specialists claim that payroll services offer a veritable lode of profitability for those willing to wade into this segment of client services.Armed with reliable encryption and the general acceptance of the Internet for easy data entry and access to reports, many practices are seizing the opportunity to add online payroll services.
And for those working on the front lines of the profession, payroll profitability may be the best-kept secret in the field of accounting, as roughly one-fifth of the firms on Accounting Today's Top 100 Firms roster over the past several years have seen growth in their respective payroll services.
But as with any third-party outsourcing, the traditional hurdles of security and finding the right partner often discourage fencesitters.
Still undecided? Below is a list of several top payroll services vendors and a sample of their product offerings for 2005.
AccountantsWorld fills a gap in the online marketplace by providing a one-stop shop for accountants wanting an Internet presence who don't have the time or expertise to create and maintain that presence. "We're in the business to help promote the practices of accountants," said Lenny Bottiglieri, an AccountantsWorld sales manager.
AccountantsWorld recently added a payroll program to its offerings. The Internet company's accountant-centric Payroll Relief is branded as a CPA's service - clients never see the AccountantsWorld logo. "One of the nice things about us is we don't deal with their clients; they don't know about AccountantsWorld - it's strictly the accountant handling it and we're doing the processing," said Bottiglieri.
Accountants however, don't need a Web site through AccountantsWorld to use the payroll service. AccountantsWorld payroll supports all 50 states and localities, with 24/7 processing available. This includes electronic regulatory filing, W-2 and W-3 data records, direct deposit, and related reports.
Rich Watson, vice president of product management and accountant services for ADP Small Business Services, describes three scenarios: Some accountants refer clients directly to ADP; others have built a payroll business that they ultimately sell to ADP; and the third group outsources client payroll business to ADP.
ADP offers a direct-link interface with the QuickBooks general ledger as part of its standard service, allowing QuickBooks clients to import journal entries from ADP. ADP also exports directly into the Excel format. Another standard service that ADP provides for accountants is direct access to client data online. Accountants can access all of their clients' payroll data whenever they want, from any computer.
In the past year, ADP has rolled out third-party wholesale retirement services. The company offers a 401(k) and solo 401(k) service.
"At the end of the day, for us it's about facilitating the relationship between the accountant and their clients, making sure that we put all of them in the best light with each other," said Watson.
Intuit promoters love to pose the question, "Which payroll service company in the U.S. serves the most clients?"
Most people respond with ADP or Paychex, according to Robin Joy, group business manager for Intuit. But the answer is QuickBooks - serving over 800,000 customers.
Intuit recently launched its QuickBooks Payroll Plus for accountants. The service enables accountants to process payroll for up to 50 companies. "It enables them to work directly with the clients and do payroll or payroll taxes for their clients," Joy said. Intuit has also added the ability to track worker's compensation, and there is a new feature called rapid time entry whereby users can input hours worked by each employee on a single screen.
Intuit also administers 401(k) products that it integrates with its payroll. Using QuickBooks, you can do as much or as little of your payroll work yourself as you like. "We really do pride ourselves on no matter what size your company is, we have a service for you," Joy said.
Another new Intuit feature is PayCard debit cards - stored-value debit cards that can be issued in lieu of paper paychecks. Marketed as ideal for employees without a bank account, the pay cards work like traditional bank debit cards and are loaded with net paycheck amounts for use as a MasterCard.
Other payroll companies feature similar services.
Paychex is the classic success story. Created 34 years ago with one employee and 40 clients, today the multi-billion dollar company reaches over 500,000 clients.
"Clients are looking for accurate, timely payroll data and information, and that seems to be the most significant motivating reason why they choose a third party to do their payroll," said Walter Turek, senior vice president of sales and marketing.
"From an accountant standpoint, a really significant offering is our Paychex Internet Report Service," said Turek. "This allows an accountant to review all of their clients' information online, so they can go in and post a general ledger and review a company's payroll without being at that company's physical location."
The service gives accountants online access to their clients' current and historical payroll data. In addition, in 2003, Paychex acquired Time in a Box, an online time-and-attendance system that allows employees to enter time sheet information, and that can also produce comparative reports.
"Small and medium-sized businesses are really looking for a one-stop shop solution. Our hottest product right now is our Paychex Administrative Services," said Turek. PAS combines payroll, employee benefits administration, human resources, administrative service organization, Section 125 plan administration, retirement savings plans, employee assistance, work-life benefit, workers comp administration, state unemployment insurance administration and claims assistance, Cobra administration, employee handbook services - and the list goes on.
In 2003 Paychex was named the preferred provider for the AICPA Business Solutions Program offered through its CPA2Biz web portal.
A relative newcomer, PayCycle, launched in 2000, offers a self-service payroll process focusing on companies with fewer than 20 employees. Originally a service to automate the paying of household employees, PayCycle now describes itself as "the leading self-service online payroll solution for small businesses and accountants." PayCycle is the brainchild of Rene Lacerte and Marvin Gates, who formerly managed Intuit's payroll business.
Lacerte grew up in the payroll business, originally working for his parents, who operated a payroll company. One might say he was born to work in payroll: "The night I was born my mom was sorting punch cards - my dad wouldn't let her go until she finished the job!"
One thing that PayCycle claims as a point of difference is that the company doesn't collect payroll tax money in advance. Most payroll companies extract payroll taxes at the time they process the payroll, and then invest that money and earn interest until the payroll tax payment is due. PayCycle customers keep their payroll taxes until tax payments are due.
"I believe tax dollars belong to the client until they're actually due," said Lacerte. "It comes back to growing up in a family business. You've got to maximize your working capital."
PayCycle's customers have the option of printing payroll checks on completely blank check stock using a special bank-friendly ink. Launched in 2004, the process enables accountants to print checks for many clients at once, using the same check paper.
"One of the big advantages in the paperless environment is to allow accounting firms to enter the market without the large infrastructure cost," said Jim Costello, vice president of operations at Payroll Associates. With Payroll Associates, a firm can license the company's payroll software itself, or the firm can interface with a service bureau that provides the software and hardware. The firm uses its own company name on reports and checks.
The service bureaus using Payroll Associates software process payroll for over 100,000 companies nationwide. One growth area of the payroll business is self-service employee hubs on the Internet. "A lot of our customers are using a one-stop shop; they include benefits, benefit enrollments, other employee-based services - that's where the whole industry is moving," said Costello. "An employee can go to an employee hub, change marital status and dependents without having to go back to the employer or the service bureau."
Costello explained that by involving employees in the system, a company becomes more entrenched in its payroll software and less likely to change providers. "People used to switch payroll providers - 20 percent would switch each year. Now, if that payroll company is administering my benefit plan and my 401(k) plan, and I have a time and attendance timesheet tied into that, if I change providers I need to retrain my employee base on what to do."
"As our industry changes and service bureaus become more one-stop shopping for the employer, accounting firms that don't get into some of these other employer product mindsets are starting to see some attrition," added Chuck Culver, executive vice president at Payroll Associates. The bottom line? "When the accountant goes out to try and compete in the big world, to try and solicit companies that he doesn't do accounting for, he's got to have some of these tools to compete."
"We were founded in 1999, and our whole goal was to create a simple, realizable, convenient, economical service exclusively for small businesses with one to 100 employees," said Michael Alter, chief executive of SurePayroll.
SurePayroll has teamed with Wells Fargo Bank to offer OnlinePayroll by Wells Fargo. SurePayroll also offers branded Web sites for accountants featuring the payroll service.
"This new, private-label, plug-and-play solution is well-suited for accountants who do not currently offer clients payroll support but who would like to," said Alter. Accountants can "offer our service with their name on it, or use our service as the back-end tool while they're providing payroll to their clients."
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