Whatever you think of payroll, you're probably right.

Whether you think it's a service you have to offer to deepen your client relationships, or an automated function that can free you up to offer higher-level services, or a value-added service in its own right that can help you help your clients, you can find an accounting practice where any one of those is true -- and, depending on the practice and its clients, more than one may apply.

For Jenn McCabe, payroll is, first and foremost, indispensable. "We absolutely have to have it be part of our service offering," said McCabe, whose company, Team Jenn, acts as the outsourced chief financial officer or controller for around 70 clients that are primarily small services businesses. "It has become something we do with a vengeance in the last eight years, because I've become convinced that I have to control payroll to control the quality of the numbers and to protect my customers."

"We're a virtual back office," she explained. "When I'm helping my clients price, they're pricing their labor hours ... . They ask me all the time, 'Can I afford to hire? How much should I charge?' Everything in revenue in a service-based business is based on how much you pay people, and how much you bill them out."

With payroll being the single biggest line item on any service business' P&L, McCabe insists, "I have to have visibility, I have to see the people costs. I have to make sure they're perfectly calibrated, and they're watched and controlled."

She also makes the point that payroll and human resources are intricately intertwined: "Making a flub on HR can tank a company faster than just about anything else." And in California, where Team Jenn is based, McCabe noted, "You must advise your clients on how to handle human resources on a daily basis. ... We have 20-25 percent of our staff focused on HR and payroll - that's all they do."



Mary Prados, a CPA with her own firm in El Portal, Fla., also finds that payroll gives her visibility into her clients.

"Although my practice is mostly tax, I also offer general accounting and business consulting services to my small-business clients," she explained. "My approach is to understand my clients' business and industry from the bottom to the top. Close to 90 percent of my small-business clients need payroll services and most do not understand the importance of payroll tax compliance and timely filings."

That said, she's quick to point out that automating payroll and using an outside provider also helps her move up the value chain. "Through us managing their payroll using ADP, not only do I gain a better understanding of their business and how it is changing, I also have the peace of mind that I am providing them a strong business foundation from which they can grow and be more successful," she said. "With this worry out of the way, I have more time to focus on providing them higher-level tax and business consulting services that can save them money and improve their cash flow, thus making both me and my clients happier."

McCabe has experienced a similar benefit from handing much of the routine work over to a provider -- in her case, SurePayroll. "It stops me from having to do payroll tax returns, which is huge because it frees me up to bill my time out for stuff that's more worthy of my brain, that we can bill out at a higher rate. I don't have to teach people how to do payroll. I don't have to watchdog over the process and worry about mistakes."

For CPA Christine Trumbull, payroll is a value-added service that she can offer clients who primarily look to her for accounting, tax and other business services -- one that helps bind clients closer to her Elkton, Md.-based firm. "It keeps the clients close to home," she said. "It is harder for them to leave if we are doing their payroll, tax, bookkeeping, etc."



While the benefits are certainly clear, payroll is not without its issues.

"Our biggest challenge is with our clients communicating accurate payroll information and whether they have the funds in the right account to cover the payroll," said Prados, though she noted that ADP has a feature to help her inform clients about what funds are needed.

For McCabe, the biggest problem is lateness. "Deadlines are a common problem -- people miss deadlines. And it can be created by clients, it can be caused by faulty information provided by an employee."

She also noted that there are emotional and educational components, as well: "A lot of times people don't understand payroll and taxation and their paychecks. People are always upset about their paycheck. There's always major stress if someone thinks that their paycheck is wrong. Usually it's not -- but the problem is usually communicating really well to an employee what their paycheck is, what it means, the difference between gross and net, why Social Security is bigger at the beginning of the year. It's just fraught with emotion, just like tax preparation is. Income tax preparation and payroll processing are similar in that they're emotional issues for workers. It's not just paper -- it's emotional."

Three other common payroll issues that McCabe identified are that most payroll processors don't address local issues, such as a city-level payroll tax; the clunky process for revising quarterly returns; and the classification of workers.

For her part, Trumbullfinds that working with a payroll processor takes some of the terror out of payroll. "Since we outsource" to Thomson Reuters' myPay Solutions, she said, "we really don't have any issues."



Payroll is currently a growing field for accountants -- McCabe, Prados and Trumbull all said that they expect their payroll practices to grow -- but viewing it from the right perspective for your firm is important, and it needs to be approached appropriately.

"I do expect my practice to continue to grow, and my goal is to put all my clients on payroll so that it can save us valuable time internally and help our clients be more successful," said Prados, who recommended that other accountants get into payroll using a platform like ADP. "When I pick up a client who came from a CPA not involved in their payroll, there tends to be more issues to resolve when bringing them on board. My clients are happier with the knowledge that we are addressing their core business functions and this allows us to work more strategically with them to save money and to improve operationally."

McCabe, meanwhile, thinks it's an important service, but offers some useful caveats. "We do not make money on it -- it is growing, absolutely, but we do not make money on it," she said. "I specifically hire educated human resource professionals, and I send my five people to school all the time to stay abreast of Department of Labor issues. ... I'm spending a lot of money on that group. It doesn't bill out at a high rate, because of the competition, but I'm basically doing it because I consider it a necessary part of giving someone good financial advice and issuing solid financial statements. I wish it weren't true, because I'm not making money on it - but it does free up my time to do other kinds of accounting."

And it's critical to take it seriously, she warned: "You should not get into bookkeeping or payroll if you don't have some education in it. It's too important. You shouldn't dabble in it -- just like you shouldn't dabble in skydiving."

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