Payroll Biz Booms: Resurgence of Payroll Requires New Tools

A popular movie trilogy many years ago was the Back to the Future series, whose basic premise was how changing the past (via time travel) impacts the present and future. If today's CPA firms were able to go back in time, say about 25 years, they would no doubt observe that a sizable portion of total service revenue derived from providing payroll processing services to their clients.

But how quickly things change! If we now travel back in time just five years, accounting trend strategists predicted the eventual demise (via diminishing revenue growth) of accounting firms who focused exclusively on providing traditional accounting services (tax, audit, write-up, payroll). These firms, the experts claimed, would ultimately give way to those focusing on specific product niches like financial and strategic planning and technology consulting.

As we return to the present day, these predictions could not be farther from the truth. Many firms are now reluctant to even provide management consulting services to their audit clients for fear of legislative backlash and negative public perception. To the surprise of many, accounting-related services (like payroll), as well as tax and audit revenues, are increasing in record fashion. Like a blast from the past, providing payroll-processing services is once again in vogue!

The payroll outsourcing market is exploding. More and more companies are looking to remove the administrative (and financial) burden of payroll compliance by hiring accounting firms and service bureaus to take over payroll processing. Companies of all sizes see significant benefits in having their CPA firms take over the setup, printing, and compliance aspects of payroll. Many of these same businesses currently outsource payroll to large, national service providers, but would prefer the personal service and comfort level of their accounting firms. More than ever before, businesses are looking to their accounting firm to provide accounting (not consulting) advisory services, and their accountant to function as a part-time CFO.

Accounting firms can position themselves as never before to take full advantage of this opportunity. By adopting an entrepreneurial attitude toward payroll, investing in the right technology, and implementing an effective marketing program, accounting firms can exploit this immense payroll opportunity and greatly increase profits and their bottom line.

There are several reasons why payroll processing can be a profitable venture. Federal and state employment laws continue to become more complicated, and are overwhelming for many businesses. Accounting firms can help small to medium-size businesses better manage payroll tax complexities. It is also now more affordable than ever for firms to invest in the technology necessary to provide payroll-processing services. Payroll services are a moneymaker, providing high billing rates and utilization with minimal write downs. Payroll also opens the door for providing your clients with other firm services.

Whether starting new or expanding your existing department, choosing the right software product is a key decision in your implementation strategy. When evaluating payroll software, begin by deciding what environment you are most comfortable with: office or Web-based. Many solutions exist in both areas; some vendors offer both alternatives with one solution. Office-based solutions offer the ultimate in security and complexity, and typically feature more robust reporting and customization options. The benefits of Web-based solutions include simplified deployment, seamless updates, and low startup and administrative costs. This article discusses office-based solutions, installed and administered from the accounting firm location.

Next, focus on features. Key features include the ability to print laser checks, allow MICR encoding, direct deposit and electronic funds transfer. Multiple pay, deduction, tax and benefit types are necessary to accommodate complex earnings and net pay situations. Labor distribution, departmental reporting, and integration with write-up software are also key factors influencing your decision.

Integrating with your write-up software will also influence your choice--the ability to transfer payroll information seamlessly to the general ledger provides significant efficiencies and eliminates data entry redundancy.

Reporting and customization capabilities are often the most decisive factors in deciding the most appropriate payroll product for your firm. Most packages provide standard payroll reporting; some offer more extensive management analysis. A few provide custom report writers to create company-specific information. The ability to change fields, screen layouts, and reports is typically found only in the more robust solutions. Special features available in a few of the products include the capture of employee photos, import of payroll data from time clocks, data export to other accounting and financial applications, and notification alerts to specific employee situations.

Providing payroll services is an excellent source of revenue and paves the way for future firm growth. Invest in the right hardware, software, and personnel, and participate in this great opportunity.

Abra Payroll
Price: $1,595 (license), $685 (support), up to 75 employees; $3,155 (license), $895 (support), up to 150 employees.

Abra Payroll is available as either a standalone application or as part of the frilly integrated human resource product. Screens are well organized and easy to navigate.

Abra Payroll has an excellent reputation. The sophistication and flexibility of this product puts it in a class of its own. Its efficient setup and time entry screens, and ability to create custom fields and reports make this product a solid choice for companies that take payroll processing seriously.

Complete Payroll
Price: $41 per month (5 employees); $115 per month (10 employees).

Complete Payroll bridges current and future technology, and represents the next generation of payroll processing. This product provides both PC and partial-Web-based access in addition to complete outsourced payroll services, including payroll input, filing, and reporting. This creative combination allows organizations to enter payroll up to a certain comfort level; then the provider takes over and completes the process.

Typical of an Intuit solution, Complete Payroll provides maximum flexibility and connection capability with time and attendance, Point of Sale, accounting, and spreadsheet systems. Both first time and experienced payroll users will benefit from this powerful and very capable product.

Industrial Strength Payroll
Price: $495

From its inception in 1989, this product has always provided a top-notch payroll solution for even the most demanding of situations. For example, this latest version (3) handles a variety of special situations, including dependent care benefits, subchapter S medical payments, advance EIC payments, 403(b), and SIMPLE and SARSEP plans.

Industrial Strength Payroll is best suited for larger firms specializing in multi-client payroll processing. Capable of handling complex earnings and deduction situations, it provides tremendous payroll processing power and flexibility.

Payroll Solution
Price: $1,000 (renewable); $1,500 (perpetual).
Payroll Compliance Solution, $250.

Payroll Solution offers a feature set capable of meeting the needs of complex clients, but easy enough to use for profitably processing payroll for those with simpler needs. It optionally offers remote payroll entry and Web-based entry and data retrieval. The product interfaces with other Creative Solutions software as well as several other vendors.

Payroll Solution combines powerful payroll functions with efficient navigation and robust reporting. The result is an excellent solution capable of providing the power for CPA firms specializing in providing payroll services to clients.

PenSoft Payroll
Price: Accounting Edition, $1,999 (1 to 50 employees); $1,999 (51 to 100 employees). Renewal, $799.

PenSoft Payroll supports an unlimited number of companies. Company-specific settings include allowing negative net pay, zero net pay, and automatic updates of overtime pay rates. You can create employee groups for entering payroll and printing checks.

PenSoft Payroll is a no-nonsense, by-the-book product, performing standard payroll tasks. Setup options are many, customization options few, but this product will effectively address most payroll scenarios without issue.

Copyright 2003 Gale Group, Inc. ASAP Copyright 2003 Thomson Financial Inc. Accounting Technology January 1, 2003, BYLINE: Knaster, Barry