How to make payroll profitable [for CPA firms]
Ever wonder how to make payroll profitable?
Well if you're the proud owner of a CPA firm, that's probably crossed your mind more than once. And to be fair, payroll, to many CPA firms is a complementary product that just happens to come with accounting. Unfortunately, payroll is a cost center to many firms, instead of it being a profit center.
But the big question is: Are there CPA firms actually making money off of payroll processing? The answer is yes. But only for the smart CPA firms.
Making payroll profitable is exclusive to the smart CPA firm. Such smart firms are mostly green.
Yes, green. There is little to no in-house payroll software. And such firms also have minimal A-Z processes within their walls.
So, there's a reason why accountants go green at the mention of payroll:
In-house payroll is a huge time suck.
And worst of all?
In-house payroll is expensive. It costs human labor (payroll, benefits etc). In-house payroll software is also expensive. Custom payroll is even out of the questions.
And with all these costs turning a profit can be totally out of the question.
But if you plan on keeping and attracting clients, offering some form of a payroll service is something you'll have to tackle.
What if I told you that it is possible to make payroll profitable and that plenty of CPA firms happily do it?
Sounds too good to be true? You'd be surprised. Come with me. Lets look at this together.
The profit problem
Before we start talking about how to make payroll profitable, we first need to get down to the reason why it isn't for most firms.
We've touched on the fact that it can be really expensive to process, but why is that?
Well the biggest expense can be finding an employee with the skills necessary to run payroll. Trained professionals with a background in payroll are hard to come by and they cost a lot to keep.
Even if you decide to invest in an employee with less experience but a good work ethic, you can still end up spending more money than you are making.
You have to invest in proper training for that employee, not to mention a processing system that would cost hundreds or thousands of dollars a month.
Then there's the issue of employee turnover. Yeah, you might find a really great person now, but it's likely that sooner or later you'll have to replace them.
Even if you try to get around this issue by hiring a temp worker, you still have to go through the hassle of the hiring process. And remember, time is money.
Why you should consider outsourcing
One way to cut down these costs is to outsource some payroll functions.
Once you outsource payroll, your profit margins will go up because you won't be spending money on extra employees.
More importantly, it will also free up your time, allowing you to focus on tasks that really matter to your clients (like managing their business finances).
Outsourcing will also save both you and your client a ton of hassle. Payroll providers are skilled professionals. They are well versed in areas like processing and taxes--areas that not every employee has experience with.
Depending on providers means you'll worry less about making a critical error that can cost you and your client dearly.
But even if you outsource, you can still find yourself faced with a huge bill if you don't chose your provider carefully.
Why payroll can be Profitable
If your business is like most CPA firms, you might find yourself paying more for payroll than making money from it.
Most CPA firms end up going with big payroll corporations when they chose to outsource. The majority of these companies have incredibly high rates and regularly increase their rates as well.
How can you charge your clients an additional fee to make money off a payroll service if the provider's rates are already too high? There's simply no margin of profit with these larger providers.
And in a lot of cases, you aren't even getting the best service.
Don't get trapped by making the same mistake.
Most CPA firms don't understand how to make payroll profitable. However, if you partner with the right company payroll can be very profitable.
The key is to find a company that's up-to-date on technology, highly skilled at the task, and willing to bargain.
Why you should offer payroll services to your clients
Payroll doesn't have to be (and probably isn't) your firm's biggest cash cow. But there are a few key motivators for listing it among your services.
- It's a gateway to attracting clients
- Offering payroll services makes your firm competitive
- Helps you retain clients
What to shop for in a payroll provider
Now that you've decided to outsource, you want to find a provider that's reliable, affordable, and highly skilled.
When it comes to affordability, the rule of thumb is this: the smaller and more local you go, the more affordable the price.
For many businesses however, this poses a problem. Going with a smaller company generally means you have to go with a provider that's less well known, which raises plenty of security concerns for you and your clients.
But, there's a way to get around this issue.
The key thing is to look at company reviews. There are small payroll bureaus out there that have amazing reviews. On the other hand, there are also those that have terrible reviews.
Not only should you look at these reviews, but you should really take them to heart.
If you find a company that has horrible reviews, don't assume that your experience will be better. Odds are it won't.
What are the qualities of the ideal payroll provider?
You need a provider that's easily available to answer any questions you might have.
Think about it this way:
Bigger firms are swamped with hundreds--if not thousands--of clients. They deal with this higher volume by making you wait for support via phone trees. That's not a good use of your time.
Instead, choose a company that provides you with support fast. Ideally, you want a firm that gives you personal, quality service and makes you feel like a priority.
The mark of a good company is that you'll never waste time waiting to speak to a customer service representative.
More importantly, if you're looking at how to make payroll profitable, you need a organization that has a competitive rate. As a CPA firm, you're going to charge clients for the service, so your provider's rate should enable you to charge clients an additional fee without seeming unreasonable.
You can find plenty more benefits to teaming up with a payroll provider here.
One thing to note is that the best firms are willing to bargain with you on price. If a firm isn't willing to bargain it's a sign that your dealing with corporate bureaucracy, which means poorer service. And please do not fall for the promotional rates. You aren't that shortsighted. Or are you?
If you really want to know how to make a payroll profitable, your best bet is to choose AccuPay Systems.
With AccuPay, you'll never have to worry about overpriced service or spiking rates.
We understand, as one small business to another, that your firm needs to make money. For that reason, we are willing to work with you based on your budget. Just check out our pricing here.
To help you widen your profit margin, we also separate our processing fee from the other payroll amounts such as net pay and payroll taxes.
We're are dedicated to helping you get your work done no matter where you are in the world. Thanks to our cloud-based system, you have access to key payroll data without having to be in the office.
And with AccuPay, you'll never have to worry about waiting for tech support and customer service. Give us a call and you'll always get a live person.
Additionally, because our system is cloud based, you never have worry about being charged extra for hosting. What's more, backing up data and security concerns are a thing of the past. We take care of everything for you.
So if you're looking for a payroll company that's as dedicated to your clients as you are, choose AccuPay.