Keeping Ownership Of The Client Payroll Relationship Colorado

"Ugh, Payroll." That's the thought that goes through the minds of many small business owners every pay period, every quarter and then one more time at the end of the year. And for good reason: Payroll can be complex for even small businesses. It requires management of withheld federal, state and local payroll taxes; unemployment insurance; union dues; and voluntary and involuntary deductions like insurance, child support and garnishments. Then come the reporting obligations and payment of these funds to government entities and third parties, and even little mistakes can be costly. According to the IRS, 40 percent of small businesses pay average payroll penalties of $845 per year for late or incorrect filings. Non-penalized mistakes, such as incorrect pay amounts, missing checks and other issues can also cause temporary headaches for employees and, in turn, the business owner having to look into and reprint a check.

It's no wonder that many small business owners have outsourced their payroll responsibilities for years. And with technology making payroll processing, compliance and payment processes more easy to manage, it's also no wonder that professional accounting practices are increasingly adding payroll services back to their client offerings. While many are doing so on a limited basis for just a few clients, many professional firms are going all out, having realized that with the proper technology and workflow processes, payroll can be a key revenue center. Either way, systems on the market allow professional practices to manage as little or as much of the payroll processing tasks as they want, and still own the client relationship. In other words, even if your firm outsources some or most of your client payroll processes, all client billing and interaction can be handled through your practice.

Modern payroll preparation systems offer fully-automated processing functions that let users simply enter employee time and accrual data, add bonuses, tips, new deductions or other information, with the program performing all calculation tasks when it's time to pay employees. The continued adoption of direct deposit has been a big relief, saving businesses as much as $0.50 to $0.60 per employee by removing paper and check delivery from the process, while also eliminating the need to reprint lost checks and diminishing the time that employees spend at the bank. Newer additions to this feature also allow direct deposit for unbanked employees, with their paycheck funds electronically deposited onto debit cards, which frees them from usurious check cashing fees and decreases the risks they face walking around with too much cash.

The continued movement toward online capabilities has extended to the payroll arena, with programs offered both as online or traditional applications. The most advanced payroll systems even provide secure online portals for employee self-service, allowing them to view prior pay stubs and W-2s, as well as to make requests for time off or notify payroll and HR personnel of changes to their personal information like dependents, address and filing status.

Other features being rapidly embraced are electronic filing and payment of state and federal tax returns, liabilities and workers' compensation funds from within the payroll system. Many programs include due-date management functions that notify the user of pending tasks and provide prompts to process forms and make payments. More advanced systems have started adding the ability to also make electronic payments to non-government entities, such as child support withholding, insurance premiums and garnishments. Because of the close relationship between payroll and human resources benefits that are based upon payroll or time worked (like deferred savings accounts, hospital plans and vacation and sick leave accruals), payroll systems also provide varying levels of support for these tasks but with automated workflow processing capabilities that greatly ease these functions.

There is a broad array of payroll processing options available for professional firms to offer their clients. Options include totally hands-off systems where the business client provides the accountant with basic employee timesheet data. Other options provide systems where the business client performs most of the processing work, including check printing, but with the professional having access to the payroll program to provide review services and to be able to import transactions for write-up and reconciliation tasks. Still other options allow the business client to outsource virtually all tasks to the accounting firm, while the accounting firm also outsources the functions to an accountant-friendly payroll service provider. The result is client payroll services branded as a service of the accounting firm, with all client contact and billing handled by the practice.

In prior years, we have reviewed professional payroll programs in two review sections, based partly upon on how the software was used as well as on the role that payroll services played in the professional firm. For firms with a strong focus on payroll as a key service offering to most of their clients, we reviewed systems that enabled these firms to work as a payroll service bureau. For professionals to whom payroll is a peripheral function provided to only a few clients, a separate review section explored programs more suited to payroll services on a more limited scale.

This year, we have combined these groups into a singular payroll review resource, with each product rated on several areas of program functionality: Ease of Use/Data Entry, Features, Reporting Capabilities, Integration/Import & Export, and Relative Value. The Relative Value section of each review specifically identifies the type of professional practice most likely to benefit the most from implementation of a specific program.

Mr. O'Bannon is the technology editor for The CPA Technology Advisor. He can be reached at isaac.obannon@cygnuspub.com.