Online Payroll Services Have Changed How CPAs Work

By Julie Lubetkin

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JULY 2008 - Many accountants are catching on to the value of payroll services, and they are increasingly using online payroll service providers to improve client service, enhance loyalty, and generate additional revenue year-round. Vendors are recognizing this online trend as well: As of late 2007, several payroll vendors were offering their own online payroll services.

More than 3 million small businesses (20 employees or less) in the United States—almost 60% of small businesses —still use a manual payroll method. Small businesses have the same tax burden as large employers, but they don’t have nearly the same resources to comply with regulations, make tax payments, and meet payroll deadlines.

Many small business owners would like to turn to their accountant for back-office services while they focus on growing their businesses. Yet, accountants have traditionally shunned payroll work. This is changing, however, and research conducted by PayCycle has revealed that more than 37% of the accountants using the PayCycle online service have never run client payroll before.

Online payroll services can be easy, especially when the accountant can assign varying levels of control, allowing a small business owner to manage some of the weekly entry work, such as employee hours.

Manual payroll methods are riddled with risk. The opportunity for errors plus late filing fees or other penalties can plague even the most astute small business owner. According to the IRS, one out of three businesses is penalized each year, for an average of approximately $1,500. Online payroll services can offer e-mail reminders that keep the small business owner and the accountant on top of weekly payroll tasks and ensure that tax filing and payment deadlines aren’t forgotten.

Ease and Convenience

Historically, payroll services required accountants to be at their desk. Online payroll services, however, can be managed anywhere Internet access is available.

Many accountants worry that a lack of payroll experience, coupled with a lack of marketing skills, will hamper potential payroll service revenue or business growth. To help, many online payroll service providers include customizable marketing tools. These include free “how to market your payroll services” webinars, marketing tips, best practices, and other resources to help accountants grow a profitable payroll practice.

Some online payroll providers enable accountants to have their own firm-branded website that allows client access. One advantage of online payroll is the ability to share the payroll tasks with clients. With a branded site, if the firm chooses to give clients direct access to its payroll accounts, clients will see the firm’s name on the product. In addition, some payroll companies offer online product demonstrations that accountants can place on their websites to show their clients how the service would help manage payroll tasks. A good vendor will also help clients promote their payroll services by providing customizable sales letters and brochures. These tools save accounting firms time and money on design and creative work.

Julie Lubetkin is director of the accounting professional program at PayCycle (





















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