Insights, Accountancy

How to offer payroll services to your clients | the accountant playbook

Tom Kelly By Tom Kelly on 6 October 2020   •   7 mins read
<span id="hs_cos_wrapper_name" class="hs_cos_wrapper hs_cos_wrapper_meta_field hs_cos_wrapper_type_text" style="" data-hs-cos-general-type="meta_field" data-hs-cos-type="text" >How to offer payroll services to your clients | the accountant playbook</span>

Accountants can no longer afford to be complacent.

With the worst health crisis in a century, and the most severe recession in 300 years being predicted, firms must take action now to develop and innovate their service offerings to support clients as they navigate uncertainty where possible prosper.  

Waking up to the technology-enabled future of accounting

Utilising technology to enhance services will speed up the accuracy and delivery of financial data, giving clients a real-time data set to optimise their business decision making. An additional benefit of using technology in the delivery of client engagements is that it can make accounting firms more productive, generate ancillary revenues and lead to introducing services lines which may not have been previously considered. Forced adoption of technology from adverse economic circumstances could propel firms to unprecedented growth. 

One such example of a much needed service being disrupted by technology is payroll. This is increasingly being demanded by clients, a recent survey from Accounting Today revealed that over a third of small businesses are open to their accountant offering payroll, and actively expect it to be provided as a service line. 

Accountants stubbornly believe the traditional fallacy that payroll is too complex

This need and opportunity are yet to be acknowledged by many accountants due to long-held views that payroll is complex and risky. Historically, its delivery has been admin-heavy and time-consuming due to being a manual task which requires human intervention and review to reduce the instance of errors. Payroll mistakes are particularly contentious as they are expensive to fix both from a financial perspective (i.e. additional reconciliations and filings), as well as the damage they can do to client relationships. When you add into the mix frequent changes in legislation (student loans, pensions, childcare vouchers etc), and competitive pricing accountants often don’t think it is worthwhile when weighing up the low margin against the time and cost of completing assignments. 

In fact, offering payroll now gives serious competitive advantages

However, the introduction of new tools and technology, alongside  clients seeking services which free up their internal resources to focus on more value-adding activities (particularly relevant in the context of COVID-19) means that the old views associated with payroll being cumbersome are now redundant.  

This has created a compelling opportunity for accountants to offer payroll as a service, a light touch delivery, and potentially lucrative, solution which utilises technology to deliver an automated, compliant and secure service. 

Aside from the benefit of offering a genuinely useful service to a client who may want it, the main advantages of offering payroll to clients is making your firm’s proposition stickier. This means that you are able to offer a wider ranging set of services to become the convenient one stop shop firm that your client needs, or the specialist firm with an enhanced service. Both mean that you are able to improve the lifetime revenue of the client while also delivering greater value in service. Adding a payroll service will also increase the cost of your clients moving to another firm as it will further embed your practice within clients’ businesses.

Additionally, it will result in a higher frequency of client interactions due to associated tasks such as entering new employee data and payroll payment runs. This will help build trust and give firms greater insights (i.e. expansion plans) to spot cross-sell advisory opportunities including access to finance and cash flow planning.

Another compelling reason to offer payroll services is that it can give you a strategic advantage over other firms not providing this. Given the results from Accounting Today’s recent survey, it is likely that existing clients will start requesting payroll soon if they haven’t already. 

Accountants should be proactive as rolling out payroll to existing clients will allow firms to stay ahead of the competition and not risk falling behind other providers. In turn, payroll can be used as a mechanism to attract new clients, with the offering helping firms to stand out and differentiate themselves among businesses seeking a new accounting provider.

Offering new services creates new revenue streams. However, it is important to make sure they are profitable and you can add a margin for doing the work, as opposed to just recouping the value of internal costs related to completing these processes. 

Utilising technology solutions will reduce the likelihood of errors by automating the transfer of data and legislation updates, as well as improving compliance and security.

How to pitch payroll services to your clients - the playbook

The most effective way to pitch payroll services to your clients is to engage with them in a conversation to understand their objectives and strategy related to payroll. 

Determining which clients need payroll services is the first question accountants should ask themselves. Here are some key considerations:

  • Consider industries with complex payrolls, such as those with contractual or temporary workers or those that run weekly payroll with fluctuating payments
  • Consider clients that are looking to grow their business or, in the current climate, in the process of restructuring and potentially making redundancies. They will need additional support and resources for payroll operations during this period of upheaval, especially when it comes to interpreting legislation
  • Think about which of your clients require regular reporting on the costs of payroll

Asking them payroll related questions will help identify what their pain points are and create opportunities to articulate the benefits of outsourcing this.

Questions should include:

  • How much time are clients spending on payroll each month?
  • How are they keeping on top of changing legislation and compliance?
  • What is their approach and policy for managing errors?
  • Whether they have incurred any fines/penalties due to errors?
  • Are they finding it difficult to access payroll data and report on it?
  • How much are they spending on payroll services?

The most appropriate touchpoint to enter into conversations will differ depending on where clients are in their lifecycle with your firm. The service should be cross-sold during proposals and onboarding for new clients. Alternatively, you may consider marketing to existing clients through discovery calls during April, in line with the tax year, or at the end of their statutory accounting periods.

In the current climate, with many businesses being forced to make redundancies, clients may consider outsourcing payroll to their accountant in order to navigate associated legislation and make the correct furlough payments, as well as wanting to make sure redundancy pay-outs are given the appropriate tax treatment. 

From a sector specific angle some clients may be more appropriate to pitch to than others. For example, retail and hospitality tends to employ a large proportion of their workforce as contractual or temporary workers, with fluctuating payments based on shift work.

Alternatively, clients working in construction are likely to be required to register under the Construction Industry Schemes (CIS). While this requires a monthly submission to HMRC the trend is for many contractors to be paid weekly, as opposed to monthly. 

Delivering a premium payroll service

The delivery of a cutting edge payroll service will need to balance the need to be profitable, as well as being competitively priced in the market. Efficiency gains should be leveraged from technology solutions to overcome these two hurdles, as well as provide a stand-out customer experience for clients. Smart use of technology will create a pain free experience for clients with reduced friction due to foregoing the need to manually share most data associated with the payroll workflow.

Technology adoption for payroll should include adopting a stack purely based on cloud-based software, benefit from an automation first approach. Cloud accounting software should be the central hub from which all elements of payroll are managed. This will include employee expense management tools, integrated reporting and, through the use of Modulr’s Payments Dashboard, seamless payroll payments and automated reconciliations of associated transactions.

Firm time saved from using technology-led payroll solutions can instead be used to better serve the needs of clients by understanding their businesses or providing higher-value advisory services.

The stubborn views of payroll being a complex low margin service are being challenged. Taking the time to consider associated future revenues from technology-led payroll solutions can allow you to future proof your firm and build better client relationships. 

Want to learn more?

Join the Accountancy Pathfinders programme. It's a first of its kind network of forward thinking accountants who see the competitive value in keeping up to date with the very latest from the world of financial technology.