Chartered accountant, fintech consultant and Modulr Pathfinder Nick Levine is back to give you the Accountant's view on how to make payroll profitable.
Because it’s our mission to help accountants work smarter, not harder, be it through our payments technology and partners, such as Sage, IRIS and BrightPay, or through our content. We produce blogs, guides, and tutorials, as well as the Pathfinders newsletter and private LinkedIn group, to make the lives of accountants easier.
Until recently, many accountants who provided payroll services did so out of obligation to their clients, to offer them a full suite of outsourced accounting and finance processes.
Payroll is usually labour intensive and time-sensitive, with the added risk of accountants making errors from entering payroll figures into banking software incorrectly. This can damage client relationships, and mistakes take additional time to fix, with the cost of the associated clean-up work having to be borne by firms.
However, new tools such as the Modulr Payments Dashboard are making it easier for accountants to scale up their payroll services and make them a profitable service line in their own right.
This is made possible by replacing manual processes with automation and leveraging the greater flexibility the tools provide, which leads to a more light-touch payroll service. Furthermore, this creates follow-on opportunities to roll out higher value and profitable advisory services.
If you haven't thought about providing payroll services for a while, it's worthwhile taking another look at the latest developments.
Automation and connected workflows
The likes of the Modulr Payment Dashboard remove most of the manual work from payroll. By connecting directly to payroll providers (including BrightPay), and cloud accounting software (including Sage, IRIS and QuickBooks), payments and payroll data is pulled across automatically.
This saves significant time and creates the scope and capacity to scale payroll services, as the traditional payroll process is reduced from days to minutes.
Additionally, automation reduces the chance of human error as a result of the manual replication of data across different systems. These mistakes can be costly and a real drain on internal resource, as fixing things like incorrectly processed HMRC payments can exceed the time spent on running payroll the first time round, and cannot be recharged to the client.
Flexibility
Technology has made payroll more flexible which means that it’s no longer a time-sensitive exercise that must be completed just a few days before month-end.
Previously, payments had to be made at least three working days in advance due to most payroll transactions being made by Bacs.
Modern payroll tools make payments via the Faster Payments network, which clears payments in around 30 seconds. This makes it possible to complete payroll and transact on the exact day employee salaries are due, so more time is available to process jobs.
Resourcing is easier, with work being smoothed out during the month rather than accountants potentially having to incur the cost of temporary staff to help during busier periods.
Payments can be set up in advance, so it becomes simple to keep on top of upcoming HMRC payments, and they can be queued up at the same time employee salaries are paid out.
Additionally, ad hoc or off-cycle payments, such as advances, can be made on the go rather than being a heavy admin burden.
Reduce the risk of error
Leading payments and payroll tools reduce the costly risk of payments getting sent to the wrong payee or incorrect values being entered by accountants and, as the client is often the final approver of transactions, they’re ultimately responsible should anything go wrong.
Clients can authorise payments from anywhere with just a few clicks. This has become even more important as we move towards a hybrid working environment and provides a frictionless experience for clients.
Retainer model
Previously, payroll was priced by the time it took to complete assignments. Due to their manual-led nature, it could be hard to gauge how much to charge clients, with the risk of accountants undercharging for their services.
However, this new automated way of running payroll means accountants can accurately plan how long jobs will take and enables them to move towards a retainer model for charging for these services.
This boosts profitability and gives them more certainty over future revenues.
Advisory services
Efficiencies from payroll software and real-time data from Faster Payments present accountants with follow-on opportunities to introduce higher-value advisory services.
Saved time from running payroll and instant visibility of client cash due to transactions clearing instantly, enables richer insights. Accountants can better understand their clients' business performance and advise them on how they can grow their revenues and exceed their goals.
This can include the likes of scenario planning, access to finance and working capital management. Providing these services will lead to higher revenues and create stickier relationships with clients, minimising the chance of them leaving.
Increase profits and become more client-centric
Using payroll tools like the Modulr Payments Dashboard will increase profits as well as help overall efforts to automate and streamline accounting processes. This will lead to a more client-centric, holistic offering that will delight accountants and clients alike.