“You deserve a break today.” That’s pretty much what Concannon, Miller & Co. is telling its approximately 700 McDonald’s clients when pitching its new online payroll services.
The Allentown, Pa.-based accounting practice has been building up a “McDonald’s niche” over the last several years, providing individual outlets nationwide with write-up, tax, and financial reporting services. Last year, the firm joined forces with A D Computer, headquartered in Center Valley, Pa., to provide the latter’s WebPay payroll processing and related tax filing services to interested clients. So far, 20 restaurants have signed on, “But we see this growing—and it is growing,” says shareholder John Sharkey, CPA.
The reasons for this growth are several. For one, there’s WebPay’s versatility within the restaurant niche. It can easily handle tips, as well as different pay rates for the same employee functioning in more than one capacity. For another reason, there’s price. Sharkey says that processing a 50-employee McDonald’s payroll, which would include Concannon, Miller’s collecting and reviewing all the pertinent data, would run about $111. If the store reviews its own data, which lets Concannon expedite it over to A D, the fee can drop to as low as $62.
Then there’s the ease-of-use factor. Each restaurant’s point-of-sale system can post all the relevant time and pay-rate data to Concannon’s own system, where it can be scrutinized before being forwarded to A D. If there appears to be an error—e.g., a Social Security number doesn’t match up with a name—Concannon’s computer will generate a diagnostic report. “With the exception of taking a look at the diagnostics, we’re pretty much hands off,” says Sharkey. A D cuts the checks and handles the payroll taxes.
WebPay, however, clearly lets Sharkey and his colleagues function better as financial advisors. “Since it’s Web-based, we have access to all the payroll reports,” so the firm has a keener insight into overhead expenses. Also, WebPay can automatically post the collected payroll data to each client’s general ledger, making it that much easier for the practice to produce comprehensive financial statements.
Sharkey reports, “We’re able to generate a profit. It’s not a big profit, but this is something we needed to do to be competitive in our niche.” And Concannon, Miller has become more competitive. “We’re attracting more clients because we have this service,” says Sharkey.
Solidifying the Client Relationship
Nor is this just a niche strategy. It’s an approach that every accounting firm needs to consider, in Sharkey’s view. “By having the payroll service in-house, it’s additional glue for keeping that customer,” he says. “They’ll think twice before moving that account.”
This goes a long way toward explaining why more and more CPA practices are branching into online payroll services. It also explains why payroll heavyweights such as ADP and Paychex are embracing the Web, along with relative startups, such as PayCycle and SurePayroll, and more established firms like A D Computer and AccountantsWorld.
In fact, Rochester, N.Y.-based Paychex has joined forces with the AICPA to offer its Online Payroll service to accountants and their clients via the AICPA Business Solutions Partner Program. The average cost for handling a weekly payroll of 10 employees is $31.40.
With Paychex Online, the Internet is used to enter payroll, calculate what-if scenarios, change employees’ records, and calculate an employee’s net pay to write a manual check. Additional services include direct deposit, as well as payroll tax filings, deposits, and reports.
Optional capabilities—designed to strengthen client loyalty—include the General Ledger Reporting Service, which allows automatic posting of payroll data directly to many of the most popular accounting software packages. There’s also an Internet Report Service, which provides 24-hour access to up to four years of data in over 35 different reports. Both services are free for CPAs.
By participating in the AICPA program, payroll customers get one month of free processing service and a six-month, money-back satisfaction guarantee.
Randy Reichstein, a Houston-based CPA, has made a specialty of doing tax and write-up work for dental practices. He tried “a little bit” doing payroll on his own, but quickly determined that there had to be a better way. He hooked up with Paychex via the AICPA program. Now, “Paychex has been like my payroll department. They have freed me up to work with other dental offices.”
The bulk of his clients subscribe to Paychex Online Payroll. While the vendor itself actually processes the payroll, Reichstein routinely reviews the semi-monthly reports and ensures the tax data is accurate. Since “most of my clients use QuickBooks,” he’s able to take advantage of the GL Reporting Service to post the downloaded payroll data to their respective accounts.
He also regularly uses the Internet Report Service. If a business owner has a question about withholdings, for example, “I tell him to give me Internet access so that I can download the reports [that I need] and work at home. That way, I can go out and take more business” during regular work hours, notes Reichstein.
 “More business” is likely to include related human resource services. Reichstein is looking at helping his clients move their employee handbooks online and adding employee self-service capability for administering 401(k) and Section 125 benefit plans. After all, referring to Paychex, he says, “They’re able to bring a lot more to the table than print a paycheck.”
Meanwhile, for companies with up to 49 employees, Parsippany, N.J.-based ADP Emerging Business Services Division offers EasyPayNet, a Web-based payroll processing and tax-filing solution. Users can create and print customized personnel reports, access electronic versions of reports on the same day that ADP processes the payroll, print payroll checks and vouchers directly from a laser printer, and view and print pay stub information for a specific check or period of time.
Designated users, including accountants, can access payroll reports and data via the Internet regardless of the payroll input method that is used.
For a 10-person company processing payroll biweekly, cost is approximately $30. However, for accountants interested in using EasyPayNet to serve several clients, custom pricing is available.
Bob Fortino, CPA, a principal with S.D. Daniels & Co. in New York City, notes that the firm has been intricately involved with clients’ payroll processes for at least 15 years. “The reason is pretty straightforward” in Fortino’s opinion. “Many of our clients insisted that we handle it for them,” because of privacy concerns and in the belief that their financial advisor should review all their business transactions, he reports.
“Of course, we can do it ourselves, but we’re really not set up to do it profitably,” he says. But there never was any question that the firm would accommodate its clients’ wishes. Enter ADP and, more recently, its EasyPayNet service.
“It helps us offer a valuable service to clients who are focused on their own businesses and are of a size that they can’t afford to have a payroll person in-house,” says Fortino. What’s more, the online service is a “much more cost-effective” way to handle payroll since a profit margin can be built into the retainer fee. The overall result is that “it helps us retain clients and to offer better service.”
From Fortino’s perspective, “The convenience of time and place is important. There’s a lot of flexibility as to when I can review the data, whether at 10 at night or at six in the morning.” Also, “I can get online reports in a couple of hours” following a payroll run. He also give high marks to ADP for support. “They assign a client representative who walks you through step-by-step setting it up and [processing] your first payroll.”
EasyPayNet also has the requisite flexibility. Most of S.D. Daniels’ smaller business clients are “pretty consistent” in their biweekly or semi-monthly payroll runs. But then there’s a client that has several bonus runs each year, and also needs to have ADP calculate its employees’ 401(k) contributions. “The EasyPayNet system handles that pretty well,” notes Fortino.
Collecting and reviewing the payroll data, cutting checks, and making the required tax filings add up to a heavy commitment in time and resources. “That’s not something I would want to do on my own,” says Fortino. However, as a result of the ADP online alliance, “We’ve got some very good revenue from payroll service and are looking to grow it.”
Offering Clients Relief
As part of its Accountant’s Office Online suite of services, Hauppauge, N.Y.-based AccountantsWorld offers Payroll Relief AC. Pricing starts at $5.95 for a weekly payroll ($9.95 for a biweekly run) of up to five employees, plus $1 per additional employee. The accountant may charge what he or she wishes, and may private label the service.
The all-inclusive service fee encompasses payroll processing, printing of paychecks, direct deposit, signature-ready quarterly and yearly federal and state forms, and electronic payment of federal and state taxes.
With more than 500 business clients, “We’ve always done payroll tax returns,” says Alan Singletary, CPA, a shareholder with Haney & Co. in Downers Grove, Ill., outside Chicago. However, starting the first of this year, the company signed on with Payroll Relief AC. “This is our first foray into actually handling the paychecks,” he reports.
“This was an easy decision for us,” because Haney enlisted it at the urging of a major client, which owns a nationwide network of TV and radio stations. “This instantly turned into 19 payroll clients. We had a nice kick-start to get this going,” says Singletary.
Haney & Co. receives the payroll data from the various stations, reviews it to ensure the deductions and garnishments are correct, and then prints the checks as well as whatever reports are requested. “We package that all up and send it off to the client’s main office,” where the checks are dispersed to each station.
The CPA firm of Michael J. Knight & Co., based in Fairfield, Conn., used to encourage its business clients to outsource their payroll. However, “it seems that a lot of the payroll providers out there aren’t meeting the needs of small and medium-size businesses,” says area director Ryan Sheppard. So the firm last summer broke out a specialized unit, Insight Payroll Services, which is a Payroll Relief AC subscriber.
The unit has 15 payroll clients now, “but we’re in the process of adding another six or seven a quarter,” says Sheppard. “There’s definitely a need out there.”
With its Web-based direct deposit and electronic tax payments, Payroll Relief “takes a lot of the work out of our hands,” notes Sheppard. It’s designed to accommodate “very much a variety” of payroll frequencies: weekly, biweekly, and twice monthly. Also, its online deployment means “we can access payroll data when on-site with a client” for a speedier, more thorough review of their financial situation.
In short, by subscribing to an online payroll service, “we can better service our clients’ needs with a minimum amount of time.” He’s sure it will become a profit generator as well as a substantial revenue generator.
Specialty Newcomers
On the startup front, PayCycle and SurePayroll have been making waves with their online services. Strictly targeted to small businesses with fewer than 50 employees, PayCycle provides online, dual accountant/client access. Clients can create paychecks and then have the CPA make any necessary withholding adjustments in real time before the paychecks are printed. Direct deposit; electronic payments and filings; integration with leading accounting packages such as QuickBooks, Quicken, and Microsoft Money; and support are included in the flat $10-per-client monthly fee that the CPA is charged, regardless of the number of payroll runs or number of employees. Accountants may charge their clients whatever they choose for this service.
PayCycle, with headquarters in Palo Alto, Calif., allows the accountant to have real-time access to all client data from an Overview screen. The service supports various pay frequencies for salaried and hourly employees, including up to two hourly pay rates for the same employee. A variety of reports lets the accountant view payroll data from different angles. For example, Payroll Details provides wage, tax, and deduction totals for a selected period, whereas Total Pay Report breaks out earnings by pay type such as bonuses, commissions, and overtime.
By using PayCycle, Indianapolis-based Schuff & Associates is able to offer payroll processing services to businesses across the country, with support via phone, fax, Web conferencing, e-mail, and express delivery.
Founder Sheryl Schuff, a CPA, has about 20 clients on PayCycle. “It’s easy to use, and the pricing structure was extremely attractive,” she notes. She has also been impressed by her ability to download payroll data into a client’s QuickBooks package, “no matter what version they’re on.” Schuff typically charges $50 a month for a client with five or fewer employees; $60 a month for businesses with six to 10 employees. There are also set-up fees.
For a client that issues paychecks on Friday, she usually receives their data by the preceding Tuesday and initiates the run late Wednesday night. “It’s all pretty simple,” says Schuff. She anticipates that, as the payroll part of her practice grows, “it will be easy for me to staff, which will allow me to grow my practice even faster.”
For those that don’t want to get actively involved in processing but still want access to their clients’ payroll data, PayCycle offers a Client Retail Service. This allows the CPA to sign up clients, who will receive payroll services directly from PayCycle. The vendor will bill these firms, with fees starting at $19.99 a month.
Targeted to businesses with fewer than 100 employees, the SurePayroll.com service encompasses direct deposit, all tax filings, quarterly returns, toll-free support, and employee self-service functionality. A real-time preview feature allows the business owner to review the payroll data prior to approval. Standard pricing for the service is $29.95 per biweekly or semi-monthly payroll, plus $1.25 per employee transaction. Accountants can take advantage of a specialized Custom Payroll Service for CPAs, which allows them to provide a branded payroll service with their own pricing schedule.
Cincinnati-based W. Bernard Kyles & Co., a financial management consultantcy, used to recommend that its clients outsource their payroll services because it had determined that payroll processing was a “thankless job”—literally. “As long as it was correct, nobody ever said ‘thank you,’ recalls principal Kyles. “But let it be a problem and all heck broke loose.”
That situation has changed because of an alliance between Kyles and Skokie, Ill.-based SurePayroll. “They made the labor-intensive job of payroll easy and cost-effective to our firm as well as to our clients,” reports Kyles.
Payroll service may not be a big revenue generator in its own right, but it is profitable and, no less important according to Kyle, who adds “it always leads to more profitable and knowledge-based work.”