Director payroll: Untap this hidden revenue stream
Payroll is an essential part of every business, yet its value is often overshadowed by its complexities. Payroll experts spend a significant amount of time managing compliance requirements, and keeping up with changing legislation. It’s vital that staff are paid correctly, so payroll professionals are constantly under pressure to ensure data has been collected on time, and accurately calculated each pay run.
Growing a payroll client base often means increasing costs, more staff or working unsustainable hours. Payroll as a service is, therefore, perceived as unprofitable. Time-poor and revenue-focused, accountants are often reluctant to manage payroll themselves. It’s common for accountants to ‘outsource the outsourcing’ of payroll to specialist bureaux in order to avoid complex tasks and compliance issues. If accountants do offer payroll services for clients, many only do so when it’s necessary alongside other services.
Seeking opportunities in director payroll
It’s clear that traditionally, due to its compliance-heavy and transactional nature, payroll is not traditionally a profitable arm of many accounting practices. But what about the simpler payroll clients, like salaried staff or director-only?
Despite the director payroll process being much easier to manage than regular payroll, director payroll isn’t perceived as any more profitable. The cost of software and the 10-15 minutes spent processing director payrolls each month means that accountants are often only able to cover the cost of payroll, rather than ever profit from it.
For some accounting firms, director only payrolls are offered as a way to capture a new client, or as part of an all-in-one service offering alongside other work. It’s rare to be promoted as a standalone service because it’s simply not in the firm's best interest to pay annual software fees and spend 10-15 minutes per month per director on non-profitable compliance work. Why then, would a practice promote a non-profitable, compliance-heavy offering?
In 2019, there were 2 million actively trading limited companies in the UK, 891,000 of which were operating as director-only businesses. Over 60% of these businesses outsource the payroll and accounting side to third parties, leaving the payroll and experts to manage their compliance.
More technology-focused firms, however, have seen director payroll function as an opportunity to make payroll a profit centre. These firms seek software which can automate all aspects of director payroll compliance, so they can get back to what they really enjoy: the advisory work. In the meantime, the director payrolls can run each month in the background, with no manual intervention, and all compliance aspects automated. This allows firms to charge their director clients a monthly fee, and take on more clients without compromising on quality, or needing to hire more staff.
To find out more about how firms can use technology to make payroll profitable, download our white paper.
Automating compliance to drive revenue
Director Pays is a cloud-based payroll system for accountants and payroll bureaux, powered by KeyPay. Designed specifically to remove the manual efforts involved with director payroll processing, Director Pays completely automates company director payrolls for the entire tax year. With a one-off set up, accounting firms can automate pay schedules, HMRC submissions including FPS and EPS, tax and National Insurance calculations, client reporting, and journal entries to accounting platforms. Configured warnings will pause an automation if something needs addressed prior to the pay run being finalised, ensuring accuracy and compliance.
With Director Pays, director payroll can be the easiest and most profitable part of any accounting or bookkeeping business. Firms can scale their director client base through automation, without increasing time or headcount. The hours of time saved each month on manual processes can be better spent on taking on more complex clients, driving value, and strategic work.
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