The big debate: Are you charging too little for payroll?
Offering an outsourced payroll service to your clients is a common additional offering for many accounting firms. But this payroll service can often be thought of as a bolt-on; something that you offer to existing clients without really assessing the true value that can be added.
Because of this, the pricing of payroll services can often be too low. And this means you’re not really making the margins that are possible for the firm’s payroll work.
So, could it be time to review your payroll services and systems, think through the client benefits and come up with a more realistic price point?
Payroll as a functional service
Any company with employees needs to run a weekly or monthly payroll. And, for most business owners and finance teams, this is a task that they definitely don’t relish.
For small businesses, outsourcing the key payroll tasks to their accountant makes perfect business sense and allows the owner or finance team to focus on higher priority operational and financial tasks. For accountants, it’s a no-brainer to offer this outsourced payroll service and to add some tangible benefit to the client relationship. But is your firm getting the best possible value and client outcomes from offering payroll as a functional service in this way?
Making payroll a profitable and effective offering can be challenging:
It’s a time-intensive recurring task – Prepping and running the payroll becomes a recurring part of the work cycle. Without the right systems support, completing all the relevant tasks can begin to eat into your team’s available business time, reducing your ability to work on other higher value (and better paid) projects and engagements.
Significant data entry and administration – Getting the payroll ready means checking timesheets, making payments and calculating the PAYE and NI deductions – not to mention dealing with pensions deductions. And over the pandemic, there’s also been the additional workload of working out furlough payments for clients. There’s a lot of manual work involved in each payroll run.
Payroll is perceived as a ‘low value’ service – When both the client and the firm see little value in the payroll service, it’s hard to justify a high price point. But when you step back to look at the work that’s involved (and the benefit you’re adding for the client) this low-value perception is unwarranted. In fact, it could be holding back your ability to make payroll a truly profitable enterprise.
Pricing that doesn’t tally with other value-add services – Even though your team is being heavily utilised to deliver an effective payroll, the low price point can quickly lead to compromised margins and a service that’s far from profitable. With an average price of £4-£6 per employee for your payroll service, traditional payroll is not doing a great job of increasing your revenues.
The impact of software, automation and cloud
Technology has changed how accounting operates in 2021. Cloud accounting platforms, integrated business applications and digital practice ‘app stacks’ have revolutionised the efficiency of the average practice – and the same is true of the efficiency of your payroll service.
In the digital age, there’s no need for payroll to be such a labour-intensive and time-consuming task. And this evolution in the capabilities and productivity of payroll solutions is integral in changing the potential value that your firm’s payroll service can offer.
With a payroll platform like BrightPay:
Using payroll software is easier – the complicated interfaces and limitations of traditional payroll applications are gone. With BrightPay, you have a clean, easy-to-use interface and clear processes for every element of the payroll run.
Automation is cutting down the workload – software automation is streamlining many of the manual payroll processes. Automation can add to your payroll efficiency by automatically integrating your payroll journals with your accounting software, batch-processing multiple payrolls and automating the syncing of your payroll files with your client’s inputted data.
Cloud portals are making communication easier – A cloud portal, like BrightPay Connect, removes much of the hassle of sharing payroll data and processing client requests. Clients can enter their own timesheet and payroll data in the cloud, and employees can book holidays, download payslips and change their personal information – all via the BrightPay employee self-service app.
Detailed payroll reporting is possible – the reporting functionality in BrightPay is highly flexible. This allows you and your clients to set the required fields and really drill down into the reporting. This can be useful for identifying issues in the payroll run, looking at trends in hours worked or giving clients a better understanding of the impact of employer’s contributions for NI and/or pension contributions.
Deeper value that drives higher fees
When payroll is driven by BrightPay, the transactional nature of payroll can be streamlined, automated and standardised and higher value benefits can be delivered to all your clients
Cutting out the hard work and freeing up your team’s time changes the payroll dynamic. This is no longer just a functional offering, but a high-value outsourced service that makes a tangible difference for your clients.
By adopting a new approach to payroll:
Clients spend less time ping-ponging payroll emails back and forth
Higher quality data can be achieved, with less human error
The client’s employees have their own online access to payslips
Clients understand the financial impact of their payroll, because of your reporting
When you can deliver such a different kind of payroll experience, there’s a justified reason for increasing your price point and bringing payroll fees in-line with your other add-on services.
With the best payroll platform at the heart of your services, you’re ready to deliver a new kind of high-value payroll – a service that adds to your firm’s reputation and your profit margins.