Payroll is a necessary evil when it comes to operating a business. The only people who like managing payroll less than accountants are their clients. Who wants to take on the pressure of messing with people’s paychecks in our current economy, especially when payroll has been known to be a high-risk, low-profit service due to the never-ending compliance tasks and deadlines?
Why would I recommend leaning into payroll instead of running the opposite way?
Why firms continue to offer payroll
Payroll can account for up to 70% of total business costs. With cash flow being the leading cause of business failure, you can probably understand why 67% of accounting firms still offer the service, but what you may not know is that firms are automating the manual tasks associated with payroll through their tech stack in order to lean into advisory.
Aside from payroll being the largest expense to most businesses, it’s a sticky service and something they often seek help with, so why would a client want to go to three different firms for different services when another firm is offering all of these services in-house? In fact, task preparation and payroll made the top two tasks that are outsourced the most by small businesses. Offering diverse services allows you to develop a deeper relationship and create a better customer experience for your clients. This often results in an increase in referrals from your most ideal and loyal clients.
Another reason you want to get your tax-only clients into a recurring engagement is the revenue increase on advisory services over other services. According to the latest Intuit rate survey, advisory services rates doubled the average bookkeeping rate in some regions.
If payroll advisory is something you’re not doing for your clients, offering this service can lead to an easy segue into advisory.
How to talk to your clients about payroll advisory services
Are your clients always in a scramble to get you last-minute information before the tax deadline? When they finally get you what you need, is the information easy to read and in compliance? Several of my accounting partners would argue that when their clients are left in charge of running their books year round, they are likely to mess it up. The value of visiting more than once a year goes beyond relationship building and increased revenue; it’s also about efficiency and accuracy; 41% of small businesses state their top complaint about their accountant is that they are “reactive.”
Think of a water park or movie theater; if you visit on the weekend during peak hours, there are likely no discounts and the rates are more expensive because the timeframe is considered “prime time.” Accountants should be doing the same when it comes to tax time. Normal cleanup rates should be reflected to show a rate increase because those are not the clients you see each month or the ones you offer other services.
When you can control your clients’ information and financial health, your business runs a lot smoother, allowing you to focus on serving these clients through support, training, and advisory. Why is it fair for the tax-only client to get equal or more support than your loyal, high paying clients?
Protip: Offer more phone and email support to clients who choose the regular engagement model vs. a client who does not to add more appeal.
Four tips to get started
Now that you see the value behind offering payroll to expand your advisory services, I want to share more protips on how to get started:
- Assess the opportunity. If you haven’t already, find out how many of your tax-only and recurring clients have payroll needs to see how many could be a good fit. Don’t forget to compile the list with contact information to have it readily accessible and/or use a CRM for maximum efficiency.
- Ask your clients if they want advisory. Now that you have a good-fit client list, start asking them to see if they have an interest in expanding their services with you. The worst they can say is “no,” but the best situation is that they are no longer tax-only clients and your busy season just became less chaotic.
- Offer free consultations. Get the conversations rolling by offering your ideal clients a free consultation to identify if they would be a good fit for advisory. It’s really important to have a solid list of discovery questions to find out what’s important to them and what challenges they may be facing.
- Suggest a referral incentive. Anyone in your firm who is client-facing could be a great referral source for low-hanging fruit. To motivate your team to actually have the conversation, create incentives such as a gift card, lunch, or team outing. Get innovative and have fun!
Examples of payroll advisory
I wouldn’t give you this great idea without having some tangible ways on how you can use payroll data to offer more insights and advisory for your clients! Here are several examples of what to do with the data:
- Payroll to revenue ratio.
- Turnover rate and competitive pay analysis.
- Breakdown of payroll by cost: average pay, overtime, total payroll cost, and other variables.
- Evaluation of retirement, health, and other benefits with regard to tax incentives.
- Investment strategies.
- Compliance and accuracy with tax and labor laws.
The more you define and expand your advisory services, the more revenue you can bring in on a recurring basis. You’ll gain efficiencies at tax time by reducing staff burnout and creating less urgency for clients to get all of their information in at the last minute.
What’s holding you back from getting started?