As many CPAs and accounting firms discovered the hard way during the Great Recession, those that were the "stickiest" retained the most clients – they offered so much value, their clients were stuck to them and didn't switch to a lower cost option.
To increase stickiness, accounting firms need to offer more than just tax return preparation and tax planning services. While those take a lot of skill and experience, there are many CPAs in the marketplace. This turns those services into commodities, making it easy for clients to switch to lower-cost accounting options when money gets tight.
Accounting firms are increasingly turning to offering payroll as a sticky service, and offering direct deposit ACH processing is key to getting payroll done right.
Payroll as a Sticky Service
All organizations must pay their employees. You could outsource this function to a payroll provider, but it will be significantly more profitable if you build a payroll capability internally.
In the Journal of Accountancy article Payroll: A Tie That Binds by Phelan and Hayes, the authors point out the following benefits for accountants offering payroll services:
- Every Business Has to Pay Its Staff: many CPAs are addressing those twin needs by offering to help their small-business clients, not just with taxes but also with the many chores that go into payroll processing, from after-the-fact tax filings to benefits administration
- Improved Technology: has made offering payroll services easier over the past 15 years, so it's a good fit with services such as pension work that must be in a prescribed electronic format
- Ease of Handling the Entire Payroll Process: prepare checks, arrange for the deposits and make sure clients payroll taxes are paid on a timely basis and their quarterly and annual returns are correctly prepared and filed
- Someone Clients Can Trust: using a CPA firm offers clients confidentiality plus the advantage of personalized service – clients like to deal with only one provider and know the individual who answers the phone
- Abundance of Payroll Support: CPAs new to payroll will find there is an abundance of software and outsourcing providers to choose from
- High ROI: Payroll services represent an adjunct to other recurring CPA work that can give a firm a high return on investment relative to the amount of time it takes
Capitalize or Risk the Consequences
According to Accounting Today in their article Case Studies: Payroll in 2018 by Ranica Arrowsmith, "Offering payroll as part of a firm's services is often the perfect value-add that small-business clients are looking for. A necessary part of running a business, the complexities of paying employees are not what small business owners can or want to spend their time navigating. So, ease of use and good customer support are the pillars that hold up a successful payroll product."
Percentage of Accounting Firms Offering or Adding Payroll Services
- Small Firms: 56% offer and 10% are planning to
- Medium Firms: 65% offer and 13% are planning to
- Large Firms: 69% offer and 6% are planning to
Even Sticker: The Role of Direct Deposit
According to a recent employer survey and white paper by Javelin Strategy & Research on behalf of NACHA, 82% of U.S. workers – crossing all age, income and other demographic categories – are paid by direct deposit via ACH payroll processing, up from 74% five years earlier. Awareness is also strong, with 79% of employees who do not use direct deposit via ACH reporting familiarity with the service.
Why Employees Use ACH direct deposit:
- 64%: their employer encourages or requires direct deposit
- 53%: faster access to pay
- 47%: no cost to employees
- 38%: eliminates risk of losing paper checks
- 37%: safer than other payment methods
- 37%: paper checks are inconvenient to deposit
Choosing a Direct Deposit Partner
Accountants have two options for providing direct deposit as part of their payroll offering: use your bank or use an ACH direct deposit specialist.
The choice of an ACH processing partner in an era of rapidly moving money and still-expanding processing capabilities is not an easy one. But we can help. Our whitepaper, Third-Party ACH Payroll Processors vs. Banks, outlines the key considerations underlying the choice of an ACH processor. It includes a framework that will help you choose an ACH processing partner you can rely on now, and continue to rely on as your business grows.