Managing your clients’ payroll may seem like a good way for CPAs to earn their trust and retain their business. but may ultimately pose further issues in the future. As a client grows, so too does the complexity, scope, and scale of the services they require. Lift HCM is a human capital management firm that partners with accountants to take the work of processing clients’ payroll off their plates.
Let’s identify some of the challenges associated with managing clients’ payroll in-house and leave you with a better understanding of when it’s worth setting boundaries on the scope of your service.
Challenge 1: Managing Payroll Poses Obstacles to CPAs Amidst Growing Client Needs
Initially, managing clients' payroll in-house might appear manageable when the clients are in their early days, much like a startup operating from a garage. This setup could even be seen as offering added value or a favor to these early-stage businesses. However, as these startups grow and evolve, what was once a manageable task can quickly become a significant burden.
This growth trajectory mirrors the early days of entrepreneurs like Jeff Bezos, where modest beginnings can lead to expansive enterprises. Consequently, accounting firms find themselves in a position where they must expand their teams, adding bookkeepers and support staff, to sustain the high quality of service their clients have come to expect. This expansion is not just about maintaining standards but also about adapting to the increasing complexity and scale of the clients' financial needs.
As businesses outgrow their initial phases, their financial operations become more intricate, necessitating a broader range of services and a higher level of attention and expertise. This shift challenges accounting firms to reassess their capacity and the scalability of their in-house payroll management.
Challenge 2: Allocating Resources to Managing Payroll Can Dilute the Focus of Your Firm
Entering the accounting profession, you likely envisioned a career focused on financial strategy, audit, tax planning, and advisory services—areas where your expertise can significantly impact your clients' success. However, dedicating time and financial resources to in-house payroll processing can inadvertently shift your focus away from these core services. The process of managing payroll internally not only diverts valuable resources but also stretches the firm's budget and operational bandwidth thin. This allocation often occurs at the expense of engaging in more valuable activities that leverage the specialized knowledge and skills of CPAs.
The administrative burden of payroll can obscure the primary objectives of both the accountant and the accounting firm, redirecting attention to tasks that, while necessary, do not align with the firm's strategic goals or the accountant's passion for higher-level financial management. By focusing on payroll, a task that does not generate significant value for the firm in comparison to its core competencies, accountants may find their ability to offer high-impact financial insights and services to their clients diminished. This shift not only affects the firm's growth potential but also impacts client satisfaction and retention, as clients seek comprehensive, strategic financial guidance from their accounting partners.
Challenge 3: A Lack of HCM Expertise Can Keep Clients From Reaching Their Fullest Potential
CPAs step outside their primary area of expertise when they agree to take on their clients payroll. But payroll processing—and, more broadly, human capital management (HCM)—often involves just as much specialized knowledge. HCM service providers go beyond the routine payroll runs, working closely with clients to optimize their workforce. This can might involve anything from helping them create an employee handbook for a local dental practice to integrating the POS for a local restaurant so it sends data to QuickBooks.
While accountants may be able to get by managing payroll runs in the early days, so many instrumental pieces to a business’ success falls under the umbrella of payroll and well outside the comfort zone of a CPA.
This doesn’t mean your clients can’t go somewhere else to take care of the things that would be inappropriate to ask of a CPA. Unfortunately, it does often force them to go it alone. Navigating the complexities of PTO policies, termination letters, and the like can hamper their growth. Partnering with a well-established payroll provider can help you ensure that they don’t end up sinking their time and resources into tasks that most payroll managers have down to an art form.
Challenge 4: You Leave Clients On the Hook if Something Goes Wrong
Handling your clients' payroll internally does not grant you legal authority to represent them in dealings with government bodies during audits or inspections. While your dedication and professionalism lead you to believe such situations are unlikely, the reality is that mistakes can occur. In such events, your clients are left vulnerable, bearing the responsibility for any discrepancies. This situation underscores the importance of having a dedicated specialist who not only manages payroll competently but also navigates the complexities of legal and regulatory compliance, ensuring your clients are well-represented and protected against potential legal and financial repercussions.
It’s Time to Find a Payroll Partner
It’s stressful to balance a desire to keep your clients happy with the weight of their expectations. Shouldering the weight of that burden as their needs evolve can create operational complications, risk damaging client relationships, and leave you at a higher risk of internal malfeasance. Only keep in-house what you’re prepared to do at scale.
At Lift HCM, we believe the standard of excellence for quality service and support is higher for a partner than what you’d expect of a client or customer. It’s central to our philosophy of investing ourselves in our partners' success. If you’re ready to consider outsourcing your payroll, it’ll help to know more about how CPAs find the perfect payroll partner.
Topics:
