FAQ

     

  • Why offer payroll services? Is it worth my time? How much income can I generate?

    These are some very valid questions any professional considering payroll services may ask. Therefore, before any decision is reached, some very important data must be taken into consideration.

    A: The income potential is tremendous. Just take a look at some figures.
    With PRO-PAY software from Paysoft, Inc., an average payroll of 12 employees can be fully processed printed and packaged in approximately 5-10 minutes (after the initial learning curve). A competitive price for 12 employees paid bi-weekly is $43.20 per payroll, or approximately $86.40 per month. Due to the highly automated features of the software, one data entry person can easily process payrolls for 150 clients per month, with an average of 12 employees. When the PRO-PAY REMOTE~PAY module is incorporated, the number of clients processed per month increases dramatically. This can translate to a very respectable annual Net Profit as shown below.
    Here is a reasonable projection chart of the average billable income and net profits from payroll services:(1)

    Payroll Clients Employees Billing Month Billing Year Annual Expenses Cost of Data Entry Person (2) Gross/Net Profit (3
    25 12 $2,160 $25,920 $2,500 $5,000 $18,420
    50 12 $4,320 $51,840 $5,000 $7,500 $36,840
    100 12 $8,640 $103,680 $10,000 $20,000 $73,680
    200 12 $17,280 $207,360 $25,000 $40,000 $142,360
    300 12 $34,560 $414,720 $30,000 $60,000 $324,720

    (1) These figures are based on our personal experience from running a payroll service and we believe that they they are close approximations. However, there may be variations depending on how each person runs their business, and we of course do not guarantee any results regarding profits.

    (2) The relative cost of the data entry person is usually higher with a smaller number of clients. If this is the only job for that person, usually a minimum salary is required.

    (3) Net profit from payroll services also depends on how much additional overhead is required. If payroll services are added to an existing accounting practice, there is usually no additional overhead. If a payroll service runs independent with its own overhead for rent, utilities etc, then overhead must be deducted to arrive at net profit.

     

     

  • Why is it, that most accounting professionals do not offer payroll services?

    A: Lack of efficient software

    Most payroll software packages in the market place are general in nature. They are designed for a company to run their payroll internally. Without a software package specifically written for a payroll service, a lot of time has to be spent wandering through cumbersome menus to accomplish simple tasks. In addition, many essential parts of the payroll process have to be done manually. That may not make a big difference to a company that processes payroll internally for their own employees once or twice a month. However, for a professional who processes several payrolls each day it makes a huge difference in costs. It can mean whether or not that professional can compete in the payroll market.

     

  • Isn’t payroll too complicated?

    This notion certainly has a great deal of validity in it. If it’s not done properly, it can lead to a great deal of frustration for the professional and when many tasks have to be performed manually it can be laborious. Having to do 50-100 quarterly returns manually is no fun. Missing a tax deposit due date can be very costly, if your client blames you for it. Figuring out the correct amount to be garnished from the employees paycheck can be a challenge. Figuring out how much to bill each client based on the number of paid employees can take hours, or days, without the proper tools.

    A: Payroll can be done by a data entry clerk

    Due to the highly sophisticated nature of this software, all critical tasks are handled automatically by the program. tax due dates, payroll tax deposit checks, EFTPS payments, and direct deposits are all done automatically with the push of a button. It leaves very little to the discretion of the data entry person. Month-end billing statements can be computed and printed in a matter of minutes. quarterly 941’s, wage reports, etc., can be batch-printed in a matter of an hour for 100 payroll clients. Electronic filing and magnetic media filing can simplify many payroll tasks.

  • How can you compete with the big Payroll Companies?

    Up to now, that has been a problem due to lack of efficient software. The reason that the big payroll companies became so big is because a huge portion of their business was and still is being referred to them by accounting professionals who are not equipped to provide payroll services.

    A: Now YOU CAN COMPETE with the big payroll companies if you want, but you don’t really have to. If you just keep the clients that you would normally refer out, you can make a good profit.

    Most clients would rather have their bookkeeping and payroll handled by the same company. Clients would rather not have to deal with two different companies. If you ever had to refer a client to a payroll service, you are competing against yourself. Of course, if you like the challenge of going out and getting additional payroll clients, it can definitely work to your advantage.

     

  • What is tax impounding and how do I benefit?

    A: Tax impounding is used by the payroll service bureau to impound the payroll taxes from the employer’s account each pay date. Then, PRO-PAY will pay the taxes electronically to the appropriate government agency using the ACH Credit method. This relieves the employer from the responsibility of having to make the tax payment and the reduces or eliminates the risk of tax penalties. This feature is available for making both federal & state tax payments.

  • What is MICR?

    A: Magnetic Ink Character Recognition.
    When you use MICR toner with your laser printer, you are able to MICR encode the bank account number on the checks as they are printed. PRO-PAY will imprint the company name and bank information on each check. When you use MICR toner, the bank can process your checks using high speed equipment that can read the account number on each check.

  • Where do I buy the MICR toner and blank checks?

    A: You may buy the MICR toner and blank checks from Paysoft, Inc. Just call for a current price list.
  • How do I benefit from MICR toner?

    A: You can benefit in many ways.

    Use the same blank check stock for different checking accounts. You order one box of checks and you can use it for different businesses. If you process payroll for more than one company, it means substantial money savings.

    If you close your account with one bank, you don’t need to buy new checks with the new bank. Use the same check stock. This means additional money savings.

    If you process payrolls for multiple companies it is easy to forget to change the checks on the printer, thus you may easily end up printing payroll checks of one company on to another company’s checks. However, with MICR encoding and blank check stock you never have to worry about changing check stock.

  • What is EFTPS and how do I benefit?

    A: EFTPS stands for ELECTRONIC FEDERAL TAX PAYMENT SYSTEM.

    PRO-PAY takes tax payments a step further by generating electronically EFTPS tax payments using the ACH DEBIT method. This method eliminates paper checks, or going to the bank and will undoubtedly make it easier and more convenient to save hundreds to thousands of dollars in late tax penalties. It is currently available for federal 941 & 940 payments.

  • What is DIRECT DEPOSITS and how do I benefit?

    A: PRO-PAY can generate direct deposits for those employees that do not like standing in line every pay day to cash their checks. With direct deposit, the net pay is automatically deposited into the employee’s bank account on pay day. With more employees demanding this feature, as an employer, you can provide this great service to your employees at minimal cost. The end result is boost in employee morale and productivity.

  • How does PRO-PAY handle tax payments different than most payroll software?

    A: Most payroll programs will print out a report of the different types of tax liabilities. It is then the responsibility of the employer, or the accountant to:

    • Study the reports in order to figure out the exact amount due, and to which agency, federal or state, it must be paid to.
    • Know the exact tax laws to determine the due date for paying these taxes.
    • Remember to manually write out a check for the amount of taxes due.

    Therefore, if the tax payment is forgotten, calculated wrong, or if it is paid late, it could mean hundreds or even thousands of dollars in tax penalties to the employer, depending on the size of the payroll liability.

    PRO-PAY can help you avoid all these potential tax penalties by:

    • Automatically printing out a tax check made payable to the appropriate Federal, State or Local Agency when due.
    • The check will be made out for the exact amount due to the appropriate agency.
    • The DUE DATE will be printed on the check stub.

    All that is left to be done by the employer, is to sign the check and take it to the bank or mail it out, thus ensuring that the tax payments are made on time.

  • What other benefits do I get from running a payroll service?

    Keep close contact with your clients. When you provide payroll services you create a stronger bond between you and your client. Most often clients will procrastinate with their write up work. You may hear from them once or twice a year, or maybe every April 15th. With the payroll service, you or someone in your office talks to them on a regular basis regarding payroll, so they are more inclined to keep up with their bookkeeping and write up work.

    Use payroll as leverage to collect for past invoices. Clients will many times place the bookkeeping bill at the bottom of the list. First comes rent, utilities, telephone and of course payroll. One way to collect for past write-up or tax work bills is to send the payroll checks C.O.D. for all past bills. (It works).

    More time off for you. Providing payroll services does not require the presence of a professional on a full time basis. When clients call-in their payroll they talk with your data entry person. You don’t need to be there all the time. On the contrary, when clients call in with a tax question, you must be there. They want to talk to you, the CPA, the tax preparer, the accountant, you.

    A practice is easier to sell with payroll services. Because of the low-skill nature of the payroll services, it may be easier to dispose of your practice when a substantial portion of the revenues is from payroll services. As long as your payroll service is consistent, reliable, and competitive, the clients have no reason to go any place else. Therefore a new buyer may phase-in and actually achieve a much higher retention rate.