Should Bookkeepers Offer Payroll Services?
Payroll can seem like a natural addition to a bookkeeping practice. You already work with the client's financial records, understand their accounting system and may be the first person they call when they hire an employee. Adding payroll can create additional recurring revenue and make your firm more valuable to the client.
But payroll also changes the nature of the relationship. Instead of primarily working around accounting deadlines, your firm takes on recurring payroll schedules, employee changes, corrections, payroll questions and year-round administrative responsibilities. For some bookkeeping firms, that tradeoff makes sense. For others, referring payroll to a specialized provider allows the bookkeeper to continue managing the books without becoming the client's payroll department.
This guide will help you decide which model fits your practice. For a broader discussion of this question for accounting firms generally, see our article on whether accounting firms should offer payroll services or outsource them.
The Short Answer
Bookkeepers can successfully offer payroll services when they have the expertise, technology, pricing and staff capacity to manage payroll profitably. However, a bookkeeping firm does not have to process payroll simply because clients need it. Firms that prefer to focus on bookkeeping can have clients use payroll software or work with a specialized payroll partner while continuing to manage the accounting relationship. The right model depends on profitability, workload, expertise, client needs and the long-term direction of the bookkeeping practice.
Table of Contents
- Why Bookkeepers Add Payroll
- What Payroll Actually Adds to the Workload
- Advantages of Offering Payroll
- Disadvantages of Offering Payroll
- Is Payroll Profitable for Bookkeepers?
- Three Ways to Handle Client Payroll
- QuickBooks and Payroll
- When Referring Payroll Makes Sense
- How a Payroll Partner Relationship Works
- Questions to Ask a Payroll Partner
- The Hidden Test: What Happens When Payroll Goes Wrong
- How Auris Works With Bookkeepers
- Questions to Ask Auris Before Referring a Client
- Should You Add Payroll to Your Bookkeeping Practice?
Why Do Bookkeepers Add Payroll Services?
Reasons bookkeepers add payroll include existing clients asking for payroll, additional recurring revenue, more integrated client service, greater visibility into payroll transactions, stronger client relationships, convenience for the client and expansion of the firm's service offering.
The opportunity can be attractive because the bookkeeper already has the client. However, demand alone does not determine whether payroll is a good service for the practice.
The question isn't simply whether your clients need payroll. The question is whether your bookkeeping business should be the one providing it.
What Does Payroll Actually Add to a Bookkeeper's Workload?
Payroll can involve collecting hours, employee changes, new hires, wage changes, deductions, direct deposit, timekeeping, payroll processing, corrections, payroll tax administration, payroll reports, client questions, employee questions, tax notices, quarterly tasks, year-end processing, W-2s, software troubleshooting and deadline management.
Here is the key distinction: bookkeeping work can often be scheduled around a firm's workflow. Payroll must generally happen according to the employer's payroll schedule. Payroll introduces recurring deadlines into the bookkeeping practice.
Advantages of Offering Payroll Services
Additional Recurring Revenue
Payroll can add another recurring service to existing client relationships.
Greater Client Convenience
Some business owners prefer working with fewer providers.
Closer Accounting Integration
Handling both bookkeeping and payroll can simplify some workflows.
Broader Client Relationship
Providing more services may make the bookkeeping practice more important to the client's operations.
Control Over Payroll Data
The bookkeeper may have direct access to payroll information needed for reconciliations and reporting.
Disadvantages of Offering Payroll Services
Fixed Deadlines
Payroll cannot simply wait until the bookkeeping schedule opens up.
More Client Support
Payroll creates questions that may require faster responses than normal bookkeeping work.
Employee Questions
The bookkeeper may begin receiving questions directly or indirectly related to employees.
Corrections
Payroll errors and changes can require immediate attention.
Technology and Training
Payroll requires appropriate systems and expertise.
Year-Round Responsibility
Payroll continues through tax season, vacations and busy periods.
Opportunity Cost
Time spent processing and supporting payroll is time that cannot be used elsewhere in the bookkeeping business.
Is Payroll Profitable for Bookkeepers?
It can be. But calculate profit based on the actual work required rather than simply the monthly payroll fee.
MONTHLY PAYROLL REVENUE
− SOFTWARE COST
− PROCESSING TIME
− CLIENT SUPPORT
− CORRECTIONS
− ADMINISTRATION
− YEAR-END WORK
= ESTIMATED PAYROLL CONTRIBUTION
Ask yourself: How many hours does payroll actually require each month? What is your effective hourly revenue after those hours? How much time is unbillable? How frequently do clients require corrections? How much software costs per client? How much coverage is required when you're unavailable? Could those hours be used for additional bookkeeping or advisory clients?
Three Ways Bookkeepers Can Handle Client Payroll
| Model | How It Works | Advantages | Tradeoffs | Best Fit |
|---|---|---|---|---|
| Bookkeeper Processes Payroll | The bookkeeping firm operates payroll for the client. | Additional revenue, control, integrated workflow | Deadlines, support, staffing, responsibility | Bookkeepers intentionally building payroll as a service line. |
| Client Uses Payroll Software | The business runs its own payroll using a software platform. | Less processing responsibility for bookkeeper, client control | Client may still ask bookkeeper for support, potential accounting cleanup | Clients comfortable managing payroll technology. |
| Specialized Payroll Partner | A payroll company handles payroll while the bookkeeper continues managing the books. | Less payroll administration, dedicated payroll resource, bookkeeper retains accounting relationship | Requires selecting a trusted provider, coordination still matters | Bookkeepers who want to solve payroll needs without operating payroll internally. |
Does Using QuickBooks Mean the Bookkeeper Should Also Handle Payroll?
No. Using QuickBooks for bookkeeping does not necessarily mean payroll must be handled by the same provider or by the bookkeeper. A business may use QuickBooks for accounting while using a separate payroll provider, depending on the provider's accounting integration. Consider payroll journal entries, payroll expenses, liabilities, reconciliations, payroll reports and accounting mapping.
QuickBooks ProAdvisors and Payroll
QuickBooks ProAdvisors are often asked to recommend technology and financial services. That does not mean the ProAdvisor has to personally provide every service the client needs. A payroll partnership can allow the ProAdvisor to remain focused on QuickBooks/accounting while another provider handles payroll. Learn about the Auris Bookkeeper Partner Program →
When Does Referring Payroll Make Sense for a Bookkeeper?
Referring payroll may make sense when payroll is not profitable at current client volume, the bookkeeper does not want payroll deadlines, clients need more support than the firm wants to provide, the firm wants to grow bookkeeping rather than payroll, the practice has no dedicated payroll staff, payroll questions are becoming disruptive, clients need HR or timekeeping tools, the bookkeeper wants to avoid employee-facing payroll support, or the firm wants to remain focused on QuickBooks/accounting.
When Keeping Payroll In-House May Make More Sense
Keeping payroll internal may make sense when payroll is already profitable, the firm has experienced payroll staff, payroll is strategically important to the service model, client volume creates sufficient scale, or the firm has reliable technology and support processes.
How Does a Payroll Partner Relationship Work?
CLIENT → BOOKKEEPER → Identifies payroll need → PAYROLL PARTNER handles payroll → BOOKKEEPER continues accounting
Bookkeeper: Books, reconciliations, financial reporting, QuickBooks, accounting relationship.
Payroll Provider: Payroll processing, payroll support, employee payroll administration, payroll-related reporting, related workforce tools where applicable.
You do not have to give up the client to give up the payroll work.
For more on protecting the relationship, see how to refer payroll without losing the client relationship.
What Should Bookkeepers Look for in a Payroll Partner?
- Client support
- Dedicated contact
- QuickBooks integration
- Payroll reporting
- Onboarding
- Payroll tax administration
- Timekeeping
- HR capabilities
- Workers' compensation integration
- Pricing
- Partner communication
- Client relationship protection
The right payroll partner should reduce payroll work coming back to the bookkeeping practice. Many of the same evaluation criteria apply as those described in our article on what CPAs should look for in a payroll partner.
The Hidden Test: What Happens When Payroll Goes Wrong?
It is payroll day. Your client has a problem. They cannot figure out how to fix it. Who gets the phone call? If the answer is still "the bookkeeper," then outsourcing payroll may not have actually removed payroll support from the practice.
The quality of a payroll partnership becomes most visible when something does not go according to plan. Can the client reach someone? Who owns the problem? Does the bookkeeper have to intervene? Is there an escalation path?
The goal isn't merely to outsource payroll processing. The goal is to outsource the payroll support burden as well.
How Auris Works With Bookkeepers
Auris works with bookkeepers and accounting professionals who want a dedicated payroll resource for their business clients. The model is straightforward: you keep the books. Auris handles payroll. The client gets payroll support.
Verified Auris differentiators include dedicated human support, QuickBooks integration, payroll + HR, timekeeping where applicable, workers' compensation integration where applicable, California payroll support, and a 3-year price lock for qualifying clients.
Explore the Auris Bookkeeper Partner Program →
Explore all Auris Partner Programs →
Questions to Ask Auris Before Referring a Client
- Who will support my client?
- Will my client have a dedicated payroll contact?
- How does QuickBooks integration work?
- What payroll reports will I have access to?
- How does onboarding work?
- How are payroll tax filings handled?
- What HR tools are available?
- Does timekeeping integrate?
- Can payroll work with workers' compensation?
- How does pricing work?
- What happens when my client has a payroll problem?
- How does Auris protect my bookkeeping relationship?
Should You Add Payroll to Your Bookkeeping Practice?
| If... | Consider... |
|---|---|
| Clients frequently request payroll AND you want another service line | Building payroll internally. |
| Clients prefer DIY technology | Client-operated payroll software. |
| You want to remain focused on bookkeeping | A payroll partner. |
| Payroll is consuming significant unbillable time | Reevaluating whether the service is profitable. |
| You already have dedicated payroll staff and healthy margins | Keeping payroll internal. |
The right answer depends on the bookkeeping business you want to build.
Can Bookkeepers Do Payroll?
Yes. Bookkeepers can provide payroll services when they have the appropriate expertise, systems and processes. Whether they should offer payroll depends on the firm's business model, capacity and economics.
Should a Bookkeeper Offer Payroll Services?
A bookkeeper should consider offering payroll if it fits the firm's expertise, staffing, pricing and long-term strategy. Firms that do not want payroll administration can instead have clients use payroll software or refer payroll to a specialized provider.
Is Payroll Profitable for Bookkeepers?
Payroll can be profitable for bookkeeping firms, but profitability depends on pricing, software costs, processing time, client support, corrections, administration and client volume.
Can a Bookkeeper Outsource Payroll?
Yes. A bookkeeper can continue managing a client's accounting records while a specialized payroll provider handles payroll.
Can You Use QuickBooks With a Separate Payroll Provider?
Yes. A business can use QuickBooks for accounting while using a separate payroll provider, depending on the provider's accounting integration capabilities. Where supported, payroll information can flow into QuickBooks to keep the accounting workflow connected.
Don't Want to Become a Payroll Department?
Give your clients a payroll resource while your firm stays focused on the bookkeeping work they already rely on you for.
Frequently Asked Questions
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