Managed Services vs Software In A Payroll Business

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By Adam Walters | 06/26/2023 | 4 min read

In the past, payroll had a bad reputation. Firms, practices, and CPAs saw it as a loss leader no one wanted to touch because it took up too much time and didn’t provide meaningful profit margins.

It’s time to change how you see payroll because, with the technology and solutions available, it’s possible for payroll to not just become profitable but to become the most profitable service for your practice. 

You have two options for providing payroll service to your clients: managed services and software solutions. Here’s your chance to learn more about each option and find out which one will help expand your practice’s offerings and improve your bottom line.

Managed Services

Managed payroll services provide your practice with the benefits of offering payroll services to your clients with minimal effort on your end. Rather than having to manage payroll yourself, your firm can use a third-party managed payroll service. Payroll issues and concerns are handled entirely by the managed payroll service, allowing your practice to keep focusing on your existing projects and tasks.

Pros of Using Managed Services

Improved Client Retention - By offering a payroll solution, you are creating an extra tie your clients have with your business. This helps deepen your professional relationship, helping to significantly improve client retention and lower churn rates.

Low Maintenance and Management Requirements - Managed services are professionally handled and managed by payroll experts, meaning your team isn’t responsible for any additional tasks. Your firm is able to provide more services and increase your potential revenue streams without having to do more work or add more staff.

Professionals You Can Trust - Managed payroll solutions partner your business with experienced payroll professionals. You can rest easy knowing your clients' employees will always be paid on time and accurately.

Learn more about managed payroll service options in North America and global solutions.

Cons of Using Managed Services

More Expensive - Because managed payroll services completely manage payroll services for your clients, it requires a larger investment from your practice.

Lower Profit Margins - Paired closely with the higher initial cost, there is also a lower profit margin for offering payroll compared to an in-house payroll software solution.

Less Control - Your business is not directly connected with any of your clients' payroll when you choose to use a managed payroll service. This provides you with less oversight and control over the payroll process. While there is always a level of customization available, you are not the owner of the payroll process, which means you will not have complete control.

Payroll Software Solutions

The other solution for offering payroll services to your clients is to choose an in-house payroll software solution. A software solution will provide you with the tools you need to streamline payroll management for your clients, while still providing accurate and reliable results.

Pros of Using Software Solutions

More Control - Payroll software solutions give you direct control of your clients' payroll needs. You are able to modify and customize any aspect, and you can even create customized automated processes unique to each client, meeting their exact needs.

Better Profit Margins - Your practice is in the driver’s seat when it comes to payroll management. Any additional revenue you earn from clients choosing to use your payroll services directly impacts your firm’s profitability.

Greater Connection with Clients - For most employers, payroll is their largest expense by as much as 70%. Not only is it important for your clients to have that large expense managed correctly, with over half of Americans living paycheck to paycheck, it’s vital payroll is processed correctly the first time. By consistently providing professional, accurate, and reliable results, your firm becomes an integral part of your clients business and their employees’ lives.

Cons of Using Software Solutions

Hands-on Solution - Payroll software solutions are streamlined and help you do more than what was possible, even five years ago, through streamlined processes and cutting-edge automation tools, but it still requires work. It is likely that you will have to hire staff with experience processing payroll.

Set up - A software solution requires some initial time investment for both integration and adoption. Integration is the time investment required to ensure your new software solution is connected to the network of your existing internal processes, where adoption is focused more on training your employees to use the software once it is integrated. These additional requirements while setting up the software mean it takes longer for you to see the impact software solutions provide to your bottom line.

Learn more about an automated payroll software platform built for accounting firms that does the “heavy lifting” for you or a highly configurable payroll and HR software platform used by many payroll service bureaus.

Find the Solution That Is Right for You

With over 40 years of experience in the industry, IRIS has the solutions you need for your practice. No matter the size of your practice or the solution you’re looking for, we are able to help. Contact IRIS today to find out more about which solution is best for you.