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Grow Your Accounting Practice With Human Resource Services

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Inspired by Human Resource ROI from the Custom Accounting Services’ Blog at http://www.custom-accounting-services.com/blog/2015/5/26/human-resource-roi

benefits-arrowMost accounting practitioners are stuck in a rut, quietly performing the services they can handle with the skills they learned back at school in Accounting 101, or maybe 102. That, and a little bit of tax practice they learned by starting with a 13 week H&R Block basic tax preparation course.

In most of these small practices, business growth is not even keeping up with the growth in the overall sluggish economy. As a matter of fact, the only reason many of these small practitioners are still in business is that clients hate change, ans many others who look at taxes as a never ending learning process (it is), or they think the field of accountancy is boring and even more boring. There is a perception problem.

[bctt tweet=”How can the local practitioner compete with the large, well funded, national firms entering the local market?” url=”[insert_php] bitly_link() [/insert_php]” via=”no”]

Combine all that with the threat of automation creeping in as online services offer their skills and software as a service competing head-on with local accountants by offering their services to the local practitioners clients, much as Quickbooks did back in the 1990’s.

When large, well funded, firms start expanding their geographical reach to directly compete with the small local practitioner, how can the local practitioner compete?

It’s a dog-eat-dog world, and many small local practitioners are getting eaten alive by larger and better funded competitors.

Back in the middle of the 1980’s, I was using a simple computer (DOS) based tax preparation software made by a company called ‘Best Software.’ I had been using them for several years, when all of a sudden, without notice, they quit making tax software, leaving me, and I guess, a bunch of other users hanging.

When I was finally able to get through to a live person at the corporate headquarters up in Alexandria, Virginia, I was told that they were getting out of the tax software business because it was too crowded, and they were going to focus on HRIS software instead.

[bctt tweet=”When Best Software quit the tax business to focus on HRIS software, it was a wake up call to me.” url=”[insert_php] bitly_link() [/insert_php]” via=”no”]

Besides being shocked, and at a loss for how to quickly find a replacement software, I couldn’t understand how in the Sam Hill they were going to program something as esoteric as human resource or personnel software.

Along the way, Best renamed itself as ‘Abra,’ and was later folded into a UK company called Sage.

Meanwhile I was able to find a replacement software, and put the thoughts about HRIS software aside. That is, until I retired and started consulting with folks who were still in practice, and who were struggling to compete in the ‘new world’ of globalized local practice.

Somewhere along the line, as I talked with the elite rainmakers on the Instant Practice Builder and Practice Builder Publishing Thursday brainsotrming calls, I started to think about Best, cum Abra cum Sage, and what was happening with PayChex and their foray into HR Benefits Administration.

And how that could affect the members of Instant Practice Builder and Practice Builder Publishing who were in the payroll processing business.

So, I started suggesting HR, and especially Benefits Administration, as an added value (cute term, huh?) type service that could attract medium and larger size clients. More prosperous clients, able to pay larger fees for the additional services being provided.

Over time, maybe a half-dozen to a dozen of the regular weekly callers to the elite or mastermind brainstorming sessions began to report that they were expanding into HR services and what their success was with its incorporation.

Members reported adding services as simple as I-9 maintenance, and as complex as three tier benefits management consulting services.

[bctt tweet=”If you are a payroll provider, it is probable that all of your clients with less than 50 employees will disappear.” url=”[insert_php] bitly_link() [/insert_php]” via=”no”]

Then, as we examined the resources available to folks who entered the HRIS and HRMS field, I began to notice that there were quite a few well funded tech firms that were offering their services directly to small firms, and in partnerships with local accountants, which had the potential to disrupt the likes of PayChex and ADP.

Who left the back door unlocked?

If you are a payroll provider, it is probable that revenue from your clients with less than 50 employees will be gone in the next 2-3 years.

Think about what percent of your business that represents. will that affect you, or your practice? Those clients will join the fastest organically growing insurance brokers in the US who are ADP, Paychex, and Zenefits.

[bctt tweet=”PayChex and ADP regularly generate a 40% net margin before taxes, just from payroll services.” url=”[insert_php] bitly_link() [/insert_php]” via=”no”]

Paychex had the 3rd largest overall growth in the Top 25 of the BI Top 100. 100% of that revenue was from new business, not acquisitions. It’s not something that is going to happen in the next couple of years. It is happening right now.

Every few weeks I talk privately to one member or another whose payroll processing business is being affected by the foray of the big providers into Benefits Administration. It can be a lost sale, or a lost client, because my client has refused to add any sort of HR service, and the PayChex sales rep has targeted in on that as a client need.

You were tricked

For years, PayChex and ADP have presented themselves as your saviour, taking the mundane, low individual fee, payroll processing tasks away from you, leaving you to focus on the higher fee accountancy tasks such as client writeup (a disappearing service), consultancy (another shrinking field) and audit (long hours, thin margins).

Neither PayChex or ADP will really mention the fact that they are getting a 40% net margin before taxes, just from payroll services. Their HR brokerage services reportedly have an even higher margin.

Everyday the newspapers, websites, and talking heads distract us with the threat Obamacare poses to the healthcare system. We’re so busy thinking about the latest threat, such as of Ebola or ISIS being presented by CNN and Fox News, that we take our eye off the ball and ignore the competitive threat.

We’re so busy memorizing our political party’s sound bite that we don’t see the real threat to our business. The real threat are the fastest organic growth HR brokers in the US.

Is your house in order?

What are you doing to keep your small business clients? I ask this question approximately a dozen times each week. In most cases the answer is: nothing. Sometimes there is even a desire for these clients to leave.

In the community rated world of small business, especially in markets like New York, New Jersey, and Connecticut that already are seeing low margins, there isn’t a lot of margin for service.

Keep your eye on the ball.

Many people thought that “Obamacare” would be the salvation of the independent local practitioner. As it turns out, PPACA and its logistical nightmares have not generated much in the way of growth. Lower level clients went to online preparations (see blog #), and it was only the late arriving higher income clients that allowed many tax preparers to remain stable in this past tax preparation season. Where are the testimonials?

The smartest guys in the room

ADP, Paychex and Zenefits are more than happy to work with your small clients. They’re not interested in working with 500 employee organizations or companies that want to go with self funded insurance plans. And, they’re so good at what they do it makes them the fastest growing payroll providers in the country.

How do they do it? They give business services to the small clients that many practitioners have neglected. Here are some of the things they advertise:

  • Payroll
  • Compliance
  • Workers’ Comp
  • HRIS

With ADP & Paychex, in many cases they already have the payroll. If you have the payroll, you have all the information you need to provide the other services. And these other services come at a cost. In some cases, ADP becomes the employer of record so that they can get lower rates on the medical.

[bctt tweet=”PayChex and ADP are starting to use their expertise in payroll and HRIS to go after your accounting clients.” url=”[insert_php] bitly_link() [/insert_php]” via=”no”]

But, there is a new hope

There is good news for all of us: The NSA isn’t concerned about a domestic attack by ISIS, we are not a 3rd world country and have quarantined the Ebola case in Dallas, and there are accountants today who are winning new business by offering payroll, HR, and compliance solutions to their clients.

Like everything else that comes at us loud and fast, we need to take a moment to look at the facts and make judgments for ourselves. As I mentioned earlier, I talk to Practice Builder Publishing subscribers every week. There’s a minority who are laser focused on increasing their revenue, and their client base, 5%-10% year over year and finding organic growth one client at a time. How do they do it?


They research benefits administrators they can partner with, and then partner with the one that offers the greatest opportunity. One model I like is the model Zenefits uses.

Zenefits will partenr with accountants in 46 states (as of this writing, Hawii and Alabama have unique situations that prevent licensing), and automate 99% of a business’s HR administrative work. They make their money through the commission from the health care provider, allowing the accountant to private label the benefits portal facing the client, and charge a benefits management fee, usually as an add-on to the payroll check writing business performed by the accountant.

Workers’ Comp

“That’s not my job” is not acceptable. Learn it and find a way to make money with it. ADP has…


It’s NOT one-size-fits-all. A Zenefits portal will allow your clients access to licensed insurance products, but there are also a lot of unregulated and no-cost to employers products and services that employers can and want to offer

It’ll soon be the 4Q. Look at what you can do NOW in time for your new year marketing and end of year renewals. Pay attention to what the competition is doing because it’s getting late. Turn off the tv and lock your back door.

Join us here at Practice Builder Publishing and become a part of the community, whether you become a contributing author, a peer recruiter, or merely a raving devotee of the Practice Builder Publishing resources, I'll work with you personally so you can reach the goals you set.

Best to you and yours,




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