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The Ultimate Guide for CPAs to Decode Payroll Outsourcing Services

The Ultimate Guide for CPAs to Decode Payroll Outsourcing Services

Payroll is a complex but critical compliance task. Many accountants struggle to execute their clients’ payroll efficiently as it involves elaborate calculations and requires a thorough understanding of the latest software and payroll norms. Therefore, several accountants often refrain from adding payroll to their service portfolio or opt for payroll outsourcing services.

Payroll, however, is one of the most lucrative services for CPA firms if done the right way. Accountants can, in fact, easily add payroll to their offerings and make it profitable by outsourcing their needs to the right payroll outsourcing services company.

What is Payroll Outsourcing?

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Payroll outsourcing is the process of handing over a CPA firm’s payroll needs to highly qualified third-party experts.

CPA firms regularly battle the challenges of skills shortage and overutilized resources. Often, accountants do not have the capacity to take up additional work or execute complex tasks such as payroll efficiently. In such scenarios, accountants and CPA firms turn to payroll outsourcing as a viable option to make the service profitable.

Top payroll outsourcing providers give accountants exclusive access to highly qualified and trained offshore payroll professionals. These professionals are up to date with the latest UK payroll norms and updated software. They work as an extension of your team and specialize in executing complex payroll tasks with maximum efficiency.

Payroll outsourcing is an idyllic solution for accountants and CPAs aiming to scale their firms without significantly adding to their expenses.

Read more: What is Payroll Outsourcing and How Could It Help You?

When Should CPAs Outsource Payroll?

Payroll outsourcing is undeniably a viable way for CPA firms to facilitate cost savings and earn greater profits. However, there is no one-size-fits-all rule to making this decision.

For every CPA firm, the right time to outsource its payroll needs may vary significantly. However, there are some common indicators to help firms make this decision.

You want to end your staffing woes: Staffing woes are native to the accounting industry and can be immensely exhausting. Small and mid-sized firms particularly face the challenge of finding skilled staff to manage their workflows efficiently.

Payroll outsourcing is a surefire solution for CPA firms to beat staffing woes successfully. Top-tier payroll outsourcing companies employ knowledgeable payroll professionals and train them extensively to make them industry-ready. By outsourcing your payroll needs, your firm will never battle staffing shortages again.

You aim to offer payroll as an add-on service: Clients prefer working with a single vendor for multiple services than branching them out to multiple providers. This means the more services you offer, the greater your chance to attract new clients and retain the existing ones.

Timely outsourcing to a reliable payroll outsourcing services company can be instrumental in helping CPA firms to add payroll as an add-on service to their existing offerings.

You want to save on overhead costs: Whether it is hiring an in-house employee or adding new services to your offerings, high overhead costs often slow down a firm’s financial scalability. These costs can sometimes surpass estimations and leave accountants with only marginal profits.

Payroll outsourcing to a reliable firm helps you save on your undue overhead costs, including hiring and training employees, workplace infrastructure, employee benefits, and much more. By partnering with the right payroll processing outsourcing firm, you cut down on these costs and make your services profitable.

You want to scale your firm: Scalability does not come easy in today’s competitive world. To add to it, the accounting industry is faced with several challenges, which makes it difficult for small and mid-sized firms to grow effectively.

If your goal is to grow your CPA firm in a limited span of time, outsourcing may be the solution you need. Outsource your requirements to a reliable payroll outsourcing services company to quickly improve your firm’s capacity to scale.

Read more: How Payroll Outsourcing for Accountants Can be A Profitable Add-On Service

Benefits of Payroll Outsourcing Services

Accountants deal with facts and are all about the rationale. Before you invest your time and money into researching payroll outsourcing services further, let’s understand their benefits.

According to Deloitte’s Global Payroll Benchmarking Survey, as many as 89% of firms from the financial services sector outsource some aspect of their payroll.

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There are numerous advantages of payroll outsourcing for CPA firms. Some of them are listed below.

Increased efficiency: Payroll outsourcing provides you access to trained payroll experts who can execute complex payroll functions seamlessly. These professionals use technology to automate critical processes and reduce manual work, thus making the payroll process simpler and more efficient.

Faster turnaround time: When you have expert offshore professionals working as a part of your team, you can be assured of faster turnaround times with minimum scope for errors.

Enhanced productivity: Top-tier payroll outsourcing providers train their professionals on the latest software and processes. These professionals have complete knowledge of the US payroll norms. With qualified payroll experts by your side, you will never miss a client’s deadline and be productive at all times.

Significant cost savings: One of the most popular benefits of payroll outsourcing services is that they trigger significant cost savings by helping firms cut down on undue overheads and ensure a steady flow of income.

Additionally, outsourcing your payroll needs to offshore professionals has several process-based advantages. The right payroll outsourcing services company will customize its services based on your requirements and help make payroll a lucrative service for your firm.

Read more: 5 Remarkable Benefits of Payroll Outsourcing Services

Challenges of Payroll Outsourcing for CPAs

Although the pros of payroll outsourcing outweigh its cons, accountants must understand the challenges of outsourcing to make the right decision. Some of the cons of payroll outsourcing are listed below.

Inconsistent communication: When CPAs outsource their clients’ payroll to a third-party organization, it results in a complex communication channel. This may sometimes lead to inconsistencies in communication or result in a loss of critical information.

Data security concerns: Another critical challenge of payroll outsourcing services is that it may put your clients’ sensitive data at risk if not protected and secured adequately.

Less control over tasks: Many accountants worry about losing control over critical processes when outsourcing their clients’ end-to-end payroll needs. Since third-party offshore professionals handle the task, accountants may be unable to make last-minute changes to crucial reports.

Client discontent: Many clients do not support the idea of their payroll partner outsourcing their work to a third-party organization. The primary concern for this is the potential communication and data risks involved in the process.

All the above challenges of payroll outsourcing are avoidable and easily solvable. Accountants and CPA firms must conduct thorough research before partnering with a payroll processing outsourcing firm to avoid risking their credibility and reputation. Some of the best payroll outsourcing companies in the market implement all the necessary regulations and security standards to make the outsourcing process smooth and profitable for CPA firms.

Read more: Challenges of Payroll Outsourcing and Ways to Overcome them

How to Find the Right Payroll Outsourcing Provider?

Once accountants have decided to outsource their work to offshore professionals, the important question arises – How to find the right payroll outsourcing provider?

There is a pool of payroll service providers in the market. Finding the right outsourcing partner for your business from among them can be tricky. To make things easier, here are a few key points to consider.

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Industry experience: While finding the right payroll outsourcing services company, accountants must consider the firm’s overall experience in the industry. A company with considerable experience has better knowledge about the industry and can provide quality resources and solutions to your firm.

Technical expertise: One of the most significant benefits of payroll outsourcing is that it allows CPAs to integrate the latest technology with their processes. Accountants must look at the technical expertise of an outsourcing firm before partnering with them, as a technologically proficient firm can bring greater value to their business.

Communication system: Communication is an important aspect of building a long-lasting outsourcing partnership. Accountants looking to outsource their payroll needs must assess potential partner firms’ communication and management systems before making the big decision.

Data security compliance: Data security is the most important parameter for payroll outsourcing. Top-tier payroll outsourcing providers comply with important data security measures, but accountants must essentially consider this factor before choosing the right partner.

Client testimonials: Testimonials and references may not sound as important, but are, in fact, extremely crucial. Client testimonials speak for a firm’s practical expertise and can be instrumental in helping CPA firms make the right decision.

We also recommend that accountants connect with a firm’s past and present clients and understand their experiences before signing the final contract with a payroll service provider.

Read more: How to choose the right payroll outsourcing provider?

Misconceptions About Payroll Outsourcing

There are several misconceptions about payroll outsourcing that accountants have harbored for years. As outsourcing is the future of hiring, especially in the post-pandemic world, it is time to bust these myths.

Below are a few examples of misconceptions about payroll outsourcing.

Payroll outsourcing is unnecessary

Many CPAs consider payroll outsourcing an unnecessary investment. Accountants also often favor building in-house teams than outsourcing to a third-party firm.

The fact is, however, that payroll outsourcing is one of the most profitable investments, especially for small and mid-sized firms. These firms regularly battle staffing challenges and find it difficult to scale in a highly competitive world. For such firms, partnering with a reliable payroll processing outsourcing firm can be a positive turning point in business.

Offshore professionals do not blend well with your team

Another major misconception about outsourcing is that outsourced professionals do not blend well with your team as they are based offshore and are not a fundamental part of your organization.

However, outsourced professionals, although based offshore, work as an integral part of your time. These experts are trained to adapt to different work cultures seamlessly and can take over your processes in no time.

Payroll outsourcing is unreasonably expensive

One of the most common myths about outsourcing payroll is that it is highly cost-intensive and unreasonable. As discussed earlier, many accountants deem building their own team more profitable than outsourcing.

Having an in-house team of payroll specialists can be highly beneficial but is incredibly expensive. When you hire in-house professionals, you must incur hiring and training costs, pay extra employee benefits to them and arrange for necessary workplace infrastructure. Subcontracting with payroll outsourcing companies, on the other hand, helps you cut down on unnecessary overhead expenses and save big on critical services.

The accounting profession is rather traditional and has operated a certain way for several years. This is one of the reasons for accountants harboring myths about outsourcing in general. However, outsourcing is known to be one of the most profitable solutions for accounting firms and can help turn around your business if done the right way.

Read more: Debunked:5 Popular Misconceptions Around Payroll Outsourcing

Data Security Concerns About Payroll Outsourcing

We have already touched upon this issue earlier. Data security is a significant aspect of payroll outsourcing. When a firm outsources its clients’ payroll to an outsourcing company, it shares its sensitive and critical data with offshore experts. The CPA’s reputation then largely depends on how the outsourcing firm handles and manages the data.

Most top-tier payroll outsourcing providers are mindful of their clients’ data and its security. In fact, these firms also comply with essential security standards and implement measures to ensure the data remains secure and protected.

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Accountants must thoroughly check a firm’s data security system before finalizing the right outsourcing partner. The most significant standards to look out for include SOC 2 and ISO 27701, awarded to firms with a robust data security structure.

Read more: Data Security Concerns with Payroll Outsourcing

How Much Does It Cost to Outsource Payroll?

Now that you are aware of the process of payroll outsourcing, its myths, challenges, and pros and cons, the real question remains – How much does payroll outsourcing cost?

To understand the cost of payroll outsourcing, accountants must recognize the factors that determine and affect the pricing.

Payroll outsourcing companies customize their services and pricing models based on the diverse requirements of clients. The exact final pricing depends on various factors such as the frequency of payroll processing, number of employees, type of employment, and more. Let’s look at each of these factors in detail.

Frequency of payroll processing: Each firm has a different frequency of processing payroll for its employees. While most firms prefer to do it on a monthly basis, some companies pay their employees weekly, fortnightly, or bi-monthly. The cost of outsourcing payroll, therefore, depends on the frequency of its processing.

The number of employees: Another significant factor impacting the pricing of payroll outsourcing is the number of employees to be paid. Payroll outsourcing providers process and charge companies based on the number of payslips to be generated. If your firm has a high volume of payslips to be generated, it is likely that your payroll service provider will offer you a discount on each payslip.

Type of employment: Does your client firm employ only full-time employees? Do your payroll processing requirements need to accommodate the pay for part-time and contractual employees? These are significant factors that determine and affect the final pricing of payroll outsourcing.

The payroll legislation in the USA is different for different employees. For example, the additional benefits and taxes applicable to full-time employees may not apply to part-time and contractual employees. Conversely, there may be different regulations for these employees, which makes the overall payroll computation process complex and challenging.

The overall payroll outsourcing cost thus depends on the type of employment applicable to your client firm. Based on each firm’s specific requirements, top payroll providers customize their pricing and provide volume-based discounts. To get the best quote for your payroll outsourcing needs, we advise having a one-to-one discussion with your partner firm’s outsourcing advisory team.

Read more: How Much Does Payroll Outsourcing Services Cost?

Payroll Outsourcing Checklist for CPAs

Outsourcing can be a significant decision for a company, especially for small-sized CPA firms. Therefore, CPAs must prepare well in advance before jumping into outsourcing and onboarding offshore resources.

Here is a quick checklist for CPA firms to evaluate their payroll outsourcing decision and prepare for it.

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Assess the scope of outsourcing: This is the most important step, to begin with. Review how much of your payroll work needs to be outsourced. Assess your team’s capabilities and anticipate the forthcoming workload. This will help you determine the number of resources you need to add to your team.

Administration and infrastructure: Take a look at your firm’s compliance and administrative tasks. Assess your internal infrastructure. Is your firm ready to hire and manage new resources? Do you have the necessary infrastructure in place? These questions will help you determine your firm’s overall capability and preparedness for payroll outsourcing services.

Take a second opinion: It is always a good idea to take a second opinion when making important business decisions. Talk to your colleagues, peers, and employees and understand their views on outsourcing.

Budgeting is crucial: You may have decided to outsource but is your firm financially capable of it? Take into account your firm’s existing expenses and the price of payroll outsourcing. Make a formal budget. This will come in handy while finalizing the payroll outsourcing cost with the outsourcing company.

Research the right outsourcing partner: An outsourcing partner can build or break your reputation. Consider multiple outsourcing companies while looking for the right firm to partner with. Conduct thorough research and interview each one of them. Do background checks. Read testimonials and look them up on social media before signing the final contract.

A quick look at all the above points can help CPA firms to understand their company’s position and make the right decision.

Customized Payroll Outsourcing Services with QXAS

QXAS is a pioneer global outsourcing company with a proven experience in payroll outsourcing services for accountants and CPA firms. Our exclusive staffing solutions ensure you get access to highly professional and dedicated payroll experts for your business.

QXAS is the accounting outsourcing division of QX Global Group, one of the fastest-growing accounting outsourcing companies in West India. We began our journey in 2003 as a mere 5-member startup, but our vision and passion have helped us grow to be market leaders in accounting outsourcing.

We have a rich experience of 12+ years in payroll outsourcing solutions and a mighty team of 1000+ dedicated accountants and payroll specialists working with us. Our resources’ unmatched expertise and industry preparedness make us the best payroll outsourcing services company in the USA.

Why Choose QXAS?

QX thrives upon the core values of Quality and Excellence and is committed to making outsourcing a seamless experience for global clients. There are multiple standards that set us apart from other payroll outsourcing companies.

To learn more about our services, call +1 862 946 6565, drop us an email at [email protected], or log on to Outsourced Accounting, Bookkeeping, and Payroll Services | QXAS USA (qxaccounting.com).