Professional service firms offer their services in a variety of ways, and this fact adds complexity to time and billing processes. If time and billing are complex, then accounting and payroll also have many moving parts. By automating some of the steps that go into accurate time and billing — and closing the gap between time and billing and accounts receivables — professional service firms improve cash flow and profits. Outsourcing is one solution to achieve automation without the costs of purchasing technology and training in-house staff.
Firms that use an in-house team for payroll, time and attendance and benefits administration spend 20 percent more than organizations that outsource those functions, according to UK-based global market research company, Technavio. The analysis, from 2016 through 2020, found that payroll outsourcing is the fastest growing segment in the human resource outsourcing market. It projects a compound annual growth rate of 4.4 percent. Just tally up the salary and benefits of a full-time equivalent employee to do the job correctly as well as the cost of system upgrades, training, supplies and office space. Then look at the rate a vetted payroll or accounting service will charge to do the function for you.
This growth rate also makes sense due to the sensitive information in payroll as well as the increasing complexity of compliance for withholdings, benefits elections and tax reporting. Payroll outsource services specialize in this area, bringing efficiencies through automation and increasing employee access to pay stubs and tax information.
An effective outsourced provider reduces non-billable time for professionals and also delivers timely reports and financials to make proactive decisions. In addition, the outsourced provider can take a more holistic view of the organization and implement processes and systems that support compliance and organization.
Even in an accounting firm where the professionals are more than capable of doing their own bookkeeping and payroll, keeping these functions in-house can lead to a lack of internal controls and objectivity — not to mention confidentiality.
A report by KPMG and HfS Research predicted that accounting and business process outsourcing overall would grow at an annual compound rate of 8 percent through 2017.
When firms select the right fit for outsourced payroll or accounting services, the service becomes an extension of the enterprise rather than a substitute. CPA firms that offer outsourced accounting or payroll services can help clients beyond their back-office in areas such as strategic planning, forecasting and compliance.
With a central clearinghouse to view financials and billing information, firms will have up-to-date data to proactively support business decisions rather than relying on historic data from several months ago.
In fact, integrative technology has advanced to allow time and billing systems to “communicate” with accounting software. Accounts can age out of the time and billing system rather than the accounting system to keep books cleaner and make forecasting easier throughout the year.
Cornwell Jackson’s Business Services Department offers a wide range of outsourced financial services to serve professional services — including outsourced payroll processing and solutions to improve cash flow and productivity. Contact us for a consultation.
Mike Rizkal, CPA is a partner in Cornwell Jackson’s Audit and Attest Service Group. In addition to providing advisory services to privately held, middle-market businesses, Mike oversees the firm’s assurance practice and works directly with many professional services firms in the metroplex. Contact him at email@example.com or 972-202-8031.