Best Practices for Incorporating Payroll Services into Your CPA Firm

Bringing payroll services into your CPA firm can increase year-round revenue, improve client retention, and give you a competitive edge. But without a clear plan or the right tools, it can feel overwhelming.

Here’s how to do it right.

Step 1: Choose How You'll Manage Payroll

Option 1: Handle Payroll In-House

Managing payroll in-house gives your firm full control. You pick the software, set security measures and build closer client relationships. But it comes with added costs—hiring payroll staff, keeping up with ever-changing regulations, and ensuring compliance.  If your firm has the internal capacity and a solid plan to scale, this approach can work.. Just make sure you have the right payroll tools built for accountants. Need help choosing software? Our Payroll Software Buyer’s Guide can help.

Option 2: Partner with a Managed Service Provider (MSP)

Want to avoid the heavy lifting? A managed service provider can take on the most tedious, time-consuming payroll and compliance tasks, ensuring accuracy and reducing your firm’s workload.

The right MSP helps:

• handle compliance and tax filings
• streamline payroll across all clients
• free up your team to focus on core servic

Step 2: Choose the Right Payroll Partner

If outsourcing payroll makes sense for your firm, choosing the right MSP is key. Here’s what to look for:

• Tax Compliance and Payments: Your partner should automate tax filings and payments to ensure compliance with federal, state, and local laws. This reduces the risk of penalties and makes sure taxes are paid accurately and on time. They should also handle any tax-related issues on your behalf. 
• Seamless Integration: Look for an MSP that connects with your existing tax, accounting, and third-party tools. This cuts out manual data entry and keeps workflows smooth. 
• Dedicated Support: A good MSP provides a dedicated payroll specialist—not a generic call center. This way you'll have reliable help when you need it.
• Employee Self-Service: Make sure employees can access pay stubs and tax forms online anytime. It reduces payroll inquiries and improves the employee experience. 
• Detailed Reporting: Your MSP should provide comprehensive, easy-to-use payroll reports for financial planning and analysis. 
• Advanced Security: Payroll data is sensitive. Choose a partner with secure portals, 24/7 monitoring, and multi-factor authentication to protect against fraud and breaches. 

By focusing on these areas, you’ll find a payroll partner that simplifies operations, ensures compliance, and increases efficiency.

Step 3: Decide How You’ll Work With Your MSP

Most payroll MSPs offer two partnership models:

Referral Model

You refer clients to the MSP, and they handle everything—onboarding, payroll processing, compliance, and customer support. In return, your firm typically earns a referral fee.

Back Office Partner Model

The MSP runs payroll behind the scenes, but you stay the client’s main point of contact. This lets you expand your services while the MSP provides expert support.

Which model works best? It depends on your firm’s goals and how hands-on you want to be. A strong MSP should offer both options.

Why Adding Payroll Pays Off

Stronger Client Retention

Bundling payroll with tax & accounting services keeps clients engaged with your firm. The more services they use, the less likely they are to leave. Plus, with payroll handled, you have more time to focus on client relationships and service quality. 

Higher Revenue Potential 

Payroll services open up new revenue streams, whether through:

• referral incentives
• fees from back-office payroll management
• new clients drawn to your expanded service offerings

Offering tiered pricing makes payroll more accessible and cost-effective, giving clients flexible options while building trust in your firm.

A More Comprehensive Service Offering 

Payroll services create cross-sell opportunities for tax, accounting, and advisory services. As your firm becomes a go-to resource, you can expand into more strategic financial services without payroll bogging you down.

Ready to Offer Payroll Services?

Adding payroll services doesn’t have to be complicated. Whether you manage it in-house or partner with an MSP, the right approach can increase revenue, strengthen client relationships, and streamline operations. Looking for a payroll partner that fits your firm? Connect with us today to explore your options. No pressure, just expert guidance.