In their latest video and podcast, Randy Johnston and Brian Tankersley, CPA, discuss payroll providers and systems for accounting firms serving multiple clients. Watch the video, or listen to the audio podcast below (transcript below):
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Transcript (Note: There may be typos due to automated transcription errors.)
Brian F. Tankersley, CPA.CITP, CGMA 00:00
Welcome to the accounting Technology Lab, sponsored by CPA Practice Advisor, with your hosts, Randy Johnston and Brian Tankersley, welcome
Randy Johnston 00:11
to the accounting Technology Lab. I’m Randy Johnston with co host Brian Tankersley, and we’d like to just discuss a bit about payroll providers. Now, again, we have separate episodes on individual products. We suspect we’re going to need to record some more of those for you in this coming year. But what really got us thinking about this was the fairly recent merger and acquisitions. Of course we saw safe send acquired by Thompson Reuters for $600 million and we have seen other big transactions like that, including, I think I wouldn’t taken $108 million and so forth. But the one that got us talking about it was paychecks, acquiring pay core for $4.1 billion and a very long term company out of Atlanta. I’ve been in their offices called on pay. The current people that are running the business actually took it over from from the Father who is running the business, but they had built a nice online payroll system, which was quite effective for being used with zero and with QuickBooks and on pay recently took 63 million from care capital. Now the reason this all kind of converges is we clearly see the issues and benefits around publicly held companies venture capital and private equity affecting the way products are being managed. And in fact, that was one of the things that Brian and I talked about at CES this year, was it looked like a lot of the PE and VC people were trying to get return on investments and not investing a lot more in products. Now with payroll, we’ve got a whole different thing coming. So what I thought we’d spend a few minutes about was just talking about the bigs. Now you’ll you already know that there are large scale providers of payroll services, and there’s dozens, if not hundreds, that are out there. For example, ADP and paychecks and Ceridian and day force and Pelosi are all high end providers. Of course, Iris software has said that they want to dominate the payroll business in the United States, and they bought apex, and they bought accountants world payroll relief and other products. But of course, we have Intuit who many of you have used for payroll, Sima, which has a wonderful payroll system, and PEO and gusto and bamboo and rippling and Zoho just released a new payroll product. You got Patriot again, I wanted to do a whole bunch of names at once to get you thinking about payroll, because I know many of you are saying payroll too risky not doing that. On the other hand, payroll very sticky and cast So Brian, that’s way too much setup on my side. But what, what would you like our listeners to think and know about payroll?
Brian F. Tankersley, CPA.CITP, CGMA 03:27
Well, another reason, I think we have to discuss this is that we’re starting to see identification of where some of the you know, some there are some people that appear to be not protecting the privacy of that data as well as we’d hope. Sometimes, when people sign up for portals, let’s say that they’re going to use employee portals for their clients. Employees, in many cases, they’re slipping in privacy policy things that say things like, we can use this for our other divisions, that also market, market loans and other things to people, and they’re slipping that into these, you know, 20,000 word privacy policies that nobody reads, and then we find out later that we’ve been doing business with somebody that may not be partnership material, you know, with respect to how they’re protecting the privacy of our client data. This is something I’m really struggling with in our account in the accounting profession, because I think we we need to demand more from our providers. And so I think you know as many of you are, you know as many of you are having to make transitions as a result of products being discontinued, or at least made made less favorable, like, like, QuickBooks, desktop, payroll, for example. One of the things that I think we, you know, we generally need to be thinking about is, is going to be privacy and and the programs, and again, we have to ask ourselves, is this a is this a partner? Or is this a competitor? Okay? And it’s okay if somebody wants to compete with this, okay? It’s free country. Live your life, be happy, do what you need to do, okay? But I’m, you know, Randy’s had this approach that that he, you know, at nmgi, where he traditionally has avoided purchasing, he avoided partnering with people that sell direct to end users, just because he wants to have something that is a, that is a, you know, that’s a service that is that is different from what what somebody buys at retail. And, you know, I agree with that to a great extent. You know, I think the discretion and the capability and the multi client capabilities that that you should expect are, are key things that we need to be looking for. And let’s be let’s be honest here. Okay, some of us have partnered with platforms that that don’t address those things appropriately and don’t give us the tools we need to make things happen, affect in effective periods of time. Furthermore, some of us are using old, you know, old things that are they’re not many, many steps descended from dos that you know where it’s it’s time for a for a UI update, if for no other reason than my younger employees don’t want to touch this product because it just feels like they’ve stepped back into the 20th century. So So I think generally, it’s time to look at payroll. And again, we have to think about what’s the privacy stance of this organization? Are they a partner or a competitor? What kinds of tool sets do they offer? Is this a service that I can make profitable? Can I get you know? Is this something I can do without having to add a whole lot of head count, given how how dear the the employee, employee salaries are these days, and how competitive it is to retain the right number of people, you know, is this something that can actually fit in our organization? Now, I’ve often said that the bookkeeper and the payroll person are the folks that have the best intel on when a business is in crisis, because they know when the money’s tight, and they know what the financial results are, and they know when people make big, strategic decisions that you may not know about, like letting large numbers of employees go and things like that. And so I think for those of you that are in the advisory space, I think payroll is a key it’s a key data input that you need to have your finger on the pulse of to really know what’s happening with clients in real time. And I think you almost need an independent way of touching it, even if the client runs in themselves. I think you need to have an independent input into it, into some kind of business analytics system or something, so that you can know when there are significant personnel changes, because you need to be Johnny or Johnny or Julie on the spot to help your clients out with those with those personnel changes and maybe HR issues and all kinds of other things. You know, again, if you’re going to be an advisor, the the most critical thing is availability in a crisis. That’s, what I’d say. Randy,
Randy Johnston 08:01
well, and those items, I think, reflect, you know, a lot of the considerations. But Brian, what do you think about risk? Because, you know, as I consulted in CPA firms in the fourth quarter of 2024 there was a clear dichotomy people that said payroll too risky, don’t want to touch it with a 10 foot pole. And the other end of the spectrum, payroll mandatory to have as a service to the client. And we want to get into HR and hiring and other things as well. And you know, there was a point in time, and I’m going to sound old school on this, there was a point in time in the 1980s and 1990s maybe up through 1995 where I understood the risk issue more clearly. It was hard to maintain payroll systems, but about 1995 firms started saying to me, Look, I don’t care. We need to do this for our clients. And so many of the companies are hard to deal with. They’ll remain nameless here, but our listeners certainly know who they are. We’ve got to make it easier for our clients, and we can take care of it, and we want to proceed that way. So talk to me about this risk and client service consideration. Well,
Brian F. Tankersley, CPA.CITP, CGMA 09:23
the thing I would just generally suggest to you here is that payroll is just an inherently risky thing, because if you blow it, or if the client is using somebody that you don’t supervise, and they blow it, it is it, you can have catastrophic things. I mean, when people miss payroll, large numbers of employees quit and create huge disruptions inside organizations. Furthermore, if you let somebody else do the payroll, so, and I’ve seen a number of businesses do this, there’s actually one, one accounting firm I’m aware of that’s a local firm in my area that that went to construction companies to take on. Their payroll because it was a way of getting the rest of the work, because nobody wanted to touch that dirty construction payroll, and they just walked in and sweeped, swept up all these super high net worth clients and advisory, advisory folks and all these construction companies without having to go in and do things because their payroll service was so good. So you know, if I think about the risk here, I think you have to, I think you have to just generally think about the the risk that something’s going to go wrong for your client. Now, it may not be your fault, but if something goes wrong for your client, it ultimately is your problem. And if you’re their advisor, it is ultimately your job to steer them away from that. So, you know, I would suggest to many of you that I don’t think you can afford to not do payroll for your clients in many situations, because the fines and the penalties are so so draconian, and the dealing with the IRS is so difficult once something gets messed up. Now, if you do everything electronically and online, through a good service, you don’t nothing gets messed up, and so things don’t get out of order. But once something, once you start getting notices in there, getting those notices resolved, is, is like a, you know, it’s just, it’s just painful. And so I think generally that that as we’re looking at this, I think it’s time to consider who’s your partner, who’s pimping out your data. You need to consider who’s going to give you the tools you need to do the right kind the right kinds of services for your client, and who’s going to give you the right kinds of inputs to help you drive your advisory service business, if you’re moving that way, furthermore, who’s going to give you the tools to help you manage. And if you’re managing, if you’re doing starting to branch off into things like family office, you’re going to obviously have a lot more domestic payroll than you normally would with people that have multiple full time employees that are that are going to taking care of the resident multiple residences, and you’re just going to have a lot, a lot more need for sophisticated services. And so what I would just generally say is that I think it’s time for I think every five years or so you ought to look at your stack of tools. And I think this is the time for payroll. I think you need to look at your stack of tools and say, okay, is this working for me? Is this not what do I want that I don’t have. What do other people have that I might want? Like an example that might be rippling ability to provision on automatically office, 365 accounts, and Salesforce accounts and and de provision them when you when you terminate people, and the ability to manage benefits and other things like that. You know it’s there’s a lot of interesting stuff that can be addressed here. And I think, I think, you know, again, this is one of those things where you need to ask, What have you done for me lately? And is this the platform that’s going to take me to the level that my firm wants to be at in three, 510, 15 years?
Randy Johnston 12:58
And so I’m thinking about advisory services a little bit differently here, Brian, because, you know, I’ve thought more of advisory services as being proactive, but I’ve noticed quite a few firms are really talking about a lot of the compliance things being in their advisory thing, so like dealing with tax notices and, you know, making payments for back taxes as being an advisory service. And I was surprised at the number of firms fighting that. And that may become a greater or a lesser need going forward, but I suspect it will be greater
Brian F. Tankersley, CPA.CITP, CGMA 13:39
but, but I think the better advisory service is to keep the client from getting in those positions in the first place. Yes, not needing those repair restorative services. You know, again, it’s like, it’s like my son in his driving when he was, when he first started driving, he was like, it was like he was operating a bumper car or something. I think he had like, three accidents in 18 months, or something like that, and, and so, you know, the the real the advice, there was an advisory service of getting those claims settled and getting the car fixed, okay? And that’s the way I think of those advisory services you discussed there. But the real, better advisory services say, okay, should this kid be driving? Does this kid need to go to driving school. What do we need to do, to put borders, to put bumpers around this, as it were, so that, so that we don’t have this problem in the first place. And I think an effective payroll offering is a, I think it really puts you at the heart of your clients business operations, because you can see, you can see for yourself in the data, in a quick scan, when you look at a payroll register, who’s getting paid, who’s not, who’s getting a raise, who’s not, who’s taken home. This many dollars, you know, are the DTE, the dollars to employee, are those numbers, the numbers you expect them to be or not, and and you know, are the have they kept up with? The market. You know, you look at the marketplace where I live in Knoxville, Tennessee, a one bedroom apartment’s gone from 700 a month to 2000 plus a month, and there are waiting lists for those. And so you have to, again, one of the advisory things I think we’ve got to do, especially surrounding payroll, is rationalize some of the salaries that people are getting made and say, Look, you’re having a big turnover problem. There has been 20% wage appreciation in this market, and your raises are 3% you should not be shocked that you are not getting the best and
Randy Johnston 15:32
brightest anymore. Well, you know, using kind of your reasoning behind all this, Brian, it does help me think through the radical adjustments we’re going to recommend to CPA firms for their client accounting services in 2025 where we use more AI powered accounting, more AI powered reporting, more AI Powered payroll. So all of those we
Brian F. Tankersley, CPA.CITP, CGMA 16:00
want, we want pimpless. Ai, we want. AI that is not pimping out the data, yes, and that’s a key thing. And AI, we must have pimpless. AI in accounting, and
Randy Johnston 16:12
I have actually been watching and now working on some of this data compromise that you and I, I think are on the same page. On and during ces I was amazed at the number of vendors that I talked about who clearly like payroll too risky, need it for stickiness on both sides. I must do the data pimping versus I must protect the data, and that’s going to be, I think, a demarcation point in the not too distant future on any of the firms. As an
Brian F. Tankersley, CPA.CITP, CGMA 16:52
example, one of the major providers to the profession has a provision in their privacy policy. It says that they will use your data and your transactions, all of them to train their AI models, and there is no way to opt out of that. Okay? And you know, your values may be different than mine. You may be of the kind that say, look, privacy is dead today, and I’m just going to put something in my engagement letter that covers my hindquarters, and I’m not going to worry about my client’s data privacy, I take a more fiduciary look at that, and I say, I don’t see any circumstance under which I can consent to that that that privacy unless I’ve specifically discussed it with my client and my client is okay with it. And I think it’s almost insulting to my client to present something like that to them, because we can say, hey, look, can I save a few bucks by pimping out your data? And the answer for that in my mind, if my client’s mind is no, and so I don’t want to present that to my client, and I don’t want to, I don’t want to deal with that. And
Randy Johnston 17:53
it’s very similar to the discussions we have around outsourcing. You know, not only do you have the required 7216 disclosure, but you know, if you’re using outsourcing for payroll and accounting client, accounting services and audit, where you may not have the regulatory piece, you know, disclosing is, in my mind, a little bit more above board in terms of dealing with the client.
Brian F. Tankersley, CPA.CITP, CGMA 18:15
And I think, I think you have to, because in our profession, so much is so much of the profession is, is contingent upon, you know, if there’s a Maslow’s hierarchy of CPA professions, the lowest level, you know is, is probably, you know is, is competence, and the next level up is trust, okay? And if you’re neither competent nor, if you’re missing either of those, it doesn’t matter how good of an advisor you are and how much money you can save them and all these other things, if you’re not trustworthy and you’re not competent, none of the rest matters. And that wasn’t
Randy Johnston 18:49
it, wasn’t it interesting, though, Brian, earlier this week, in a conversation which we won’t disclose, trust was the keyword that came up. And, you know, trying to get accountants to trust, providers of products where trust needs to be earned. And right now, trust is trying to be marketed.
Brian F. Tankersley, CPA.CITP, CGMA 19:12
You know, I think, I think very much of a lot of lot of people are starting to wake up and they’re realizing that that some of their providers are cheating on them with their data. And, you know, I it kind of the reaction when I talk to people after they realize it, and they realize the extent to which it’s been taking place. It’s very much like a spouse that’s experienced a an unfaithful spouse, you know, a divorce aide that’s experienced an unfaithful spouse, they’re almost afraid to trust anybody, and I think that’s unfortunate. I really hope that, you know, I really hope that there is a, there is a path forward with privacy. Because I think, I think at the end of the day, it’s, you know, everybody needs to be happy, and if they need a new payroll provider, they need to go. Be with that payroll provider and go on vacation and see the world with that payroll provider. And they need to make babies together and have a good time, you know, and just make life together, you know. Because if the one they have is doing them wrong, as we would say in country music in the south, you know, maybe it’s maybe it’s time. Maybe it’s time for Tammy Wynette, D, I, V, O, R, C, E,
Randy Johnston 20:24
well, Brian, I’m listening to you and thinking, gosh, are you a open marriage person or against
Brian F. Tankersley, CPA.CITP, CGMA 20:30
absolutely, absolutely not. I I can. I can barely handle getting one list of things done. Randy, I cannot imagine having two or three lists of things that I have to get done.
Randy Johnston 20:40
And you know, as we’re having this discussion, I’m thinking about the open marriages that are being quietly executed on payroll data, on financial data, and many other things. So throughout 2025 and beyond, you can always be assured that Brian and I will be on the favor of protecting clients data, because we think there’s a fiduciary responsibility. You can choose to do something different. We’re not going to tell you what to do, but we’ll always land on that side, and that was part of the reason a payroll discussion was needed today.
Brian F. Tankersley, CPA.CITP, CGMA 21:18
We are not on Team, Team pineapple for payroll data under any circumstances, okay? And that’s where we are, and we’re not going anywhere on that.
Randy Johnston 21:28
All right. Well, we appreciate you listening in to our discussion back and forth on this topic, and we will talk to you again soon in another accounting Technology Lab. Good day.
Brian F. Tankersley, CPA.CITP, CGMA 21:40
Thank you for sharing your time with us. We’ll be back next Saturday with a new episode of the technology lab from CPA practice advisor. Have a great week.
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Tags: Payroll, payroll providers, podcast, Technology