Payroll, as a profit business for an accounting firm, can yield hourly rates of $100 per hour and above. A properly trained bookkeeper-level staff person can do the complete payroll processing job at a going rate of $12 to $20 per hour, with an average of $15 per hour. In calculating typical payroll production, the average payroll processor can process a minimum of 100 accounts per month at an average fee of $100 to $150+ per month, per client, yielding $10,000 to $15,000 in recurring monthly billings each month, which means that they are responsible for averaging $150,000+ of yearly payroll revenues into the firm.

In most firms, the breakeven in labor costs for this person will be 20 to 35 clients per month. Once this process is at a breakeven point, the real opportunities of payroll open up and can bring profits to the firm. In the above example, startup costs are not included, just labor costs, including payroll taxes and benefits. Every firm has a different breakeven point but everything else is benefit.

To illustrate the costs further, let’s use the example of a CPA firm in the Midwest where one employee services 130 clients at an average of $1,500 yearly fees. The bottom-line numbers in this firm are $195,000 in gross payroll revenues while paying approximately $40,000 in pay and benefits to the processing person. When the system of payroll processing is outsourced, very little daily or weekly communication with the client is required of the accountant. The exclusion would be a high-level discussion that might lead to additional billings.

These are the obvious benefits of payroll, but let’s view payroll as an iceberg. What lies under the surface is the real value of payroll business. Once a firm has made the first step of delegation, the other four “keys” of payroll reveal themselves and produce additional profits and benefits.