Payroll was once a core service offered by many CPA firms. It attracted clients, fostered long-term relationships, and served as a gateway to more valuable tax, audit, and advisory engagements.

But this is no longer the case. What was once a sure-fire way to cultivate client loyalty has become a growth bottleneck. Here are several reasons why it may be time to move away from offering payroll processing to your clients.

• Payroll is a drag on other parts of your firm. Payroll isn’t strategic – it’s reactive. You’re entering hours, processing changes, running reports, printing checks. It’s administrative, transactional, and time-sensitive. Your best workers spend time fixing minor payroll issues instead of advising clients or building high-value services. And every quarter, every tax filing, every late change request adds friction.
• Payroll compliance can be a trap. The minute you touch payroll, you’re on the hook for a myriad of federal, state, and local laws. And it’s not just tax filings. You’re also responsible for garnishments, benefit deductions, tip credit rules, sick leave ordinances, and random mid-payroll cycle rate changes because someone got promoted three days before the close of a pay period. Clients don’t notice compliance completed perfectly – but they sure do notice even one mistake. You’re taking all the risk, with very little reward.
• Payroll puts a ceiling on what you charge. As a CPA firm, you likely want to be seen as a strategic partner for your clients. But if you provide payroll services, your clients may compare you to their old payroll provider, not their old CFO. This makes it hard to price based on your value-added expertise. It’s difficult to command advisory fees when you’re solving clerical problems.
• Payroll doesn’t provide differentiation. Many accounting and advisory firms are trying to specialize. Whether it’s dental practices, SaaS startups, or professional services firms, clients want experts who understand their business model. Providing payroll services, unfortunately, doesn’t support this positioning. It’s the same across industries. And the better you get at providing payroll services, the more invisible you become. With advisory services, the better you get, the more praise you’ll receive from clients.
• You’re competing with payroll giants. ADP, Paychex, and Gusto have armies of engineers, sleek onboarding portals, and dedicated compliance teams. And even if you white label for one of these large payroll providers, you’re still the one holding your clients blame if something goes wrong.

Clients want help growing their business. For many owners, payroll is simply one of many costs of doing business. CPA firms that drop payroll usually see unlocked capacity and more opportunities to grow. These firms redirect staff towards advisory work, which can be extremely profitable and very difficult to outsource.

This is why many CPA firms are now partnering with payroll platforms instead of duplicating them. The result is more focus, better margins, and deeper client relationships.