Accounting and Payroll

[S T]

How does one compete with

1 - Payroll Services offered via ADP or other payroll services that are less than what you feel you can charge?

2 - Accounting and Payroll Services that target a specific Industry or Franchise - and the fees are so "discounted" ?

This has been a long time business client of mine since 1993 and I have been there through thick and thin on accounting, payroll, sales tax, financing, etc - and now since the economy is not so good and he is cost cutting or comparing my fees to other services. What he is providing me on information for other service charges - I can not even begin to compete with.

I am just about "sick" right now!
Sandy

[taxxcpa]

Competing

There is no way you can compete on price other than by lowering your prices. If you can't do that, then just bit the client a fond farewell.

I've had people call who thought over $ 15 was too much to charge for a return. I tell them that I charge $ 125 to $ 500 for most returns and tell the to keep shopping until they find someone who will do it for that price.

[Corduroy Frog]

Cost, No. Service, Yes.

Sandy, you cannot measure your capabilities and cost competition with huge companies that have seemingly endless resources. ADP has such a broad customer base that they can afford sophisticated programming and lightning-quick processing. And this large base can drive down their costs such that you absolutely cannot compete.

You bring up industry-specific accounting software and the problem is similar. If your client has 30 tractor-trailer rigs, how can you compete with an integrated software package which simultaneously captures, gallons, states, fuel taxes, permits, etc. with every payables record? The simple answer is you can't. Like a local hardware store trying to compete with Home Depot.

Don't sell short your advantages, however. Their volume drives basic costs downward but also creates overhead. And when their customer really needs help fast, he ends up calling a guy named "Peggy" in Bangladesh. One critical feature of ADP, for example, is the client lives with fixed, inflexible input forms because their low-paid clerk cannot understand the real nuances of payroll processes. The low-paid clerk is part of their labor mix and their corporate model that brings down their costs. "Peggy" is another cost-slashing feature that drives down their cost.

If you really have intimate experience with this customer's payroll you already know that 85% of ongoing problems are with timekeeping, rates, updating, and event-specific features that are often unique. The other 15% is feeding this stuff into a meat-grinding calculator that spits out paychecks and tax reports. Your client is going to get zero help from ADP for these phenomena. He will be given a deadline and these aforementioned inflexible forms to send in, and their meat-grinder will spit out paychecks and tax reports just like your software will.

No, you can't compete with their price. Because you don't have that low-paid clerk. You are not "Peggy." And when something unusual comes through you can handle it, instead of forcing the client to negotiate with pre-printed forms. Considering this, are you really that much at a disadvantage?

So price is not everything. None of these can be as responsive or customer-centered as you can. Just as you can't compete with their price, they can't compete with your service. The allegory becomes clear when a contractor goes to Home Depot for a cheaper product and the bepimpled teenager can't find one tool from another.

Good luck with this -- If I were your customer I would hate to lose you, Sandy.

[S T]

So far

Thank you two for the viewpoints.
Snags, you pointed out a couple of great "issues"
If this client goes to ADP for lesser cost - he will most definetly have to change his payroll paydate. We do it on a 2 day turn around - and I do not believe he will receive that from ADP - he will have to advise his employees - that there will be a 1 week differntial just to set it up - electronic or not
The other items, I am looking at - is the integration with Quickbooks - that might be a maybe or a possible
What about the employee notices from State of California such as garnishments, wage verification, etc??
This is a "high end" revolving door on employees as they are in the low end pay scale (as in minimum wage) revolving door employee - not stable - so we usually have Calif chasing garnishments and then have reports or checks to issue or respond to.

And, the monthly accounting is not an easy deal - even though they have migrated to an "so called" integrated system - there are monthly accountings, sales tax reports, underground storage reports, and the list goes on. The so called integrated system does not 100% migrate to Quickbooks, and there are a lot of hours expended even though QB will download certain bank transactions - but for me it all has to be verified, and we are finding we have to create our own "excel" reports to meet the Government Reporting.

I know I am justifying my position to all of you on the board - but guess I need that right now, as I feel like I was just hit "right between the eyes" after about 17 - 18 years worth of time expended and working with this client.

So my apologies, I am not thinking clearly and not in the best frame of mind right about now - tonight.

Sandy

[Uncle Sam]

Accounting and Payroll

As was brought up by a prior post - clients see price - they don't see service. In our consumer conscious public, they don't consider the intangible attention given to provide service - they only consider dollars - and that's not easy to convince some clients.
So - you're experiencing what we all experience at some time or another
And it's frustrating at the beginning of tax season.

[PIGLEE]

After this client leaves, you just might get a new client. Then in a year or two when the old client is begging you to take him back, you then can decide ,no, or yes with a higher price. I know it hurts right now, but it might be a blessing in disguise. I've been in your same shoes, and know how it feels when it happens.

[S T]

thoughts

Piglee, This is not something I have not thought about, as this client is so labor intensive, and I am pretty much on call 24/7- Faxes, emails and phone calls, just always something.

So my thoughts are not to respond much and say "I can't compete" or try to give the breakdown of the services " I actually compete on" such as added services that are not charged and relationship with bankers, insurance agents, etc. Make an excel spreadsheet of each "service" and I am not good at putting together spreadsheets

Client just faxed over some fact data from ADP - which is "not even in the realm of possibilty" except for the first few months, or maybe a year. I have a contact at ADP so will find out more about charges. The other Competing Service - my charges are in relationship with their's on accounting, and payroll - just some extra reports. However, the charges they are quoting on Tax Prep is "killing" me! So not sure how to overcome that. I am double what they are quoting.

At any rate it is Friday nite, and I am not going to act on this before Monday, sometimes procrastination is the best tool to get our "heads screwed on straight"

Yes Piglee, you are right and always how I have approached, let one "intensive/demanding" client go, and then the "world" opens up and we receive more or multiple "less intensive clients" that really do appreciate our work.

I am just having a "huge" moment due to the length of time I have been with this client, since 1993 and now to have this confrontation about charges and having to compete with lesser services. It is also a client, that has grown and expanded, so the fees received are an issue.

Thanks everyone for your support, and any additional support or ideas you can provide.

Sandy

[S T]

Question on Fees

Comparing some notes

What is your interpretation of a quote on payroll service that says

"$35 Base Fee + 1.25 per check each payroll" (This is what is listed on their Quote Sheet)

It is a Bi-weekly payroll so 26 times per year

Is that a $35 fee each payroll period + $ 1.25 per check (bi-weekly)
Or just $ 35 per month? +the 1.25 per paycheck
And does that include the associated payroll period checks to pay the payroll liabilities, or wage levy checks or garnishments associated. ????

Example: Bi-weekly payroll of 15 payroll checks for employees and 2 associated Fed and State deposits for payroll liabilities.

What would the cost equal for payroll services per payroll period?

The quote is not including payroll quarter reports, or annual reports and W-2 reporrting, stating that it is included.

?????? Would like anyone else's interpretation - I have the clients interpretation. Quote from competing service might not be necesarily as presented ?

Sandy

[gboykin]

Sandy,

I have two scenarios that are similar to your that are/were clients of mine. The first is a pizza shop owner. He used ADP for his payroll for the first year of business, and I would feed in the payroll ATF just to track it for him, as I do the monthly bookkeeping/sales tax. In looking at his ADP reports, the fees are drafted from his account, along with the accompanying payroll taxes to the taxing authorities. He paid a per payroll fee, plus $1/!.75 (not sure of the exact amount) per check. Then he was charged additional for each payroll report generated. An extra fee at year end for W-2's. An additional fee for New Hire reports. So in a nutshell, there was an additional fee for EVERYTHING not related to printing checks. When I added all of the add on fees, my fee for just monthly bookkeeping/sales tax reporting was less than he was paying ADP for his payroll. I offered to do the bookkeeping and payroll for 1/2 of what ADP was charging plus my bookkeeping fee, and was able to get his payroll and a nice addition to what I was charging for just bookkeeping. And I was doing the same work either way, as I was already inputting his payroll ATF. The only difference was I cut his checks. He got several letters from IRS re: his payroll, and I could only refer him to ADP, as I did not process his payroll. It was very inconvenient to him, and took forever for ADP to resolve the issue, that would have taken me probably one phone call or letter.

The other client runs about 50 employees per bi-weekly payroll. This one is very time consuming, as the client doesn't get the information to me until the day it is due. Sometimes if I'm lucky, I will get it the day before. Then, invariably, I have to chase new employees that have been added (and I always get - you had them last payroll) - NO I DIDN'T or I wouldn't be asking for it. Have to go over hours worked over and over until they are satisfied. Actually more work than it is worth, but keeps my payroll processing employee busy, so I keep them. Now they are considering using a payroll service as it will be less expensive. I know that there is no way that they will ever be satisfied with the non-flexibility of a payroll service, but I wished them well, and told them that I would be happy to take them back after the first payroll week if it didn't work out, but after that, I would not make any guarantees about taking them back, or what the new fee would be if I chose to take them back.

I really think your selling point to them is your flexibility and the fact that you are available to assist with any IRS/state related issues rather than having to deal with these frustrating problems over the phone with someone that is just doing their below minimum wage job trying to get to the next call. In my opinion, if you lower your fee to try to compete, you will be de-valueing (sp?) yourself, and may not want to throw that image towards the client. Make him an offer like I did, and let the chips fall where they may. You may be surprised at the outcome, or you may lose a client.

Hope this helps, and good luck with your decision.

[Lion]

Don't compete on price

Don't even try to compete on price. If you decide to make a counter offer, make it by detailing your services and not by lowering your prices. List what you actually do, in great detail, including being on-call at all hours, short turn-around time, etc.

Maybe remind them that they are receiving a discounted fee by being your client for multiple services. Let them know that your prices are higher for clients purchasing only one or a few services, will increase for them on your remaining services if they remove some services from their mix.

Maybe outline their total package with you and offer to divide it to a set monthly or weekly fee to make it easier for them to budget -- instead of a fee per payroll but extra charges each quarter for reports and extra charges annually for W-2s, such as ADP is offering.

And if they go elsewhere, you'll be able to take on a new client who's less labor intensive. Probably two!

[oceanlovin'ea]

Know how you feel

I had a client that I was just doing the payroll for a couple of years ago. Manager was a foreign person whose English was limited. I was printing the checks. They would fax over the hours and I would figure payroll and print checks twice a month. Always new people on payroll that may have left before the payroll was even done. Getting Social security numbers was sometimes difficult. Usually had to redo half a dozen checks each time. It was really a giant PAIN.
They got in trouble because they weren't paying worker's comp on their employees. So they quickly signed up with ADP.
At first I was a little bit in shock and my revenue reflected the loss of the account. But the stress level was so much better. I didn't realize how much they took out of me.
Then I had time to work on other things....increase my tax clients. It all worked out in the long run.
Of course, I didn't have a long standing relationship with them like you have had. But make a statement for your case and then let it rest. It will all work out in the long run. You can look for new business if they choose to leave.

Linda

[JON]

One of your

goals is never to be cheap in this business. Hurts occasionally, but long term you will be fine. Payroll services start cheap and try to build to additional services. They are a lot more aggressive than before. When there are communication problems and payroll reruns, corrections or timing issues come into play that is what we are the best at.

Good luck..

[dsi]

I have a client who uses ADP for their payroll. For 50 employees, they are charged $191 per pay period. That = $382 per month. There are extra charges for the w-2's etc. I think they are $5 per form? There may also be extra charges for the qtrly reports?

[dsi]

Personally, I wouldn't offer any explanation for my fees except to say that "this is what I can prepare your payroll for". "If you feel you need to have it prepared by someone else who says they will charge you less, then I hope it works our for you".

[JG EA]

I charge a per month fee. I don't charge extra for W-2's and other year-end items. But, clients might compare that monthly fee with another quote. So, I started putting on each bill what that monthly fee covers. I list quarterly reports and year end reports (it is set up automatically under the payroll item screen).

But, try to view it as a sign of the times. People want to cut all the corners they can. I also had a "hit in the teeth" moment this last week. A long time client called to ask her AGI because she is doing Turbo Tax and needs it to efile. I thought of so many things to say but just gave it to her and wished her well. Of course I was secretly hoping she would totally mess it all up.