How to Set Up Payroll for Your Accounting Clients

From tax preparation to advising, your accounting services are invaluable to small businesses. One in-demand service among small business owners is payroll. Not to mention, 43% of accounting firms believe payroll services can benefit clients. 

Offering payroll services to clients helps you: 

• Increase income from current clients
• Retain clients who want you to manage their payroll
• Attract prospective clients looking for payroll services

Once you decide to grow your practice by adding payroll to your list of services, you need to determine how you’ll manage payroll. Then, you need to set up payroll. “How do I set up payroll for my accounting clients?” is a question you might have. 

How to manage payroll for a small business 

When you offer payroll services, you likely provide the following for your clients:

• Employee timesheets collection 
• Payroll calculations (wages, taxes, and deductions)
• Direct deposit payments to employees
• Payroll tax filings and deposits
• Deductions and contributions remittance (e.g., 401(k) deductions)
• Payroll accounting
• Recordkeeping for payroll 
• Access to payroll analytics

Yes, it’s a long list of responsibilities. But technology has made offering payroll services much easier for accountants than in the past. 

Accountants who don’t want to spend hours staying on top of new payroll tax rates and laws can use reliable payroll software.

The software handles tax rate updates, calculations, direct deposit payments, and tax filing and deposits (if using a full-service payroll). 

Using payroll software to manage payroll is a must for accountants who want to save time, simplify compliance, and maximize earnings. But, it’s not the only decision you need to make.

You also need to decide how you’ll use the software. You can either:

1. Offer full payroll services: Handle the entire payroll process for clients
2. Offer client DIY payroll: Let clients use the software to run payroll themselves 

Often, accountants will offer a combination of both to best serve the specific needs of their clients. 

Payroll service models (and who they’re best for)

• Full Payroll Management (we do it for you)
  • Best for: Owners who want zero admin, growing teams, multi-state, or complex deductions/benefits.
    What’s included: End-to-end payroll runs, direct deposit, filings/deposits (with full-service), year-end forms, records.
• Client DIY Payroll (you run it, we oversee)
  • Best for: Cost-conscious clients with simple payroll who still want expert oversight.
    What’s included: Client runs payroll in software; you review reports, reconcile, and advise on compliance.
• Payroll Tax Compliance only
  • Best for: Clients comfortable running payroll but want filing/deposit accuracy and deadlines handled.
    What’s included: Tax filings and deposits, agency correspondence support, compliance calendar.

Tip: Many firms package payroll with bookkeeping and year-end to increase retention and margin.

Deciding how to manage payroll for your clients is a big factor in determining your payroll pricing. How much do accountants charge for payroll? 

Your price depends on factors like: 

• Whether you offer full payroll services or give clients software access
• Your experience and credentials
• Location
• How many employees your client has

Setting your pricing is a key part of a successful payroll program. Charging too much could turn clients away, while charging too little can force later increases. Common pricing models include:

• Per-run fee + per-employee fee
• Monthly retainer (tiered by headcount)
• Bundled pricing (payroll + bookkeeping + year-end)

Assess your services, compare rates, and gather client feedback when determining your pricing structure. Whichever model you choose, publish what’s included, and note any add-ons (e.g., new-hire reporting, off-cycle runs).

How do I set up payroll for my clients?

To begin setting up payroll for your accounting clients, it’s important to establish a streamlined process.  

1. Choose a payroll system

Choose a reliable payroll software system before setting up payroll for your clients. Or, you can manually handle payroll using tools like spreadsheets and subscriptions to tax news. 

If you’re like most accountants, you don’t want to think about payroll; you’d rather earn scalable, recurring income! In this case, you want to use payroll software for multiple clients. You might also consider looking for payroll software with time and attendance software integration. That way, you can easily track your clients’ employees’ hours worked. 

What to look for in payroll software for accountants:

• Multi-client dashboard, role-based access, and easy client switching
• Tax filing coverage for the states you serve (and a filing reliability guarantee)
• Direct deposit at no or low cost and fast funding timelines
• Bulk import tools for YTD data, employees, and deductions
• Integrations (GL exports, time tracking, etc.) and audit-ready reports
• USA-based support and onboarding help for migrations

Many providers, like Patriot Software, offer discounts on time and attendance and payroll software for accountants. Plus, you can get other perks like free support, co-branding, and special tools for managing your client accounts. 

2. Have a consultation

How you set up payroll for your clients also depends on each client’s needs. Consider offering a free payroll services consultation to learn more about client needs. 

You can ask questions like:

• Do you want me to run payroll for your business?
• Have you ever used software to run payroll?
• How much time do you spend on payroll? 
• How much time do you want to spend on payroll?
• What do you currently spend on payroll?
• What’s lacking in your current payroll process?

Again, no two clients are the same. Tailor your payroll services, and pricing, to each client. You may also bundle multiple services (e.g., payroll services, tax preparation, etc.). 

3. Gather client information

After you create an agreement with your client, you can gather the necessary payroll information. 

You will need your client’s:

• Employer Identification Number (EIN) 
• Electronic Federal Tax Payment System (EFTPS) account 
• State and local tax account numbers (e.g., SUTA tax number)
• Workers’ compensation coverage
• Bank account and routing numbers for tax collections and direct deposits
• W-4 and state W-4 forms for each employee
• Contribution and deduction information

Pro tips:

• Request current payroll register, YTD totals, and benefits/deductions schedules to ensure accurate first runs.
• Use secure upload portals (not email) for ID and bank documents.
• For contractors, gather W-9s and payment preferences.

After you receive client information, you can onboard their payroll data into your software account.

4. Set up direct deposit

Over 93% of employees receive their wages via direct deposit. Most payroll software systems offer free direct deposit so you can set up this payment method directly through the system. That way, the software handles the direct deposits each payroll run. 

Gather bank information for each of your client’s employees, including:

• Bank account number(s)
• Routing number(s)
• Bank’s name
• Type of account (e.g., Checking or Savings)

5. Manage payroll for your clients

You can start running client payrolls after you have everything set up. Again, how you manage payroll depends on whether you’re running payroll for your clients or giving them software access. 

Full payroll services: You’ll run the payroll (may take as little as 2-3 minutes). Ensure employees are paid via direct deposit or paycheck. Give access to paystubs and W-2s. You are also responsible for filing and depositing your clients’ federal, state, and local payroll taxes. Full-service payroll software will handle this for you. Some providers, like Patriot Software, provide a tax filing reliability guarantee so you can feel confident that you have a payroll partner you trust. 

Client DIY payroll: Give clients access to the payroll software. Under your watchful eye, clients have access to run and manage their payroll.

Keep all clients’ payroll records according to IRS, FLSA, and EEOC requirements.

6. Bill clients according to your practice fees

Last but not least is ensuring you get paid for your payroll services. 

If you use software, the provider bills you for the software. You can then invoice your clients according to your practice fees, which may include other services you offer. 

Tip: Automate invoicing with accounting software and set collection terms (e.g., ACH/credit card on file) to protect cash flow.

Common pitfalls (and how to avoid)

• Missing YTD totals: Always import YTD wages, taxes, and deductions before the first live run.
• Duplicate filings: Clarify which provider files which returns to avoid double-filing.
• Security gaps: Use encrypted portals for IDs and bank docs; restrict user roles.
• Timing missteps: Avoid mid-cycle cutovers; align with a new pay period or quarter.
• Unclear scope: Publish what’s included (runs, filings, year-end, off-cycle).

Enjoy the bump in profits 

When diving into offering payroll services to your accounting clients, it’s normal to feel like there’s a lot to think about. 

But get ready for some awesome perks like happier clients, a steady stream of recurring income, and a nice bump in your profits.

FAQs

This article has been updated from its original publication date of June 7, 2024.

This is not intended as legal advice; for more information, please click here.