How to Start Up a Payroll Service
The success of payroll services such Paychex and ADP has revolutionized the payroll industry, proving that launching a payroll service can be a lucrative endeavor. However, there are several steps that must be considered when implementing a payroll service.
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Instructions
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Instructions
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Apply for a federal tax identification number with your local IRS field office. Check with your Secretary of State office to see if you are required to have a license to operate your payroll business; a fee may apply if you are operating a corporation, limited liability company or partnership.
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Open a bank account specifically for your payroll service. Invest in an efficient, reputable payroll software. There are plenty of payroll software systems available, but do your homework to avoid buying one that is unreliable. If you are starting up a large payroll service with several employees, you can purchase your own personalized payroll software. If operating on smaller scale, use payroll software such as QuickBooks.
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Gain clients by cold calling, sending custom e-mails, mailing proposal packets or by visiting the company. If you call or stop by, ask to speak with the person in charge of making the payroll decisions. When mailing or dropping off your proposal packet, ensure that it is professionally presented, and remember to attach your business card.
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Set up a system that invoices each client upon your completion of each payroll processing. Most payroll/accounting systems will have an invoicing feature. Determine your rates by researching your competitor's rates; you can call them directly to find out what they are charging. Set your rates competitively by keeping the following fees in mind: check processing, direct deposit, manual check, voided check, W2 issuing, tax filing, tax reporting and courier fees.
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Find a central location. Your prospective clients will be more inclined to use your service if you are easily accessible. Stay within close range if possible to avoid making lengthy trips to your local clients should face-to-face meetings become necessary.
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Have an attorney prepare a standard contract for you and your clients to sign. The contract should include your services, rates, and any documents giving you Power of Attorney for specific payroll transactions. Prepare a checklist for your clients outlining all the documents and information you will need to set up their account, such as bank account information and their tax ID number. If you will be hiring employees, have your attorney prepare a contract outlining your hire terms, termination rules, and consequences of employee criminal activities such as theft or embezzlement.
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Contact your Internet Service Provider to provide you with Internet service. Most companies that use payroll services transmit their payroll through the Internet. However, some may use e-mail or fax, so besides computers, purchase a fax machine, and if you can, a scanner.
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Tips & Warnings
Employ a knowledgeable and professional payroll staff. Ensure that you are easily accessible by phone. Show your clients that you care about their payroll. Make as few payroll mistakes as possible. Correct errors promptly, regardless of who made them.
