Small CPA Firms Can Thrive Even As Payroll Giants’ Territory Expands

Julio Gonzalez, National Tax Reform Expert and CEO of Engineered Tax Services (ETS), The Growth Partnership and ABLE CRM.

In recent years, the accounting and financial services industry has undergone a seismic shift driven by technological advancements and changing business practices. Large payroll management companies, once confined to processing paychecks and managing employee records, are now expanding their offerings into the realm of tax and accounting services. This transformation has caused ripples through the CPA firm landscape, particularly affecting smaller practices.

In this article, I will explore how the expansion of services by these payroll giants is reshaping competition and potentially challenging the models of smaller CPA firms.

The Evolution Of Payroll Management Companies

Back when I and most of my peers entered this industry, payroll management companies were primarily associated with payroll processing, ensuring accurate and timely payments.

However, the advent of cloud computing and advanced software solutions has allowed these companies to extend their offerings beyond payroll. Leveraging their existing client relationships and streamlined infrastructure, they have begun offering additional services such as tax preparation, accounting and even financial consulting. This expansion has positioned them as one-stop shops for businesses seeking financial services.

Impact On Smaller CPA Firms

In today’s competitive landscape, I’ve seen smaller CPA firms face heightened competition in an already saturated market. The allure of consolidated services appeals to businesses looking to streamline their operations and reduce vendor relationships. This trend places smaller CPA firms at a disadvantage, as they often lack the resources to match the comprehensive suite of services offered by their larger counterparts.

Moreover, the convenience factor plays a pivotal role. Many business owners prefer having a single point of contact for various financial needs. This allows payroll management companies to cross-sell their tax and accounting services seamlessly, posing a challenge for smaller CPA firms striving to retain clients drawn to the convenience of these bundled services.

Quality Vs. Convenience

While convenience is crucial, quality of service remains paramount. Smaller CPA firms have long-standing expertise in tax and accounting services, often tailored to the unique needs of their clients. This often translates to personalized attention, deep industry insight and a history of building client trust. However, the challenge lies in effectively communicating the value of these differentiators to clients who may be tempted by the all-inclusive packages from larger payroll management companies.

Maintaining Independence And Specialization

One of the core concerns that I have repeatedly encountered firsthand is the potential loss of specialization. Smaller CPA firms often thrive in specific industries or niche services, building a reputation for expertise in those areas.

The broad spectrum of services from large payroll management companies might dilute this specialization, resulting in a more standardized, cut-and-dried approach to financial services. Businesses that require tailored solutions for complex financial situations may find it challenging to obtain the same level of specialization from these larger entities.

Maintaining Client Relationships And Integrity

For smaller CPA firms, allowing clients to migrate to larger payroll management firms is akin to letting the fox into the henhouse. These companies have been leveraging technology to disrupt CPA practices and obtain new clients for new services. CPA firms need to be cautious when choosing a payroll management company, ensuring their clients won’t be poached in the process.

A productive partnership between CPA firms and payroll companies is vital. Exploring strategies such as revenue sharing or other means of incentivizing optimal outcomes for the client without compromising each other’s clients could foster a mutually beneficial relationship.


In a swiftly evolving financial services landscape, the expansion of large payroll management companies into tax and accounting services sparks a dynamic interplay of convenience, specialization and competition. Smaller CPA firms, while facing challenges in this new environment, still possess the advantages of personalization, expertise and a history of trust with their clients. The key lies in effectively conveying their value proposition and embracing technology to stay competitive.

As the industry continues to evolve, the dynamic between these payroll giants and smaller CPA firms remains intriguing. The firms that successfully navigate this shifting landscape will likely be those that strike a balance between harnessing the power of technology and maintaining the core principles that have defined the CPA profession for decades.

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