As the economy improves and the labor market slowly revives, businesses will begin to outsource payroll services again, causing industry demand to rise. For these reasons, industry research firm IBISWorld has updated a report on the Payroll & Bookkeeping Services industry in its growing industry report collection.
Los Angeles, CA (PRWEB) January 24, 2013
The Payroll and Bookkeeping Services industry provides payroll and bookkeeping services on an outsourced basis. According to IBISWorld industry analyst Andrew Krabeepetcharat, “The industry has grown over the long term as clients increasingly outsource back-office administrative activities to focus their efforts on core business functions.” By outsourcing payroll and bookkeeping, small businesses can save time and money, freeing up resources for higher-priority activities. Additionally, the rising complexity of payroll and benefits payments and deductions has led businesses to outsource these functions to ensure compliance. Unfortunately for industry operators, rising unemployment caused a fall in demand for payroll services during the past five years. In the five years to 2012, IBISWorld estimates that revenue has declined an average 1.1% annually to $48.5 billion. The recession caused revenue to fall as rising unemployment led to shrinking client payrolls and more client bankruptcies. As a result, many businesses brought their payroll and bookkeeping processes in-house to cut costs. However, the industry's fortunes have begun to improve over the past year. From 2011 to 2012, revenue is expected to rise 3.3% as the economy recovers and the unemployment rate begins to decline.
The recessionary fall in industry revenue hit the bottom line for many payroll and bookkeeping firms. “Profit margins suffered as firms reduced their fees to retain clients,” says Krabeepetcharat. The decline in demand was especially hard on small firms, which represent the majority of operators. Falling demand adversely affected these firms because they typically focus solely on the small business market, which was particularly hurt by the recession. Many small players were forced to leave the industry in the face of poor operating conditions. In the five years to 2012, IBISWorld estimates that the number of firms has declined at an annualized rate of 0.6% to 264,066. However, an expected rise in profit over 2012 is anticipated to bring some of these firms back into the industry.
IBISWorld estimates that in 2012, the four largest players in the Payroll and Bookkeeping Services industry will account for less than 20.0% of the available market share, indicating that the industry has a low level of concentration. About 73.7% of enterprises with at least one employee have fewer than five employees, while 86.7% have fewer than 10. Furthermore, most industry firms are sole proprietors. While nonemployers only generate 10.0% of revenue, they represent 85.5% of firms operating in this industry. The dominance of small operators in the industry is mainly due to its low barriers to entry. It is relatively easy and inexpensive for an accountant or person with in-house payroll or bookkeeping experience to start a small bookkeeping business and capitalize on the outsourcing trend. Additionally, most payroll and bookkeeping services clients are small- to medium-size businesses, which often prefer to deal with small, local service providers to receive personalized service and understanding of their business.
As the economy begins to recover, the improving labor market will boost demand for payroll and bookkeeping services. In the five years to 2017, revenue is forecast to increase steadily. Despite this growth, however, continued high unemployment will spur increased price competition, which will ultimately weigh on profit margins.
For more information, visit IBISWorld’s Payroll & Bookkeeping Services in the US industry report page.
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IBISWorld industry Report Key Topics
Businesses in this industry provide outsourced payroll services for clients' employees. Basic bookkeeping services are also covered in this report. This industry does not include tax preparation firms and certified public accountants (CPAs).
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.
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