ZenPayroll targets accountants with new dashboard, hopes to make service providers an influential ally
Payroll is one of those things that is a necessary evil of business, but that no one really enjoys – even the people who get paid to manage it for a living. For the last five months since its launch, cloud-based ZenPayroll has been making this process easier and more enjoyable for early stage startups and small businesses, including Y Combinator (where it was a member of the W12 class), Clever, SendHub, and SwiftType. Today, the company is announcing ZenPayroll for Accountants, a centralized dashboard for managing the payroll of multiple companies concurrently.
Of the six million companies in the US that require payroll, 3.7 million have less than five employees. The majority of these companies find themselves managing payroll manually or outsourcing it to an independent bookkeeper or accountant, rather than suffering through dealing with costly and frustrating “enterprise-grade” vendors like ADP, Intuit, and Paychex. Every year, one third of US small businesses are fined for doing payroll incorrectly, resulting in more than $5 billion worth of penalties in 2011. (This is not surprising that businesses in California have to pay 12 different state taxes alone.)
ZenPayroll aims to eliminate this by bringing the power of modern software to these small companies and their service providers, while further disrupting the 40-plus-year-old incumbents by working from the long-tail up-market toward the enterprise.
The company’s new dashboard allows an accountant or bookkeeper to add multiple clients seamlessly in a matter of minutes per account, as well as maintain a list of pending tasks for each company, create individual payroll reports in just a few clicks, and review company statistics and status all from a single screen. For a multi-person firm, the software also allows multiple admin and user credentials. Most importantly, ZenPayroll for Accountants is entirely free, with each individual client company, rather than the accounting firm, paying for their respective license much as they would for complementary accounting software like Quickbooks or Freshbooks, or Bill.com.
Once inside an individual company account, the software offers the same benefits that have already earned it the business of hundreds of clients. The user can quickly add pertinent details like employee hours, overtime pay, bonuses, reimbursements, garnishments, benefits, etc. The platform then automates payroll tax calculations and payments, and enables direct deposit and paperless filing of payroll-related government documents. Employees get persistent access to their personal profiles, even after changing employers, where they can change payment settings, access paystubs and employment documents, manage personal and financial details, and review pay and benefits data
“We have already processed tens of millions of dollars in payroll, and are currently processing several million dollars each month,” CEO Joshua Reeves says. The individual tasks might not be “sexy,” Reeves concedes, but he aims to make the overall experience of managing payroll through ZenPayroll “delightful.”
Reeves considers accountants one of three primary constituencies that ZenPayroll serves, with the others being small business owners and employees. The idea is not to disrupt or replace these service providers – although the fact that there’s 1.8 million accountants and bookkeepers in the US surely makes for some dry dinner conversation. Rather, it’s to allow them to spend more time advising and consulting their clients rather than buried in mundane and value-robbing tasks like processing payroll.
“Based on feedback, we’ve found that accountants are thrilled to be armed with a better product they can use to keep their clients from fleeing to larger competitors,” Reeves says.
Y Combinator switched from Paychex to ZenPayroll nearly a year ago while it was still in beta, according to the accelerator’s head of backoffice Kirsty Nathoo. “The key for me was the speed and flexibility of being able to run payroll on my own timeline, and not have to wait for a call from Paychex,” she says. “The fact that they send me cute facts like ‘this month’s payroll is equivalent to X pounds of bananas’ is just a pleasant bonus.”
ZenPayroll is currently available in California only, although the company plans to add several new states per month beginning at the end of Q2 this year, according to Reeves. The SaaS product is priced at $25 plus $4 per employee per month up to ten employees, with additional employees priced at $2 per month thereafter. This means that a company of five pays $45 per month, and a company of 10 pays $65.
Reeves has grown his team to 13 people, following a splashy $6.1 million Seed round announced in December 2012 (the round actually closed in April), the largest in history for a Y Combinator grad. Backers include Box CEO and co-founder Aaron Levie, Yammer CEO and co-founder David Sacks, Dropbox CEO and co-founder Drew Houston, YouTube co-founder Jawed Karim, Yelp CEO and co-founder Jeremy Stoppelman, Badgeville CEO and co-founder Kris Duggan, SugarCRM CEO Larry Augustin, and Zuora CEO and co-founder Tien Tzuo, as well as Google Ventures, Data Collective, Sherpalo Ventures, and Salesforce.com.
Despite its pile of cash, ZenPayroll is understaffed and underfunded given the $50 billion worth of market cap owned by its three largest competitors (ADP, Intuit, and Paychex). The startup is relying on its ability to move quickly and think differently, while these giants grapple with the innovator’s dilemma. It wouldn’t be the first company to unseat a decades old oligopoly, but the task ahead remains a monumental one.
This risk is compounded by the challenge of targeting the long-tail of the market. ZenPayroll has a small inbound sales team, but no outbound sales efforts. Rather, it’s focusing on being a payroll knowledge repository via its help center and on forums like Quora and elsewhere, according to its CEO. “Our philosophy is all about helping,” he says. SMBs may be the customers most in need of an alternate solution, but identifying and then converting them to customers can be a costly and highly inefficient process.
Today’s announcement of the ZenPayroll for Accountants is a big step in the right direction. By more directly targeting this market, the company can add a powerful advocacy and inject leverage to its customer acquisition machine. There is little doubt that the payroll market is in need of disrupting. With a strong pedigree and a deep bench of leading tech CEOs as investors, ZenPayroll is well positioned to take on the challenge.