Incurring penalties and interest because of missed deadlines on federal, state and local taxes that slip through the cracks is painful, particularly so for Paychex Inc., which serves the tax payment needs of more than 500,000 small businesses.
The company's Taxpay tax filing product is designed to collect funds from clients each time payroll is processed to cover their tax liabilities. It then holds the monies until the date the payments are due to respective agencies--nearly $90 million this past fiscal year in the aggregate.
Revenue on the float is significant, but so is the cost of penalties due to a missed due date. "As we got larger, the penalties grew proportionately," acknowledges Bill Coller, Paychex risk manager.
The problem, in part, was the company's quarterly audit process, which identified payments that were missed only after the due date. Paychex initially met the challenge with a two-week audit process, which helped but ultimately was deemed inefficient. Enter the company's Enterprise Risk Management group, formed in 2003.