Why payroll providers should own their spend, not just the paychecks

Payroll software has entered a new era. What started as a function focused solely on issuing paychecks has grown into a central financial and business management tool. Today, providers are under pressure to do more, especially as CFOs seek fewer vendors and more integrated systems. In response, payroll providers have added capabilities to their product stack. If spend management isn’t on the list, it should be.

This shift isn’t just about checking another box. It’s about staying competitive in a market where finance leaders want visibility, control and efficiency all in one place. That’s why payroll platforms should  ask a new question: How can we help our customers save even more time and money beyond what we already provide?

The next frontier: from pay to managing spend

Recent moves in the market underscore this trend to use HRIS software to help manage spend. Gusto, for instance, partnered with Expensify to combine payroll and expense management.

What payroll providers stand to gain–and therefore why they should care:

• Increased revenue by customer
• Greater customer retention, increased customer lifetime value and more contract renewals
• Embedded payments services drive higher platform engagement and deeper data insights   

The big picture: the opportunity from a market opportunity standpoint:

• Allied Market Research found that the U.S. payroll (& HR) software market is expected to reach $47 billion by 2030
• The expense management market is projected to hit $16.48 billion globally by 2032
• Providing these two verticals gives providers access to a $63B+ opportunity–not including future growth in AI, real time pay or embedded finance

What’s at stake: 

According to ADP’s 2022 and 2024 earnings calls, losing a single payroll client, means that ADP loses thousands in recurring annual revenue (ARR). And as the old adage goes, it costs more than 5X the cost to acquire a new customer than it does to retain one. 

What that means: 

Retention and expansion are growth levers. Capturing a small percentage of customers upgrading to spend-enabled platforms could drive millions in new annual recurring revenue (ARR) for payroll providers.

Expense management is now table stakes for payroll platforms

A collaboration between payments and payroll are signaling something bigger: the traditional boundaries between payroll and finance tools are dissolving.

Why? Because expense control isn’t a nice-to-have anymore. PEX has merged SaaS and payments which is table stakes for any program provider working with the office of the CFO–giving end-user companies the ability to:

• Simplify month-end processes and reconciliations to save >600 hours per year and realize >$30K in labor costs 
• Deploy AI-driven workflows to ease receipt reporting and transaction coding, making expense policy compliance so easy that employees follow through with fewer reminders
• Automate budget management to prevent overspending
• Create embedded approval workflows that takes work of finance and manager teams
• Run employee reimbursements through the same approval flows as card spend 
• Reduce spend fraud and mistakes through auto blocking
• Combine payroll, time management and spend management into a single system employees already use for time management, pay, 401K, time off requests and more 

When these tools live disparate systems  separate from payroll, finance teams struggle to reconcile data, enforce policies, and get a full picture of their cash flow. But when payroll providers bring these capabilities in-house, they deliver a complete solution that keeps customers in a single platform. Clients who are more engaged and productive place higher value on their payroll provider capabilities and are more likely to renew at year end. 

Controlling spend strengthens customer relationships

Payroll platforms like ADP, Paychex and others that help their clients manage employee and operational spend do more than expand their feature set. They have the potential to become indispensable.

Combining payments and payroll offers the opportunity to become a customer’s  system of record. This deeper level of engagement:

• Drives loyalty and reduces likelihood of replacement 
• Increases customer retention by reducing the need for third-party tools
• Creates new monetization paths through premium spend features
• Broadens exposure beyond finance to include operations and even IT

As a result, providers that integrate expense control can differentiate on value, not just on price or payroll accuracy.

Partnering with PEX powers expense control without the complexity of developing payment products

The opportunity is clear, but building a spend management system from scratch is costly and complex. That’s where PEX comes in.

PEX offers a fully developed infrastructure for expense control that payroll platforms can co-brand, embed, or integrate through APIs. It gives providers the ability to launch a modern expense solution without years of development.

With PEX, payroll platforms can offer:

• Virtual and physical corporate cards with real-time rules and controls
• AI-powered automation for coding expenses and matching receipts
• Live dashboards that show spending as it happens
• ERP integrations to simplify reconciliation and month-end close
• Rebate programs that add financial value to every purchase
  

Today, payroll clients piece together disconnected tools, instead, offer them a unified platform that builds trust, improves compliance, and drives ROI.

The value is in the numbers

Expense management is often one of the most painful, manual and time consuming parts of finance. Bookkeepers often reconcile credit card statements with hundreds of transactions each month. With PEX, it becomes a source of efficiency.

Across 10,000+ customers, PEX delivers measurable impact. Finance teams save 657 hours a year on manual tasks like chasing receipts, coding transactions, and reconciling purchases. That’s the equivalent of $35,476 in labor cost savings per year. Add a 1% rebate on qualifying transactions, and the total ROI climbs to 10.85% annually (for a business spending ~$350K per year).

That’s real value your customers will see and feel, and that value reflects positively on your brand.

Payroll providers are perfectly positioned to lead

Payroll companies already have the infrastructure to move money. You already have the compliance framework in place. And you already have trusted relationships with your customers’ finance teams. Adding spend control simply extends your existing capabilities.

In today’s market, standing still means losing ground. But with the right partner, expanding your offering doesn’t have to mean reinventing the wheel. With PEX, you can unlock new revenue, deliver more value, and deepen your customer relationships, all while staying focused on your core strengths. Get a personalized demo now.