NAPEO
Employee turnover poses significant challenges to PEOs, affecting their productivity, financial stability, and overall success. In this article, we will delve into the various costs associated with employee turnover, providing a detailed analysis of the expenses involved and the detrimental effects on organizational performance.
If you asked someone in the PEO space what he or she thought of actuarial science a positive response might be reserve analyses or accruals. A negative response might be collateral calls or rate increases. Naturally, the varied reactions stem from whether there is positive or negative news coming from the work of the actuary. Yet, one of the most helpful projects an actuary can perform for a PEO, eliciting either positive and negative reactions, is a client-level financial analysis.
The article provides some simple guidance for streamlining operations (thus reducing selling, general, and administrative (SGA) costs) and increasing gross profit contribution from their existing client base. For the purpose of this article, we are only exploring pricing strategies that affect client profitability and operating efficiency items that impact select SG&A cost categories. Business development and organic growth are excluded from this discussion.
General ledger reconciliation is a key control to help maintain timely and accurate financial statements in any business. If you speak to accounting or finance professionals in the PEO industry, they will agree that general ledger balance sheet reconciliations are the most telling and critical tools in analyzing a PEO’s fiscal position. Failure to reconcile balance sheet accounts timely and accurately can lead to material losses to the PEO. Let’s explore the 5 W’s of PEO ledger reconciliations.
Performance metrics can provide valuable insights into different aspects of your business from financial health to client satisfaction. However, it can be challenging to determine which metrics are essential and which ones are merely background noise.
Among the many determining factors in PEO transactions, profitability is one of the most important. I like to call these factors “Pieces of the Puzzle” in this very complex 2023 world of M&A. Let’s go through some basic concepts first.
General ledger reconciliation is a key control to help maintain timely and accurate financial statements in any business. If you speak to accounting or finance professionals in the PEO industry, they will agree that general ledger balance sheet reconciliations are the most telling and critical tools in analyzing a PEO’s fiscal position. Failure to reconcile balance sheet accounts timely and accurately can lead to material losses to the PEO. Let’s explore the 5 W’s of PEO ledger reconciliations.
To achieve success, a PEO must build and maintain a strong foundation. Without this, the weight of the inevitable operational stresses and changes to be encountered as the year progresses will not be sustainable. With the new year rush behind us, take this opportunity to get your house in order. While there are multiple financial items to tackle such as budgets, forecasts, and tax rate reviews along with sales and marketing initiatives, this article focuses primarily on operations-related steps.
Six M&A experts from across the PEO industry weigh in on the market, where things are headed, and what buyers and sellers should keep in mind.
All these challenges can be met by PEOs. It may take some re-engineering of the model, but the PEO service could be central in the reordered economy and business environment in the years ahead. It is a time to be especially vigilant to customer wants and expectations, for many businesses will find it difficult to be profitable. This is where the PEO value proposition will be challenged most.
If you read any newspaper, watch any news program, or listen to any business podcasts it’s impossible to avoid discussions of surging gas prices, record inflation, labor shortages, supply chain bottlenecks, and—scariest of all—signs of a looming recession.External influences like these economic forces are part of any business cycle. You can’t out-grow, out-innovate, or out-think market forces. However, how you respond to such influences can be determinative in how well you fare through challenging economic cycles.
Following industry best practices is a step in the right direction to help drive profitability.
In the business world, companies and individuals use goal-setting methodologies to achieve the core mission, objectives, and key metrics. Many achieve this with the use of key performance indicators (KPIs).
Understanding how to analyze a PEO’s financials is beneficial for scaling and maximizing profit. Formal due diligence on potential acquisitions within the PEO space should always begin with a financial analysis.
As we head into the midpoint of 2022, wage and goods inflation continues to be a hot topic because it continues to negatively affect the vast majority of industries, as well as the people working within them. How has the PEO industry managed to, in large part, avoid a phenomenon that has had such high-cost implications? It’s all relative. Literally.
All PEOs start somewhere and create systems that work for them. Eventually, if the goal is to grow, scalable systems and operations need to be in place to sustain the PEO’s growth, along with the right people who can manage and execute these operations. Scaling can create many benefits for the PEO: ongoing client satisfaction, a great employee experience for team members, hitting growth targets, and ensuring profitability over the long-term. This is hard work, and it’s not for the faint of heart. Therefore, I hope to put together a practical guide to give you a roadmap for scalability.
Multi-state expansion for most PEOs can be planned or unplanned. This article will provide insight for small and middle market PEOs that are dealing with the operational aspects of multi-state expansion due to one-off employee hirings by clients in states where they are not currently licensed or registered.
Last year, a brand-new client learned a difficult but important lesson about the value of the PEO partnership. The client was a tech start-up in an aggressive growth mode. The owners were hiring remote workers in multiple states, including employee-friendly states, without anyone with HR expertise to guide them. The PEO model was attractive to them because they knew they were not able to grow quickly while keeping up with HR and payroll compliance. However, right after the client signed the PEO agreement, it terminated an employee based in California without reaching out to us. It turns out that the terminated employee was more versed in California law than the client. Eight days later, the client called us in a panic.
There have been many lessons learned over the last two years as we faced the pandemic and the new world of work. When the shutdowns were announced in March of 2020, ESC immediately put an action plan together that included how we could best assist our clients and what would be most helpful for them during that challenging time. Some clients were nimble and employees began working from home with little interruption, while others did not know where to start. We assisted them through the transition to work from home, and then many of them came back to the office. Currently, the majority of our clients are either working on-site or in a hybrid model, while a few made the decision to be fully remote. We wanted to share best practices and lessons learned as our team of HR business partners and clients worked together to navigate this new world of work.
Many issues stem from the current labor shortage crisis. Many long-term employees who are great at their specific skill sets have their eyes set on retirement. These employees are consistent, yet some are stagnant and slow to embrace change. This may pose a challenge for contribution to forward-thinking strategies. Leaders need to push long-term employees from becoming stagnant, which is especially important when these workers are in charge of hiring and training.
As the needs of clients evolve and change over time, it is important for PEOs to offer solutions that meet those needs. Sounds simple, right? We have all seen clients that initially onboarded with 10 employees that now have 200 employees and just hired a new CFO and HR director. Their needs have obviously changed.
It’s year end and everyone within the walls of a PEO is heads-down, preparing clients for “the push:” the end-of-year payroll, benefits renewal, W-2s, and annual tax filings. This is also a natural time to reflect and chart a path forward, maybe even make a resolution or two. If diversity, equity, and inclusion (DEI) isn’t in your review mirror or your windshield looking forward, you’re leaving your organization and your clients behind. The truth is, DEI is good for business—yours and your clients.’
The new year is a time to reflect on the past, plan for the upcoming year, and set goals and determine how to achieve them. At this time, all PEO departments should have processes to address these initiatives. Financially, among other things, budgets will be created, forecasts reworked, and tax rates reviewed and updated. The sales team will be assessing its pipeline, addressing what strategies did or did not work in the past year, and evaluating potential selling channels. Marketing might be updating social media accounts and finding new ways to create a buzz. But what areas should PEOs address operationally? The choices are limitless, but there are a few key operational areas that should be at the forefront for annual assessment.
Buying another PEO is an expensive and time-consuming proposition. It can also be disruptive to both the buyer and the seller, and to their employees and clients. It’s imperative that both sides do their due diligence, make sure there is a fit beyond the economics of the deal, and that the post transaction integration is completed with minimal hiccups.
