Randy Wadle, CEO
Client Profitability Breaking Down the P&L Billable Services Measuring Cost of Service Client Scorecards
BREAKING DOWN THE P&L
P&L – Gross Revenue Administrative Fees – Target growth industry and geographic sectors Insurance Premium Billed – Play it safe or strong risk management critical? Taxes – Profit center or pass through? Surcharges – Any fees that are not a factor or payroll Cost of Goods Sold Sales & Operating Expense Net Income Net Revenue Gross Margin Net Revenue Gross Margin
Revenue Adjusters Revenue class Strategic for WC or Benefits Referrals Predictability Growth potential Complexity Easy to work with, fair and reasonable – YOU DEFINE BASED ON VALUES Is all Revenue created equal?
Adjuster Multiplier Prioritize the “adjusters” based on company goals Assign positive and negative multipliers to a limited set of scores that will be assigned to clients (1.0 being neutral) – Adjusters and their weights will be different between companies based on values
P&L - COGS Client Payrolls – Pay frequency, off cycle runs, adjustments Insurance Premiums / Losses – Important to benchmark losses/claims against expectations Taxes – Controlling unemployment important for long term profitability Commissions Gross Revenue Sales & Operating Expense Net Income
Containing COGS It All Starts In Underwriting – Set Performance Expectations and Measure Against
The Importance of Underwriting Validating / setting expectations that drive pricing – Expectations for losses, unemployment, visits, complexity, service levels, etc. should be recorded Client & Industry comparison data Risk vs. Reward
Containing COGS It All Starts In Underwriting – Set Performance Expectations and Measure Against Hands On WC Claim Management – Important for Guaranteed Cost and High Deductible Unemployment Management Benefits Reconciliation
Gross Profit per WSE
P&L – Operating Expenses Personnel Costs – Key Metric: WSE per Internal EE Administrative – Rent, insurance, technology, etc. Sales and Marketing Gross Revenue Cost of Goods Sold Net Revenue Gross Margin Net Revenue Gross Margin
Sales & Operating Expenses Client Self Service
Sales & Operating Expenses Client Self Service Efficient and Consistent Processes
Sales & Operating Expenses Client Self Service Efficient and Consistent Processes Analytics Driven Decisions Outsourcing (sales, technology, legal,etc.)
Key Profit Drivers Summary Higher Revenue per WSE – Command higher admin fee, value add services – High wage employees (depending on admin bill method) – Organic client growth Controlling COGS – Risk Management – Unemployment Management – Benefits Reconciliation Controlling Operating Expenses – Client Self Service – Efficiency / process automation – Analytics – Outsourcing
WSE per Internal Employee
Operating Income per WSE
BILLABLE SERVICES
Billable Services Billing for Services – Difficult to track and bill – Included services by Contract Type – Tracking time ClientSpace Steps – Determine Billing Method (time vs incident) – Define Bill Rates and Contract Type Service Levels – Client Statements
Case Type Configuration
Tracking Activity
User Time Management
Client Statements
MEASURING COST OF SERVICE
PEO COST OF SERVICE
Service Delivery Cost Evaluation Service Case Cost Valuation – Time tracking Setup on any dataform Requires discipline Cost Rates by Case Type or Person – Average Cost Cases by Type Other transactions use time tracker
Case Type Configuration
Recording Actual Time
Estimated Effort
Service Delivery Cost Evaluation Visit Cost Valuation – Time Tracking – Travel & Other Costs
Client Visit Costs
Workers’ Compensation Costs Cost of WC Claims – Claim administration – Guaranteed Cost: Cost = Premium Cost + (Actual Incurred Value – (ELR * Premium)) – High Deductible: Cost = Premium Cost + Incurred Value – Safety visits and programs – Software & Technology Certificates of Insurance – Cost per unit
Benefits Benefits Administration – Open enrollment, Qualifying events, Plan management, COBRA administration,Claim advocacy ACA Compliance Benefits Reconciliation – Time consuming process – Cost of billing errors – Liability of missed coverage
Other Servicing Costs Unemployment – Unemployment claim cost, Claim appeals, Paperwork administration, Systems and interfaces FMLA Time reporting systems Systems customization per client
Contract Expectations vs Actual EE Count Gross Payroll Expected Losses Unemployment Claims Complexity Visits
CLIENT SCORECARDS
Client Scorecard
Decision Driver Service Renewals – Facts vs. Emotions – Terminating clients – Adjusting fees – Incorporating a la carte fees or deductible/transaction costs into model Prioritization Team assignments Sales & underwriting bonuses/promotions