Newsletter
Content
Opportunities lost, one that can’t be done and one I won’t, but maybe you will.
Been a little longer than I usually take to write, but its been really busy. We are still on a really good sales tear but a couple of weeks ago I got the chance to get a huge client. Most of my business is less than 6 employees at a time and this one was over 500. Great risk, really good owner who really understands PEO and the risk I take, priced well. Problem was I couldn’t service them the way they wanted. The client wants to process remotely and I don’t do that right now. It is frustrating to have a great client that manages risk really well not be able to bring them on because of my shortcoming. We use Summit software and thanks to our “it’s not broken, lets not create a problem” attitude we still have the DOS version. Nothing is perfect but Summit for us, has been a great solution for payroll. Problem is, for us we can not secure the check printing process. I hate losing and even worse I hate it when it is my fault. Maybe we should be more proactive in offering these solutions, we just haven’t yet. Fortunately I am on the list to upgrade to the windows version and we should have the capability this year. Owning a PEO has a ton of moving parts to herd into a corner so that everything is done correctly and safely. It is all interrelated and one piece out of place can really affect the results in profitability, the stability of your comp program and the trust of the producers that bring you business. Until now we have been very successful at keeping the balls in the air. Not much of a story but I thought I’d write it down so you can see the quandary of an owner. It’s not all unicorns and rainbows… Being an owner I know other owners and I get the low down about my competitors before most people by virtue of knowing a ton of people in the industry. Plus from years of doing this everyone know they can talk to me about confidential stuff and I wont talk. For the last two weeks we have known of a PEO that has had a comp problem. I immediately got on the phone with my contacts. I didn’t have a personal relationship with the owner to get in front of them to make an offer. I did know who knew them though thanks to LinkedIn. It is a small industry and I knew a ton of people that knew the PEO with troubles. Most of you would be surprised how often PEO’s have problems or are offered buyouts. This industry attracts attention from people that really shouldn’t own them. Not that this owner was bad, they just got into a cash flow problem. I did get a meeting with them and after talking with the PEO it became obvious that they didn’t want to sell. Happily it looks like they are going to work out things. For us it would have been a good fit and instantly made us bigger.
In talking with the people who this would effect I was surprised that they thought I hoped the PEO would fail. Nothing could be further from the truth. ANY PEO that fails is bad for everyone. The news of another PEO having problems is bad for the industry. The clients sometimes get burned by poor exit planning. Lastly, the brokers almost always get the shaft. Most of the time when a PEO changes hands the commissions paid to outside agents is looked upon as a profit center for the buyer. It is unfortunate and short-sighted but it happens almost everytime. I offered the PEO a plan to pay them for their book, keep the clients at current rates and keep the broker 100% whole with no breaks in coverage. It truly was a win-win-win-win if they wanted out. That is almost never the case. If the chance comes up again I’ll do the same thing. Just know I’ll never buy one if I can’t keep everyone whole, It’s just the way I do things. If you ever hear of a PEO that wants to sell or sadly has to sell, let me know. You are doing the industry a favor and we will pay you for the lead. February is going well and the contest is popular with a few brokers. Get your submissions in and we will pay the clients SUTA contribution year to date to make transition easier. Check out the last newsletter for the rules. I got a sales call this week too! I get about 3-4 emails/calls per week for products or service to offer our clients. It usually results in me telling the salesperson that my clients are the brokers. We don’t usually offer our payroll clients anything automatically because our brokers like to have the option to offer the end clients health/401 k/GL...etc. This one was a little different though. The service was for sales tax management. Many of you know I also own a pawn shop. Let me tell you that sales tax is a major PITA. I made a mistake on it one time and you would have thought I shot the president. In addition to several threatening letters I had a penalty and interest to pay that was not nice, I thought I charged high interest! Anyway I was interested in more info here is what they sent…
If you help by outsourcing payroll, you’re only eliminating half their pain.
By Patrick Falle- SVP of Strategic Channels- Avalara
If your clients understand the benefits of outsourcing payroll, then they are primed to embrace the concept of outsourcing sales tax. There are services available starting at less than $30 per month which include tax calculation, filing and remittance and remove the worries of non-revenue generating compliance tasks and allow them to stay focused on growing their business. Here are five great reasons you should consider introducing your clients to outsourcing their sales tax compliance;
1.
Time Savings – No need to research rates and/or build and maintain tax tables ever again
2. Increased Accuracy – Sales tax engines can pinpoint accuracy to “rooftop” levels 3. Risk Mitigation –Always file and remit your sales tax returns to the states on time, and in the correct format. 4. Increased Efficiency – It’s a fast, easy, and accurate way to calculate and remit indirect taxes that is as reliable and affordable for SMBs as it is for large corporations. 5. Increased Focus – Focus on what you do best: grow your revenue and improve customer satisfaction, rather than spending time focused on non-revenue generating activities. Your clients outsource payroll because it’s complicated, distracting, and time consuming. If you know how difficult payroll tax is, I’m here to attest to you that sales tax can be even more daunting than payroll tax. If your client is doing that manually, they could be placing their business at risk. “In a recent survey of 400 accountants 44% of them stated that they would rather go through divorce proceedings than through a sales tax audit” source: Wakefield Report For example, states like Colorado have hundreds of sales tax jurisdictions, and each jurisdiction can overlap with one or multiple other jurisdictions. Imagine that you just shipped a package to a customer in Aurora Colorado. Within a few yards of your destination the sales tax amount could be 4.25%, 8% or 7.62%. This is because State, County, Local County, Local City, and Special Taxing Jurisdictions (STJ’s) can overlap each other causing buildings located on the same street to be taxed completely different. Getting sales tax calculations correct can be daunting. Imagine that you sell marshmallows. Are they taxed as a food, an ingredient or a snack? The answer is…it depends. Even if you can master and update all 11,000 tax jurisdictions the individual products and services you sell (or buy) may be taxed differently depending on who you are selling them to, and where they are being sold. When products and services get taxed differently this is called product taxability and combined with all of the ever changing jurisdictions it becomes impossible for a business to calculate this correctly. From shoes, to food, to medical supplies each state (and often local jurisdictions) has their own rules for calculating sales tax. When you say the word “tax” most people think of income tax and the Internal Revenue Service. Sales tax is known by everyone as something they pay when they purchase items, but what most fail to comprehend is the effort and risk involved in the sales tax management process. Sales tax is not an expense borne by the retailer, but a pass-through to the final consumer. The retailer assumes all the risk of collecting tax on the proper item(s), at the proper rate(s) and then remitting it to the proper jurisdiction(s), all in a timely and appropriate manner. If any of these are done incorrectly there is both a financial risk to the business as well as a personal risk for officers. It’s important to monitor your business activities and identify when you meet the threshold to begin billing, collecting and remitting tax. These activities can range from having a third party contractor acting on your behalf selling your product, to attending trade shows and taking orders. Failure to register with a tax jurisdiction does not relieve you of your obligation to pay tax on all taxable sales in that jurisdiction. By registering, and filing returns, you stop the clock ticking from ticking. If you never file a return, the jurisdiction can go back and look at all your sales for an indefinite period of time, basically leaving the statute of limitation open forever. By filing a return, and remitting the tax billed, the statute of limitations begins running, thus limiting the time a jurisdiction can look back at sales and purchases. There may be instances where a company has set up their billing system to bill sales tax on invoices. What happens to the tax once it’s been billed? Remember, you are acting as an agent for the tax jurisdictions and are required to remit all taxes billed. Failure to remit tax billed, and collected, or knowingly filing incorrect returns can be subject to criminal charges. Florida imposes a penalty of 100% of tax and 3rd degree felony for filing a fraudulent return, or willingly evading the payment of sales tax if the tax due is less than $300. While you may do everything right by filing and paying your sales tax on a timely basis, jurisdictions don’t always post things properly. An error in posting will cause notices to be generated and sent. If you don’t respond to those notices in a timely manner, jurisdictions can place a lien on bank account, property or even on a corporate officer. A sheriff could even be sent to your location to close your business until the tax balance is paid in full, even though you did everything you were required to. If we outsourced sales tax compliance like we outsource payroll we could probably avoid the sheriff altogether. 72% of us think we will be audited at some point. One of the first things an auditor will ask you for is a list of exempt
sales, not the sales you collected taxes on, but the sales you didn’t collect taxes on. They want to see your sales tax exemption certificates associated with every sale you didn’t tax, and if your business is like most businesses your exemptions are either stuffed in a drawer in the back room, or piled into a cardboard box waiting for the day you have time to organize them. If you can’t find a certificate, or you have incorrect certificates, an auditor will calculate the percentage of missing and incorrect certificates. That percentage is then applied to total exempt sales for the entire audit period and finally the tax rate is applied. Even a handful of missing certificates could equate to a tremendous audit assessment. The average cost of sales tax audit was around $130,820 Avalara, the market leading provider of sales tax compliance solutions, now partners with payroll and PEO companies to help you build a one-stop compliance solution for your clients. Partner with us and let’s grow your book of business together! Join us on Tuesday, February 18th at 1pm Eastern/10am Pacific for an informative webinar on this revolutionary new program and how it can help you increase your profits. This webinar will include information on: What part of sales tax compliance is the biggest drain on most businesses? The average time companies spend filing sales tax returns. How confident are companies that they have the correct tax strategies, policies, and processes in place? Do companies feel they’re prepared for the Marketplace Fairness Act, should it pass? What steps your clients can take NOW to streamline your sales tax compliance. Benefits of partnering with Avalara Click here to register for this event-à Avalara PEO partner Webinar
I am not endorsing or receiving anything for this and we are not going to offer it to our clients. But it looks like a well thought out product that is similar to PEO in that it resolves a problem for business owners. If you have any interest click the link and due your due diligence. I’ll have more next time I am working on a great article. I hope you are having a great weekend. Go sell something then send it to me. Tim
Record For Me January How Did You Do?
Well January was bang up for me, they usually are. This year something is different though. It is starting to feel like 2006 again. Construction is up, new hires are up and existing employees are getting more hours especially overtime. We have new brokers, and our renewal although due in June is on track for Mid-February, I've already paid for it. It's not all unicorns and rainbows though. We hear rumblings about other PEO having difficulties and markets getting squeezed by hard comp markets. Honestly I don't want anyone to fail it just looks bad for our industry. The flip side is we are doing great and have planned and saved just for this opportunity. I know the PEO world operates on a 7-9 year cycle and the upside for PEO's that save their pennies is going to be a great. For those that didn't it will take 3-4 years to catch up.
Our carrier SUNZ is doing great and because of the way we do business basically leaves us alone to write whatever we feel is good business. Usually we run at a ~40% loss ratio, mostly due to the fact my brother-in-law might be the best risk guy I know. This year as I write this we have a 16% loss ratio. Yes 16. So, dramatic growth and a good loss ratio makes a happy carrier and they reward our good fortune. If you run across any PEO that is less than thrilled with their carrier, please tell them about SUNZ I have never seen a better carrier for a PEO. No one can predict losses other than they are going to happen. What we do is manage the claims, we take them personally. Where most carriers, TPA's and PEO's might write a check to make stuff go away we really look at them. We only pay when it's an honest claim. Plus our carrier takes great pride in investigating and prosecuting obvious fraud. If you ever get to go to their office they have a great wall of mugshots of claims that were investigated and resulted in arrests, it is very cool. Here is the latest bad guy behind bars There is a myth floating around that many brokers believe that all clients of a carrier have the same underwriting guidelines. Nothing could be further from the truth. The reality is that each client has it's own leash with differing amount of slack depending on the PEO's ability to pay claims. We operate very differently from most PEO's in that we don't look at Comp as a profit center. We look at Comp as a lifeline that keeps us in business when times get hard. That time is now. Just because you have submitted a deal to a SUNZ client that got declined doesn't mean it would be declined here. Now obviously the underwater demolition company with 3 deaths this year is not going to happen. I can tell you though that I have written many a 1.4 mod client mainly because the client got the mod because of a shock loss. Shock losses don't bother me nearly as much as frequency. We use common sense here at EnterpriseHR to bring clients on. The benefit to you is that we can write stuff no one else will touch. We look at individual companies not whole industries. Another benefit is that you have an organization that wants to deal with you. We have zero inside salespeople other than me. I only deal with producers. I sold PEO on the street just like some of you do, I know how hard it is to produce a quote. We make bringing a client here as easy as we can. The approval process is literally hours, not days or weeks. There is no hidden fees or deductibles. No sign up fees for you or the client. Your commission is protected forever. Even if the client terms for a year and comes back you are put right as the broker of record. The only thing we don't do is find the business for you. January's contest is over and the first broker in with more than 5% on one deal was Ryan DeJong from Axis group. Great PEO brokerage if you don't generate enough PEO prospects to get good pricing from your PEO these guys can help. I have been doing business with Axis group literally from day one 13 years ago. Ryan and Patrick are some of the best in our industry and truly promote PEO in a solid, honest, professional way. Their commission check reflects it and I am sending off their $500.00 check today.
To make February fair everyone that opens this newsletter will have the contest emailed to them tomorrow at exactly 8am. The rules will be simple and I am going to make one of your base objections go away. Usually as the year goes on the fact that clients have to restart SUTA payments is a problem. For 1 month I am going to change that. That is all you get for right now, but the offer is a game changer. I just looked at January's submissions and if the same offer was in place it would have cost me over $40,000 so expect something you have never seen before from a PEO. That is how we operate here. I am your biggest fan and the bigger the check you get from me, the bigger mine is. One last thing I had a broker ask about this newsletter as to the response. OK Bill here is the screenshot for my report from the last one.
As you can see it is popular. The cool thing about it is you can see that exactly 20% of people I send it to opened it and it was opened a total of 590 times. The old 80/20 ratio thing at work. I hope that I bring you useful information and a little entertainment. If you have anything you would like an answer to or a topic you would like to see here let me know. If it is PEO related maybe I will give you my take on it.
One last thing could you would forward this newsletter to some friends. If you get anything from this please share it by clicking it will take them to last weeks newsletter. This will not create more competition for you unless they actually subscribe to it.
7 more days and another new record.
Well seven days after our best week we did it again. Over 100 new deals submitted this week here is the breakdown.
● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●
111 submissions from 37 different brokers here is how the worked out7 got flat denials, for cause 3 denials had states we don’t do 36 of them we still need info, things like losses, not complete submissions for whatever reason 6 subs were late today and we still are waiting on carrier approval 69 approvals 17 new clients ran this week from previous weeks approval
This is not a bunch of telemarketing rooms and law offices. This is real risk, concrete, carpentry, staffing, even harvesting. We had submissions with losses, new companies, and a ton of stuff that is coming from other PEO’s. All of it was approved with pricing that leaves room for you as a broker and without a claim fee. I had meetings with 4 new brokers this week and have 6 lunches to do next week (I have no idea how I’m going to do that). I need to ride my bike more hopefully the weather warms up. Every meeting had the same theme though. Brokers and clients looking for a better PEO. I heard stories that would make you wonder what the heck is going on. The worst part is, is going to get even uglier. I hear rumblings from all my usual suspects of PEO’s getting non-renewed and others making Plan B’s. If you are unaware of the current climate for PEO comp coverage then you are not doing your job. I secured our next 18 months by scheduling the comp renewal in couple of weeks. By the next time I write you I should have up to June 2015 covered. Do you know
when your PEO coverage expires and what their plan is? If not it is time to find out. Everyone knows that this is a residual based business if your PEO doesn’t have a long term plan you should make your own.
Should you take some of the risk?
Every time I meet a new broker the question of pricing, specifically how to get better pricing comes up. All brokers here are in control of their commissions but I have a standard formula for base pricing. To shorten the story the only way to get better pricing is either send more business or take some of the risk. More business is pretty simple. You send one deal I love you. You send 30 a month and you get more of my attention. Risk is a different story. As an owner of a PEO I’m the biggest gambler you know. I take on business I know one day I will write a huge check for. We have to have good rules and mitigate the losses as they happen. I have what I think are the best set of loss control rules and risk people around. Our carrier understands our unique business model and we are going on our 11th renewal with them in a few weeks. I think that might be a record for PEO’s. We save our comp money for rainy days and for when we see opportunities. The opportunity thing is my part of the business. I know the history of PEO and how carriers react when the market tightens. I see a huge place in the market I can fill and I am ready for it. When a broker/agent asks to take on some of the risk I have a formula for that too. As a broker you have two ways to do this. You can pass the risk on to the client in the form of a claim fee or take the risk on yourself. Passing the risk is always the easiest and depending on the industry a small claim fee can result in the vast majority of expected injuries to be paid for. As the broker you will get a standard discount for the risk transfer and you can share that with the client or not. Taking the risk yourself while easy to say can be painful when the bill comes, and it will. Once you have a good book with several PEO’s increasing your commissions is very difficult without adding producers and agents working for you. If you have the stomach for it ask your PEO what $500/$1000/and up will get you in consideration. Call me after that, I’m happy to meet or talk on the phone about it. If your PEO won’t consider it or won’t negotiate it’s time for a new PEO. I’d like it to be me but at least take a look at it. If you are willing to roll the dice sometimes you win. It’s my job to help you through the process because without brokers sales stops for me. All of my brokers are partners and I treat them that way. If they make money so do I. The worst that can happen is you decide it is not for you, lets find out.
Been a little longer than I usually take to write, but its been really busy. We are still on a really good sales tear but a couple of weeks ago I got the chance to get a huge client. Most of my business is less than 6 employees at a time and this one was over 500. Great risk, really good owner who really understands PEO and the risk I take, priced well. Problem was I couldn’t service them the way they wanted. The client wants to process remotely and I don’t do that right now. It is frustrating to have a great client that manages risk really well not be able to bring them on because of my shortcoming. We use Summit software and thanks to our “it’s not broken, lets not create a problem” attitude we still have the DOS version. Nothing is perfect but Summit for us, has been a great solution for payroll. Problem is, for us we can not secure the check printing process. I hate losing and even worse I hate it when it is my fault. Maybe we should be more proactive in offering these solutions, we just haven’t yet. Fortunately I am on the list to upgrade to the windows version and we should have the capability this year. Owning a PEO has a ton of moving parts to herd into a corner so that everything is done correctly and safely. It is all interrelated and one piece out of place can really affect the results in profitability, the stability of your comp program and the trust of the producers that bring you business. Until now we have been very successful at keeping the balls in the air. Not much of a story but I thought I’d write it down so you can see the quandary of an owner. It’s not all unicorns and rainbows… Being an owner I know other owners and I get the low down about my competitors before most people by virtue of knowing a ton of people in the industry. Plus from years of doing this everyone know they can talk to me about confidential stuff and I wont talk. For the last two weeks we have known of a PEO that has had a comp problem. I immediately got on the phone with my contacts. I didn’t have a personal relationship with the owner to get in front of them to make an offer. I did know who knew them though thanks to LinkedIn. It is a small industry and I knew a ton of people that knew the PEO with troubles. Most of you would be surprised how often PEO’s have problems or are offered buyouts. This industry attracts attention from people that really shouldn’t own them. Not that this owner was bad, they just got into a cash flow problem. I did get a meeting with them and after talking with the PEO it became obvious that they didn’t want to sell. Happily it looks like they are going to work out things. For us it would have been a good fit and instantly made us bigger.
In talking with the people who this would effect I was surprised that they thought I hoped the PEO would fail. Nothing could be further from the truth. ANY PEO that fails is bad for everyone. The news of another PEO having problems is bad for the industry. The clients sometimes get burned by poor exit planning. Lastly, the brokers almost always get the shaft. Most of the time when a PEO changes hands the commissions paid to outside agents is looked upon as a profit center for the buyer. It is unfortunate and short-sighted but it happens almost everytime. I offered the PEO a plan to pay them for their book, keep the clients at current rates and keep the broker 100% whole with no breaks in coverage. It truly was a win-win-win-win if they wanted out. That is almost never the case. If the chance comes up again I’ll do the same thing. Just know I’ll never buy one if I can’t keep everyone whole, It’s just the way I do things. If you ever hear of a PEO that wants to sell or sadly has to sell, let me know. You are doing the industry a favor and we will pay you for the lead. February is going well and the contest is popular with a few brokers. Get your submissions in and we will pay the clients SUTA contribution year to date to make transition easier. Check out the last newsletter for the rules. I got a sales call this week too! I get about 3-4 emails/calls per week for products or service to offer our clients. It usually results in me telling the salesperson that my clients are the brokers. We don’t usually offer our payroll clients anything automatically because our brokers like to have the option to offer the end clients health/401 k/GL...etc. This one was a little different though. The service was for sales tax management. Many of you know I also own a pawn shop. Let me tell you that sales tax is a major PITA. I made a mistake on it one time and you would have thought I shot the president. In addition to several threatening letters I had a penalty and interest to pay that was not nice, I thought I charged high interest! Anyway I was interested in more info here is what they sent…
If you help by outsourcing payroll, you’re only eliminating half their pain.
By Patrick Falle- SVP of Strategic Channels- Avalara
If your clients understand the benefits of outsourcing payroll, then they are primed to embrace the concept of outsourcing sales tax. There are services available starting at less than $30 per month which include tax calculation, filing and remittance and remove the worries of non-revenue generating compliance tasks and allow them to stay focused on growing their business. Here are five great reasons you should consider introducing your clients to outsourcing their sales tax compliance;
1.
Time Savings – No need to research rates and/or build and maintain tax tables ever again
2. Increased Accuracy – Sales tax engines can pinpoint accuracy to “rooftop” levels 3. Risk Mitigation –Always file and remit your sales tax returns to the states on time, and in the correct format. 4. Increased Efficiency – It’s a fast, easy, and accurate way to calculate and remit indirect taxes that is as reliable and affordable for SMBs as it is for large corporations. 5. Increased Focus – Focus on what you do best: grow your revenue and improve customer satisfaction, rather than spending time focused on non-revenue generating activities. Your clients outsource payroll because it’s complicated, distracting, and time consuming. If you know how difficult payroll tax is, I’m here to attest to you that sales tax can be even more daunting than payroll tax. If your client is doing that manually, they could be placing their business at risk. “In a recent survey of 400 accountants 44% of them stated that they would rather go through divorce proceedings than through a sales tax audit” source: Wakefield Report For example, states like Colorado have hundreds of sales tax jurisdictions, and each jurisdiction can overlap with one or multiple other jurisdictions. Imagine that you just shipped a package to a customer in Aurora Colorado. Within a few yards of your destination the sales tax amount could be 4.25%, 8% or 7.62%. This is because State, County, Local County, Local City, and Special Taxing Jurisdictions (STJ’s) can overlap each other causing buildings located on the same street to be taxed completely different. Getting sales tax calculations correct can be daunting. Imagine that you sell marshmallows. Are they taxed as a food, an ingredient or a snack? The answer is…it depends. Even if you can master and update all 11,000 tax jurisdictions the individual products and services you sell (or buy) may be taxed differently depending on who you are selling them to, and where they are being sold. When products and services get taxed differently this is called product taxability and combined with all of the ever changing jurisdictions it becomes impossible for a business to calculate this correctly. From shoes, to food, to medical supplies each state (and often local jurisdictions) has their own rules for calculating sales tax. When you say the word “tax” most people think of income tax and the Internal Revenue Service. Sales tax is known by everyone as something they pay when they purchase items, but what most fail to comprehend is the effort and risk involved in the sales tax management process. Sales tax is not an expense borne by the retailer, but a pass-through to the final consumer. The retailer assumes all the risk of collecting tax on the proper item(s), at the proper rate(s) and then remitting it to the proper jurisdiction(s), all in a timely and appropriate manner. If any of these are done incorrectly there is both a financial risk to the business as well as a personal risk for officers. It’s important to monitor your business activities and identify when you meet the threshold to begin billing, collecting and remitting tax. These activities can range from having a third party contractor acting on your behalf selling your product, to attending trade shows and taking orders. Failure to register with a tax jurisdiction does not relieve you of your obligation to pay tax on all taxable sales in that jurisdiction. By registering, and filing returns, you stop the clock ticking from ticking. If you never file a return, the jurisdiction can go back and look at all your sales for an indefinite period of time, basically leaving the statute of limitation open forever. By filing a return, and remitting the tax billed, the statute of limitations begins running, thus limiting the time a jurisdiction can look back at sales and purchases. There may be instances where a company has set up their billing system to bill sales tax on invoices. What happens to the tax once it’s been billed? Remember, you are acting as an agent for the tax jurisdictions and are required to remit all taxes billed. Failure to remit tax billed, and collected, or knowingly filing incorrect returns can be subject to criminal charges. Florida imposes a penalty of 100% of tax and 3rd degree felony for filing a fraudulent return, or willingly evading the payment of sales tax if the tax due is less than $300. While you may do everything right by filing and paying your sales tax on a timely basis, jurisdictions don’t always post things properly. An error in posting will cause notices to be generated and sent. If you don’t respond to those notices in a timely manner, jurisdictions can place a lien on bank account, property or even on a corporate officer. A sheriff could even be sent to your location to close your business until the tax balance is paid in full, even though you did everything you were required to. If we outsourced sales tax compliance like we outsource payroll we could probably avoid the sheriff altogether. 72% of us think we will be audited at some point. One of the first things an auditor will ask you for is a list of exempt
sales, not the sales you collected taxes on, but the sales you didn’t collect taxes on. They want to see your sales tax exemption certificates associated with every sale you didn’t tax, and if your business is like most businesses your exemptions are either stuffed in a drawer in the back room, or piled into a cardboard box waiting for the day you have time to organize them. If you can’t find a certificate, or you have incorrect certificates, an auditor will calculate the percentage of missing and incorrect certificates. That percentage is then applied to total exempt sales for the entire audit period and finally the tax rate is applied. Even a handful of missing certificates could equate to a tremendous audit assessment. The average cost of sales tax audit was around $130,820 Avalara, the market leading provider of sales tax compliance solutions, now partners with payroll and PEO companies to help you build a one-stop compliance solution for your clients. Partner with us and let’s grow your book of business together! Join us on Tuesday, February 18th at 1pm Eastern/10am Pacific for an informative webinar on this revolutionary new program and how it can help you increase your profits. This webinar will include information on: What part of sales tax compliance is the biggest drain on most businesses? The average time companies spend filing sales tax returns. How confident are companies that they have the correct tax strategies, policies, and processes in place? Do companies feel they’re prepared for the Marketplace Fairness Act, should it pass? What steps your clients can take NOW to streamline your sales tax compliance. Benefits of partnering with Avalara Click here to register for this event-à Avalara PEO partner Webinar
I am not endorsing or receiving anything for this and we are not going to offer it to our clients. But it looks like a well thought out product that is similar to PEO in that it resolves a problem for business owners. If you have any interest click the link and due your due diligence. I’ll have more next time I am working on a great article. I hope you are having a great weekend. Go sell something then send it to me. Tim
Record For Me January How Did You Do?
Well January was bang up for me, they usually are. This year something is different though. It is starting to feel like 2006 again. Construction is up, new hires are up and existing employees are getting more hours especially overtime. We have new brokers, and our renewal although due in June is on track for Mid-February, I've already paid for it. It's not all unicorns and rainbows though. We hear rumblings about other PEO having difficulties and markets getting squeezed by hard comp markets. Honestly I don't want anyone to fail it just looks bad for our industry. The flip side is we are doing great and have planned and saved just for this opportunity. I know the PEO world operates on a 7-9 year cycle and the upside for PEO's that save their pennies is going to be a great. For those that didn't it will take 3-4 years to catch up.
Our carrier SUNZ is doing great and because of the way we do business basically leaves us alone to write whatever we feel is good business. Usually we run at a ~40% loss ratio, mostly due to the fact my brother-in-law might be the best risk guy I know. This year as I write this we have a 16% loss ratio. Yes 16. So, dramatic growth and a good loss ratio makes a happy carrier and they reward our good fortune. If you run across any PEO that is less than thrilled with their carrier, please tell them about SUNZ I have never seen a better carrier for a PEO. No one can predict losses other than they are going to happen. What we do is manage the claims, we take them personally. Where most carriers, TPA's and PEO's might write a check to make stuff go away we really look at them. We only pay when it's an honest claim. Plus our carrier takes great pride in investigating and prosecuting obvious fraud. If you ever get to go to their office they have a great wall of mugshots of claims that were investigated and resulted in arrests, it is very cool. Here is the latest bad guy behind bars There is a myth floating around that many brokers believe that all clients of a carrier have the same underwriting guidelines. Nothing could be further from the truth. The reality is that each client has it's own leash with differing amount of slack depending on the PEO's ability to pay claims. We operate very differently from most PEO's in that we don't look at Comp as a profit center. We look at Comp as a lifeline that keeps us in business when times get hard. That time is now. Just because you have submitted a deal to a SUNZ client that got declined doesn't mean it would be declined here. Now obviously the underwater demolition company with 3 deaths this year is not going to happen. I can tell you though that I have written many a 1.4 mod client mainly because the client got the mod because of a shock loss. Shock losses don't bother me nearly as much as frequency. We use common sense here at EnterpriseHR to bring clients on. The benefit to you is that we can write stuff no one else will touch. We look at individual companies not whole industries. Another benefit is that you have an organization that wants to deal with you. We have zero inside salespeople other than me. I only deal with producers. I sold PEO on the street just like some of you do, I know how hard it is to produce a quote. We make bringing a client here as easy as we can. The approval process is literally hours, not days or weeks. There is no hidden fees or deductibles. No sign up fees for you or the client. Your commission is protected forever. Even if the client terms for a year and comes back you are put right as the broker of record. The only thing we don't do is find the business for you. January's contest is over and the first broker in with more than 5% on one deal was Ryan DeJong from Axis group. Great PEO brokerage if you don't generate enough PEO prospects to get good pricing from your PEO these guys can help. I have been doing business with Axis group literally from day one 13 years ago. Ryan and Patrick are some of the best in our industry and truly promote PEO in a solid, honest, professional way. Their commission check reflects it and I am sending off their $500.00 check today.
To make February fair everyone that opens this newsletter will have the contest emailed to them tomorrow at exactly 8am. The rules will be simple and I am going to make one of your base objections go away. Usually as the year goes on the fact that clients have to restart SUTA payments is a problem. For 1 month I am going to change that. That is all you get for right now, but the offer is a game changer. I just looked at January's submissions and if the same offer was in place it would have cost me over $40,000 so expect something you have never seen before from a PEO. That is how we operate here. I am your biggest fan and the bigger the check you get from me, the bigger mine is. One last thing I had a broker ask about this newsletter as to the response. OK Bill here is the screenshot for my report from the last one.
As you can see it is popular. The cool thing about it is you can see that exactly 20% of people I send it to opened it and it was opened a total of 590 times. The old 80/20 ratio thing at work. I hope that I bring you useful information and a little entertainment. If you have anything you would like an answer to or a topic you would like to see here let me know. If it is PEO related maybe I will give you my take on it.
One last thing could you would forward this newsletter to some friends. If you get anything from this please share it by clicking it will take them to last weeks newsletter. This will not create more competition for you unless they actually subscribe to it.
7 more days and another new record.
Well seven days after our best week we did it again. Over 100 new deals submitted this week here is the breakdown.
● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●
111 submissions from 37 different brokers here is how the worked out7 got flat denials, for cause 3 denials had states we don’t do 36 of them we still need info, things like losses, not complete submissions for whatever reason 6 subs were late today and we still are waiting on carrier approval 69 approvals 17 new clients ran this week from previous weeks approval
This is not a bunch of telemarketing rooms and law offices. This is real risk, concrete, carpentry, staffing, even harvesting. We had submissions with losses, new companies, and a ton of stuff that is coming from other PEO’s. All of it was approved with pricing that leaves room for you as a broker and without a claim fee. I had meetings with 4 new brokers this week and have 6 lunches to do next week (I have no idea how I’m going to do that). I need to ride my bike more hopefully the weather warms up. Every meeting had the same theme though. Brokers and clients looking for a better PEO. I heard stories that would make you wonder what the heck is going on. The worst part is, is going to get even uglier. I hear rumblings from all my usual suspects of PEO’s getting non-renewed and others making Plan B’s. If you are unaware of the current climate for PEO comp coverage then you are not doing your job. I secured our next 18 months by scheduling the comp renewal in couple of weeks. By the next time I write you I should have up to June 2015 covered. Do you know
when your PEO coverage expires and what their plan is? If not it is time to find out. Everyone knows that this is a residual based business if your PEO doesn’t have a long term plan you should make your own.
Should you take some of the risk?
Every time I meet a new broker the question of pricing, specifically how to get better pricing comes up. All brokers here are in control of their commissions but I have a standard formula for base pricing. To shorten the story the only way to get better pricing is either send more business or take some of the risk. More business is pretty simple. You send one deal I love you. You send 30 a month and you get more of my attention. Risk is a different story. As an owner of a PEO I’m the biggest gambler you know. I take on business I know one day I will write a huge check for. We have to have good rules and mitigate the losses as they happen. I have what I think are the best set of loss control rules and risk people around. Our carrier understands our unique business model and we are going on our 11th renewal with them in a few weeks. I think that might be a record for PEO’s. We save our comp money for rainy days and for when we see opportunities. The opportunity thing is my part of the business. I know the history of PEO and how carriers react when the market tightens. I see a huge place in the market I can fill and I am ready for it. When a broker/agent asks to take on some of the risk I have a formula for that too. As a broker you have two ways to do this. You can pass the risk on to the client in the form of a claim fee or take the risk on yourself. Passing the risk is always the easiest and depending on the industry a small claim fee can result in the vast majority of expected injuries to be paid for. As the broker you will get a standard discount for the risk transfer and you can share that with the client or not. Taking the risk yourself while easy to say can be painful when the bill comes, and it will. Once you have a good book with several PEO’s increasing your commissions is very difficult without adding producers and agents working for you. If you have the stomach for it ask your PEO what $500/$1000/and up will get you in consideration. Call me after that, I’m happy to meet or talk on the phone about it. If your PEO won’t consider it or won’t negotiate it’s time for a new PEO. I’d like it to be me but at least take a look at it. If you are willing to roll the dice sometimes you win. It’s my job to help you through the process because without brokers sales stops for me. All of my brokers are partners and I treat them that way. If they make money so do I. The worst that can happen is you decide it is not for you, lets find out.
