Member of Russell Bedford International, a global network of independent professional service firms.
Member of Russell Bedford International, a global network of independent professional service firms.
Bringing a new employee into your organization involves more than evaluating their skills and cultural fit, it also requires a clear understanding of the financial impact. A new hire can significantly affect your company’s cash flow, both in the short term and long term. Here are key financial considerations to keep in mind when making this important decision:
1. Salary and Compensation Structure
The most immediate and ongoing cost of hiring is the employee’s compensation. Your company must decide whether to offer a fixed salary, performance-based pay or a hybrid approach. Each structure has unique implications for cash flow:
Project how these structures will impact your monthly budget and cash flow to ensure financial stability during and after onboarding.
2. Onboarding and Training Costs
Investing in onboarding and training is essential for long-term productivity but also comes with costs. You must consider:
Tracking these costs and evaluating their return on investment (ROI) can help determine when the new hire will begin contributing to the bottom line.
3. Employee Benefits and Related Expenses
Beyond direct compensation, employee benefits can be a significant part of total employment costs. Common benefits include:
Understanding the full cost of your company’s benefits package and how it impacts your cash flow is vital for effective financial planning.
4. Technology and Tools
Ensuring that new hires are equipped with the right tools to do their job is a cost that shouldn’t be overlooked. You need to factor in:
While these tools are necessary, their costs must be integrated into your hiring budget.
5. Revenue or Productivity Potential
One of the most important items to factor into hiring expenses is estimating how and when the new employee will contribute value. Make sure you consider:
This analysis helps ensure your hiring decision supports the company’s profitability goals.
6. Ramp-Up Time and Cash Flow Impact
New employees often need time to become fully productive. It’s important to prepare for this adjustment period:
Accurate forecasting helps set expectations and supports smoother financial management during transitions.
7. Long-Term Financial Considerations
Beyond initial costs, hiring decisions should align with your company’s broader financial strategy. Keep in mind:
Hiring a new employee is a strategic decision that affects more than just your team dynamics, it can have lasting financial implications. With thoughtful planning and financial foresight, the right hire can become a long-term asset. By considering these financial factors, upfront, your business can better manage costs while building a stronger, more capable team.
If you’re evaluating the financial impact of a new hire, Cray Kaiser offers expert financial analysis and business consulting to support smart, sustainable growth. Our team can help you assess hiring costs, forecast cash flow and align your staffing strategy with your financial goals. Contact us at 630.953.4900 or fill out our contact form to learn more about how we can support your hiring decisions.
In the not-for-profit world, maintaining strong internal controls can be a challenge, especially when working with limited budgets, small teams and basic account software. Watch our video and learn more about common internal control issues, practical workarounds like compensating controls and strategies to strengthen financial oversight, even with limited resources.
Transcript
I’m Carl Thomas, I’m a manager at Cray Kaiser focusing on the assurance line of business. In my experience working with not-for-profit organizations, a big challenge is internal controls and segregating duties and making sure that the process is well protected from error and mistakes and things.
A couple of reasons these challenges may exist is limited budget constraints and limited staffing in the finance office. Another challenge is that a lot of smaller and not-for-profit organizations use off-the-shelf accounting software, which may not be able to limit access controls in terms of who can do what in the system. With a small finance office, there’s also limited FTEs. So you can’t necessarily break a process up amongst three, four people if your finance office is maybe only two people. So that’s also a challenge.
A good way to work around these limitations is what we call compensated controls in the industry. Now, compensated controls would be something that is outside of that process. So it could have a time lag where it happens after it, or it could be someone even outside of the finance office looking at something. An example would be after payroll was run, the president or CEO may run a report for what we call an exception report, for example, where they’re looking for paychecks that may be populated for a plus or minus 10 percent different than the last period. This would really target the review by someone who is not familiar with the usual finance processes and make it very efficient. And since that person, in general, does not have access to assets or the accounting system, it would provide sort of an independent check on that process. In this case, this would be a pretty good control for payroll. However, it is important to understand that that person, again, should not have access to any of the accounting system or assets. Otherwise, it kind of negates the value of that process because controls could be overridden. We call that management override in our business.
Another good compensated control is keeping the board of directors engaged. Now, the board should be reviewing financial information regularly. Balance sheet, investment reports, profit and loss statement, and potentially even cash flow statements. This helps the board be informed about operations and how the organization is performing. It’s very important that the board assess performance. Now, it’s also interesting because this is a control. And so it’s important to keep the board engaged because the board being engaged is actually a great control.
Other good things to have in process are what we would call entity level controls. And when we talk about these, we’re talking about things that are outside of that transactional process. For example, good tone at the top is actually pretty important. If there’s a good tone at the top with the board of directors and management, it cascades down. And this is actually very paramount in our industry. If we do not have a good tone at the top, it can lead to problems in the organization. So that is actually a very good control and that is very hard to quantify, but it is something that organizations should be thinking about. It’s very important.
Going along with the entity level concept, too, it’s really important to have well-defined policies and procedures. For example, employee handbook, perhaps a code of conduct can also be quite helpful. People operate better when they have a framework of what’s expected, I think, and that’s also another great entity-level control. Something from a blocking and tackling standpoint could be maybe a tip line. All right, tip line. If you see something, say something.
Going again with the entity-level control, something that organizations may also wish to think about is keeping their employees and their stakeholders engaged. And a great way to do this could be something what we call maybe a suggestion box or a way to keep engaged where there’s a two-way communication between employees, management, and the board of directors. In this way, certain things that may not be visible at some levels of the organization may be apparent if there’s good two-way communication. Two-way communication is also a foundational principle of auditing. Auditors have to have good two -way communication with our boards of directors so that everyone is informed of matters that are relevant.
These challenges and issues are inherent to many small, medium, and even large-sized not -for-profit organizations. If some of these challenges are resonating with you, feel free to give us a call. Cray Kaiser is a full-service CPA firm with a dedicated team to not-for-profits, and we’d be very happy to hear from you.
Important changes to Illinois sales tax rates are coming your way. Effective July 1, 2025, several taxing jurisdictions in Illinois will impose new local sales taxes or update their existing rates on general merchandise sales.
What’s Changing?
The following local sales taxes will be affected:
These updates will be collectively referred to as “locally imposed sales taxes.”
What’s Being Taxed?
This locally imposed sales tax will apply to the same items of general merchandise reported on Line 4a of Forms ST-1 and ST-2 that are subject to State sales tax.
Locally imposed sales taxes do not apply to:
What Steps Should I Take Before July 1, 2025?
Make sure any cash registers and computer programs are updated to reflect the new tax rates beginning July 1, 2025. If a software vendor manages these processes, contact them immediately to begin implementing the changes.
Use the MyTax Illinois Tax Rate Finder here to verify your new combined sales tax rate (State and local sales taxes).
If a prior sale was subject to a sales tax rate different from the current sales tax rate, this should be reported on Line 8a of Forms ST-1 and ST-2.
What About Business District Sales Taxes?
Your business address determines whether business district sales tax applies to your sales. Remote retailers and marketplace facilitators who meet the tax remittance threshold should pay extra attention. If property is shipped or delivered to an address within a business district, the tax likely applies.
For more information, refer to the MyTax Illinois Tax Rate Finder, which provides a detailed list of business district addresses and corresponding rates.
Don’t Get Caught Off Guard
Avoid headaches and prepare now for this sales tax rate update. If you have questions or need assistance navigating these changes, Cray Kaiser is here to help. Contact your trusted advisors at (630) 953-4900 to ensure you’re ready for the July 1, 2025, rollout.
CPA | CK Principal
As we await possible significant changes to the 2026 tax law, the IRS has provided guidance on Health Savings Accounts (HSA). Specifically, they’ve recently released the inflation-adjusted contribution limits for 2026 related to HSAs and high-deductible health plans (HDHPs). While there are modest increases in the contribution limits, the HSA catch-up contribution amount remains unchanged.
Important Reminder: You can only contribute to an HSA account if you are enrolled in a High Deductible Health Plan (HDHP). The IRS sets specific criteria for what qualifies as an HDHP, including minimum deductibles and maximum out-of-pocket expenses.
One key tax benefit of HSAs that stands out is that contributions are tax-deductible even if you don’t itemize deductions. Additionally, these funds grow tax-free over time.
When HSA funds are used for qualified medical expenses, such as doctor visits, prescriptions, and certain medical procedures, withdrawals from an HSA are tax-free. However, if you use HSA funds for non-medical purposes, you will owe income tax plus a 20% penalty (10% after age 65).
To read more about the benefits of an HSA, click here. If you’d like to explore how an HSA could fit into your financial planning, please contact our office at 630.953.4900 or fill out this form.
CPA | CK Principal
In a world where resources are stretched thin and regulatory compliance is more demanding than ever, many organizations are asking the same question: How can we effectively plan for and manage our external financial statement audits?
The answer for many is to leverage outsourced support, particularly through Client Accounting Advisory Services (CAAS). If you’re skeptical about how an external team can integrate with your team’s processes, you’re not alone. But with the right support, you can significantly reduce the workload on your team, meet deadlines and stay in compliance, without sacrificing accuracy or transparency. Here’s how CAAS can help you simplify and strengthen your external audit process.
Many firms have dedicated teams specializing in client accounting and advisory services (CAAS or CAS). These teams are experts in audits, financial reporting and compliance. When you engage a CAAS team, you gain access to seasoned professionals who can assist your in-house accounting functions in planning for the year-end financial statement audit without disrupting your day-to-day operations. Here are several key areas where CAAS support can make a real difference:
Planning for your next external audit doesn’t have to be stressful or overwhelming. If you consider the topics discussed above and look to outsource some of these tasks to professionals who can guide you through the process, you will be able to save time and resources for your internal team.
Let CK’s CAAS team help. We offer tailored solutions to support your audit readiness and financial transparency. Reach out today to learn how our experts can help your organization move through the audit process with ease.
CPA | CK Principal
Illinois taxpayers looking to give back while receiving a tax benefit now have a new opportunity with the Illinois Gives Tax Credit Act. Effective January 1, 2025, the act allows donors to receive a 25% state tax credit for qualified charitable contributions made to permanent endowments at approved community foundations.
However, the State has capped the program at $5 million in total tax credits per calendar year through 2029. Additionally, the credits are distributed based on the order in which the donations are received. Because of these limitations, we recommend that you act early if interested in the credit.
Only permanent endowment funds held by Qualified Community Foundations are eligible to receive donations that generate the credit.
Donations can support or establish funds that:
Qualified Community Foundations are specifically designated as such by the State. Additionally, each Qualified Community Foundation can issue up to $750,000 in credits per year (15% of the $5 million available in total annual credits).
Be sure to inquire on eligibility before starting the contribution process.
The Illinois Gives Tax Credit offers a limited amount of State tax credits no matter if donors itemize or take the standard federal deduction.
The credit can only offset your state income tax liability each year. Any excess credit is carried forward and applied to your tax liability in the subsequent five taxable years.
Donors should apply online at MyTax.Illinois.gov and request a Contribution Authorization Certificate (CAC). Once the CAC is received, you have 10 business days to make your gift to a Qualified Community Foundation.
If you have questions about the Illinois Gives Tax Credit or are ready to take advantage of the new credit but need assistance, contact Cray Kaiser at 630-935-4900 or visit here.
Deanna Salo, Managing Principal at Cray Kaiser, shares valuable insights for business owners navigating the complex process of selling their company. She discusses the various payment structures sellers might encounter and the tax implications of each. Deanna also highlights common pitfalls that can be encountered throughout a merger or acquisition. Whether you’re beginning to explore a sale or already deep into negotiations, this video offers practical guidance to help you make informed decisions.
Transcript:
My name is Deanna Salo and I’m the Managing Principal here at Cray Kaiser, Limited CPAs and Advisors.
When a seller receives a letter of intent and is trying to understand how much money am I going to get and when am I going to get it, you know, in the current market we’ve seen a lot of private equity firms coming in and they’ve got a lot of cash to spend on new investments. And so they’ll come in and provide a full cash deal at closing. The seller looks at that and says, “Wow, that’s fantastic.” That also might indicate a lower value for your company because they’re willing to absorb that risk of what might happen after they purchase your company. We do see sometimes that in private equity deals while I might get all my cash up front, what happens if my company grows exponentially because I’m still here with maybe an employment agreement, maybe I’m helping them around the corner of maybe some existing big deals that I’ve had already in the hopper when I sold them my company. In that situation, I may want some additional cash on the on the prospect of me getting additional profits in the company and I might even want an earn out what might be some future compensation to me as the seller for me doing really great work while I’m still hanging around. So the benefit of getting all the money at closing is that the seller can turn around and reinvest that and kind of look to retirement. Some sellers want to stick around for a little longer. Some buyers need the sellers to stick around a little longer. So in that case, you’ll want to make sure that you, as the seller, have some uptick, up game, on the back end of maybe some of these deals. When private equity, excuse me, when a privately held company comes in to buy another privately held company, oftentimes we see that they don’t maybe have as much liquid cash. They may be financing it with a bank and maybe they need the seller to finance a little bit more of that. In that situation, the seller has a little bit more risk. What if I don’t get all my money at closing? I then, as the seller, am bearing the risk of maybe not getting paid the rest of my money over the set amount of time that I was told that I was going to be able to receive my money. So, in either situation, cash at close, cash at close plus earn up, or maybe the seller has to take financing on the proceeds of the sale of their company. Each one of them have different tax effects to the seller. Each one of them may adjust the value of the company because there’s a risk and reward element of timeliness of getting all my money up front versus timeliness of getting my money a little bit over time versus me having to wait as the seller for five to seven years before I get my money. We often see our sellers, our clients not wanting to wait very long for their full cash outlay of their sale of their company. But again that might also indicate a risk of the buyer that they have to come up with all the money at closing and it might affect the value of the of the company and might reduce it a little bit more too. So there’s a lot of numbers that play into a fact of do I get my money all at closing? Do I get my money at closing with some additional uptick on an earn out? And lastly, will I get some money at closing and maybe get the rest of my money over a period of time?
A common mistake I see is going too fast. This is a process and with due care and listening to your advisors in each of the phases of a transaction is really important. If a buyer is really eager and wants to go really fast through the transaction, you as the seller might be really excited and want to go as fast with them, But we really need to be thoughtful in each phase of a transaction because it affects the future of your company, the future of your people, as well as the future of your customers and vendors that you’ve been serving for the many years you’ve been in business. So I think sometimes, you know, people want to get the deals done, they want to get the deals done quickly. There is a point of it’s taking too long versus it’s going too fast and somewhere in between is probably the right speed by which these transactions are best processed.
I think the red flags that companies need to look at is if you’re looking at a buyer, I would suggest that you’re looking at more than one buyer before you sign a letter of intent. If you have multiple buyers that are courting you to sell your business to them, I think that is a good position for the seller to be. If you really only have one buyer in the market for yourself, it may not be the right time to sell your company. Again, sellers get really excited because they may be done. They may be mentally, physically ready to be out of their business and they may want to go too fast, as I mentioned before, going too fast through the process. Jumping into the wrong conclusion is one of the red flags I see and that’s even on the buyer and the seller side.
So, in terms of the communication and what role we play in the very large group of advisors as we talked about, the buyer is going to have its group of advisors and the seller is going to have its group of advisors and you don’t want to be tripping on one another. So, having a clear line of roles and responsibilities in the process of selling your company is really important. Somebody needs to take the lead. Sometimes Cray Kaiser is called upon to set up the data room, which is an electronic space for all the information that’s going to be shared. There’s folders set up in there so it really identifies the attorney’s lane, the accountant’s lane, maybe payroll and HR lane. And so being very organized in this process and making sure that people are communicating. At the very front of all of this, the owners are going to be overwhelmed. The sellers, our clients, are usually very overwhelmed. So we typically have weekly calls with them just to make sure that we’re on pace, information is being shared. Both the buyer and the sellers use a lot of checklists to make sure all the work is getting completed and we can have a timeline for which the transaction is supposed to transpire. So making sure you’re organized to get set up. The attorneys, they’ll talk to one another. The accountants typically are the ones talking to one another. We, Cray Kaiser, get involved. Sometimes talking to the attorneys, we’ll get drafts of the agreements as they’re getting drafted by the buyer to just make sure that it makes numerical sense. But clearly the attorneys are used to make sure that the companies are protected from any of the things that we need to be protected on in the seller’s position. So if everybody does what they’re supposed to do and communicates at a high level, stays in their lane to the extent that they are hired to do a specific task. But certainly raising their hand during the course of these conversations as well as, you know, having some memorial timeline points that we each have to come and connect on to make sure we’re moving through the transaction as efficiently as possible. So being organized, a timeline of communication, setting forth the roles and responsibilities of your advisors, the data room is super helpful. It’s an electronic place to keep everybody organized to what they’re looking at, and, again, keeping the owners involved as much as they need to be. But also they’re relying on us as professionals to get the work done and get to the goal line.
All of this process, there’s lots of phases to this process, and at Cray Kaiser, you know, we’re here to help our clients, again, to and through their transactions at whatever point in their life cycle they’re at. And if you need any further assistance on that, please feel free to give us a call. Cray Kaiser is here for you during any part of this transaction.
CPA | Manager
Financial statement audits don’t have to be a stressful time for nonprofit organizations. With some proactive planning and preparation, nonprofits can successfully prepare themselves to have a successful and smooth audit process. Below are some key tips to help your team get ready before the auditors arrive:
1. Get Organized
Make sure that important documents are easy to find and well-organized. This includes:
Having these readily available will help to streamline the audit process.
2. Update Your Books
Ensure your accounting records are current. You should:
Up-to-date books are essential for a smooth audit.
3. Review and Analyze Financial Results
Before the audit:
If something looks off, investigate further. It might require adjusting a journal entry.
4. Know Your Compliance Requirements
Nonprofits face unique compliance obligations. Be aware of the following:
Know your state and federal requirements ahead of time.
5. Coordinate with Your Audit Firm
Proactive communication with your auditor can prevent delays and confusion. Consider the following:
At Cray Kaiser, we understand that preparing for an audit can feel overwhelming. Our experts are here to support you every step of the way, from organizing your records to navigating compliance requirements and coordinating with your auditors. If you need guidance with preparing for your upcoming audit, don’t hesitate to contact us at 630.953.4900 or fill out this form.
In this video, Deanna Salo, Managing Principal at Cray Kaiser, shares the story behind the firm’s relationship with Russell Bedford International, a global network of independent accounting and consulting firms. Deanna explains how Cray Kaiser’s commitment to supporting clients with international needs led them to seek out a network that offered trusted partnerships across the globe. From cross-border transactions to international tax planning, Russell Bedford has empowered Cray Kaiser to expand its reach while staying true to its values. Learn how this collaboration has deepened the firm’s bench, strengthened its global perspective, and enhanced the services offered to clients both locally and internationally.
Transcript:
My name is Deanna Salo and I’m the managing principal here at Cray Kaiser, Limited CPAs. I’m here today to talk to you about our relationship with Russell Bedford International Network and basically how we came to find this network and how it serves us in assisting us to serve our clients. So about 15 years ago, our clients were starting to grow in shape and size, dipping their toes if you will across the pond in deciding where they’re going to do business globally. Many of our clients have been doing business globally, but we’ve been able to serve them by leaning on attorneys or other affiliations. Through other networks, we were able to serve them. Our tax department has always done an exemplary job in being able to look up treaties and determine tax treatments and making sure that our clients were compliant in all the necessary pieces of their annual filing, whether they were doing business here in the States or whether they were doing business afar.
About 10 years ago, we decided to join a different group, another network, an international network that was based in the Chicago land area that we felt very aligned with. We were going to help them when they needed it, and they were going to help us when we needed it. About two years into that relationship, that organization ended up rolling up into a national firm. And it was very soon thereafter that we basically did not feel the same connection, access, and just compliance and alignment of how we wanted to serve our clients and our access to those technical things we needed when dealing with international business.
So, we received a phone call with a British accent on the other side of it asking us if we’d like to join an international network and we were surprised because of the very lovely British accent on the other line of the phone. At the same time, he said, “I’ll be in Chicago. Would you like to have a chat?” And we said, “Of course, come on by.” So, we met with the membership development person at Russell Bedford International. It was in September of that year in 2017. And they were having their annual meeting in New York City in October of that same year. And we said, “Sure, let’s go try it out. Let’s go meet and greet.” This is their global annual meeting. So people are coming from all over the world to attend this annual meeting. So I got the wonderful opportunity to hit New York City Times Square and meet what were some of the most amazing, relatable, independently owned and operated CPA firms from across the globe. And it was almost love at first sight. We had collaboration, sharing stories, sharing skills, determining how we could do business with one another without feeling a need to tit for tat and give and take, which is kind of how we felt in these other relationships we’ve had.
So since 2018, fast forward to now, we have received a number of referrals from Russell Bedford, which was not the reason why we joined. We specifically joined our intent was always to deepen our bench in our understanding of international tax law. So when I have a client who’s buying a property in Tuscany, Italy, I could pick up the phone and have somebody on the other end willing and ready to technically assist my client, language, find attorneys, find land surveyors, find whatever I needed, you know, time zones away from where I’m sitting. And so the ability to do that, the ability to serve, even though it was no increased billings for Cray Kaiser, the ability to provide resources to our clients in their moments of need, transactionally, educationally, networking-wise.
It’s been a profound impact not only to our ability to serve our clients but also even with our staff. When we’re recruiting for employees and to be able to say you’re working in our size of our firm in Chicago at an international CPA firm and you will be doing some international work is a really interesting thing for many people. They like to savor international tax law, or just the opportunity to be talking with people, networking with people from not just your area, but literally from across the globe. So our reason to join was really to deepen our bench. Certainly from a recruiting perspective, it was a fantastic roadmap to getting new staff here. And we also had the opportunity to have exchange students, some college graduates from Spain that were coming to the United States and wanted to intern with us. We’ve had those opportunities to exchange some personnel and again fast forward to 2019, I was asked to be on the board of Russell Bedford International and so since then I’ve had the opportunity to sit amongst some extremely brilliant individuals. My perspective of how we do business here in the United States has been enhanced globally by really understanding boots on the ground, what’s happening in the world, in business, as these other practitioners are trying to serve their clients amidst economic downturn, war, social responsibility, global warming, all the various impacts that other parts of the world are far more sensitive to than what we might be here in the United States. So, the perspective gained by this relationship has profoundly impacted how I’m able to serve our clients here at Cray Kaiser.
Some of the statistics that I just want to share a few of just to understand the size of Russell Bedford International because here in the United States it’s not as well-known as some of the other global alliances which are typically supported by the big four CPA firms. They rank in the top 20 global networks around the world. This past year, we ranked 17th among the top 20. I have 110 countries that I can call upon literally picking up the phone or dropping an email and having what is otherwise real-time or next-day responses if those folks can help my clients. There are 375 offices around the world and almost 10,000 people at these other firms globally that are ready and waiting to assist us. Conversely, one of the new things that we’ve been able to do, not really new, but it’s been a wonderful enhancement to our relationship, is we’re getting called upon to assist their clients here in the United States. There’s a lot of business that wants to be done here in the United States, so we have clients that are now ours from Ireland. We have clients that are now ours from Spain, from the UK. And while those other CPA firms host the relationship, we’re used to assist in getting those companies set up here in the United States to do business here in the United States. And so we not only have the referral from that other firm in those other countries, but we now get the opportunity to work alongside them to help secure their relationship as well. Because on both sides we want to keep our clients happy and well served as well with the resources that they need to keep their businesses going. So it’s a win-win across the board.
One of the other things that I think felt very in well-alignment with our firm was really their vision and their mission and their vision is why we exist, to be the global network of choice for independent professional service firms committed to sharing core values and to enable their clients to do better business globally. And that’s really what we’re all trying to do, is do better business globally. Not every one of Cray Kaiser’s clients needs a global representative, but at some point in time, they might and we’ll be ready by being able to leverage our relationship with Russell Bedford.
Their mission is also to take clients further to a better future and that again, similar to Cray Kaiser, we want a better future for our clients and we want to see them to and through their transactions. So Russell Bedford for Cray Kaiser has been a fantastic alignment, very resourceful, growing our business, growing our people, and certainly growing relationships abroad.
Russell Bedford has empowered Cray Kaiser to serve our clients domestically and globally in an enhanced position than we’ve ever had before. And as I said earlier, it’s because of the commitment to serving each other, whether it’s a tax question, a transactional question, I need somebody, do you have the resources, and trusting that the person on the other end of that email or phone call is going to deliver. It’s no different than how we make referrals here in the states, but having an international alliance network to deepen our bench, to enhance our employees’ experiences in doing the work that they do here, enhance our education, our perspectives, our awareness of what’s happening globally and locally is really why Russell Bedford has been such an amazing colleague and companion to Cray Kaiser over the past handful of years. In summary, if you want more information about how we can help you with your international or local accounting or tax or advisory services, you can check us out at www.craykaiser.com and Russell Bedford and Cray Kaiser’s team would be welcome to have you give us a call.
When hiring a new insurance agent, it’s essential to evaluate more than just their skills and cultural fit — you must also consider the financial impact. A new hire can significantly affect your agency’s cash flow, both in the short term and long term. Here are key financial considerations to keep in mind when making this important decision:
1. Salary and Compensation Structure
The most immediate and ongoing cost of hiring a new agent is their compensation. Your agency must decide whether to offer a base salary, commission-based pay, or a combination of both. Each structure impacts your agency’s cash flow differently:
Projecting how these salary and commission structures will fit within your overall budget and monthly cash flow is critical to making an informed decision.
2. Onboarding and Training Costs
Training and onboarding investments are necessary for a new agent’s success, but they also come with costs. You must consider:
Tracking these expenses and their potential ROI is essential. A well-trained agent can generate income sooner, but upfront expenses must be carefully managed.
3. Employee Benefits and Related Costs
Beyond salary, employee benefits add to overall hiring costs. Benefits may include:
Calculating the total cost of employee benefits and their impact on your agency’s cash flow — both immediately and over time — is crucial for financial planning.
4. Technology and Tools
Equipping a new agent with the necessary tools ensures productivity but also adds to operational costs. Consider expenses for:
While investing in the right tools can enhance efficiency, initial costs should be factored into your cash flow projections.
5. Revenue Generation Potential
A key factor in justifying hiring costs is assessing the new agent’s potential to generate revenue — both in the immediate and long-term. Consider:
By comparing projected revenue generation against hiring costs, you can better determine the financial feasibility of your decision.
6. Ramp-Up Time and Cash Flow Impact
New agents often require time to establish their client base. Calculate the projected ramp-up time, which can vary depending on the market and the agent’s experience. During this period, be prepared for slower cash flow:
Proper forecasting helps manage expectations and ensures financial stability during the transition period.
7. Long-Term Financial Considerations
Beyond immediate costs, hiring decisions should align with your agency’s long-term financial goals. Consider:
Conclusion
Careful financial planning is crucial when hiring a new insurance agent. While hiring costs can be substantial, the right agent can provide significant returns on investment, making the expense worthwhile. By incorporating these financial considerations into your decision-making process, you can strengthen your team’s capabilities while maintaining a healthy cash flow for your agency’s growth.
How Cray Kaiser Can Help
If you’re considering hiring a new insurance agent, the experts at Cray Kaiser can provide financial insights and strategic planning to help you make a well-informed decision. Our team specializes in financial analysis and business consulting to help your agency maintain a strong financial position while expanding your team. Contact us at 630.953.4900 or visit www.craykaiser.com to learn more about how we can assist you with your hiring strategy.
