The ever-growing question of whether G&A Human Resources (HR) should be categorized as a contributor to revenue or simply overhead is one that continues to split opinions. For those who view HR expenses as simply another service cost, it makes perfect sense to view the expense as overhead. However, those who believe HR has a direct, and therefore measurable, impact on an organization’s success and revenue, view it as belonging to the general and administrative expenses category.
The Role of G&A
G&A, or General and Administrative expenses, include a variety of costs related to staffing, payroll, and training and are located under the costs of goods sold on a company’s income statement. These are all investments that may have an indirect impact on the success of the business. However, when managed properly and invested appropriately, HR for G&A can be a significant driver for revenue growth. G&A human resources can take the form of:
- Risk management
- Payroll and benefits
- Employee engagement initiatives
- Employee training and development
- Recruiting, onboarding, and retention
- Compliance and regulatory requirements
These HR investments can help to grow and protect the organization by allocating resources more efficiently while promoting a healthy work environment. HR Managers are responsible for ensuring that their teams are adequately supported, but also that the organization is optimizing its G&A HR spending. But what should organizations classify G&A as when it comes to budgeting and accounting? An overhead cost or put it in the G&A accounting column?
Differentiating Between Revenue and Overhead in G&A
Many organizations struggle to choose between revenue and overhead when it comes to G&A investments because they are challenging to measure in terms of direct contributions or quantifiable output. However, with the right HR processes and systems in place, it is possible to measure the impact of G&A on spending accurately. This can help decide which investments are truly providing a return and can be classified as revenue-generating and which should be classified as overhead.
For example, if an organization invests in employee training programs and then sees a 20% increase in productivity for those same employees, this can be considered a direct result of the investment made. Similarly, if an organization reduces employee turnover by 10% due to improved recruitment practices, this too is a direct result of G&A Human Resources spending. When considering if G&A can be seen as revenue or overhead, it’s important to look at the tangible impacts of investment to maximize the value of G&A.
So is it Revenue or Overhead?
On one hand, G&A expenses are typically related to the day-to-day operations of a business, such as accounting services and legal fees, which provide direct value. On the other hand, they can also be viewed as overhead costs, since they don’t directly contribute to the business’s revenue and can potentially increase the cost of running a business. Both perspectives have merit and it is up to CFOs and HR leaders to decide how these costs should be classified and how they should factor into the budgeting process. Ultimately, what matters is that the expenses are tracked accurately and that the costs are managed wisely. This can help ensure a business remains competitive in an ever-changing business climate.
Ultimately, it all comes down to how organizations invest in G&A and how they use the resources provided to maximize their value. Investing in the correct HR processes and systems can allow organizations to measure the impact of G&A investments more accurately and track progress over time. And, by partnering with someone like Corban OneSource who has experience assisting companies with 75 to 6,000 employees with their HR-related responsibilities, organizations can ensure they are optimizing their investments to maximize value.
Using HR Outsourcing to Improve G&A
Organizations of all sizes and industries can benefit from HR outsourcing. By leveraging the expertise and resources of a professional HR consultant or firm, organizations can focus on their core business activities while still having access to the highest quality HR services. This also ensures that G&A can be managed efficiently and effectively, leading to a more productive and satisfied workforce, whether your organization sees it as revenue or an overhead cost.
At Corban OneSource, we serve organizations with 75 to 6,000 employees by providing comprehensive HR solutions tailored to the specific needs of each business. Our experienced team of HR professionals helps to optimize G&A investments through user-friendly technology and custom plans that are designed to maximize the value of G&A. We strive to create an environment in which businesses can capitalize on their G&A HR investments, leading to greater growth and productivity for organizations of all sizes. To learn more, explore our HR solutions and get on track to a better financial future for your organization.