External Forces Effect on Float Revenue Forecasting: State Unemployment Insurance Component

Float revenue in a payroll service organization is difficult to forecast accurately. Float revenue is generated by investing client payroll tax liabilities held in trust between collection day and disbursement day. This quantitative correlation study attempts to reduce forecasting difficulty by determining if a relationship exists between state unemployment insurance (SUI), a component of payroll tax liability, and external forces such as natural disaster, political change, or economic change that may exert an effect on employment levels in client organizations. The state unemployment insurance component of payroll tax liability was chosen for this study because of its unique characteristic behavioral complexities as compared to other tax liabilities. Archived SUI data was collected from Ceridian Corporation's client trust archives and historical events were collected from the Internet. A timeline of funds collection and historical events was developed and correlation testing affirmed a relationship exists between SUI funds collection and external forces. Hypothesis testing confirmed external forces of political and economic change do have an effect on SUI funds collection. Natural disaster did not yield a clear relationship because the 12-year timeline of data collection only contained one year, 2005, having disastrous events severe enough to have implicated a change in SUI collections. Nonetheless, descriptive statistics have provided information useful to a financial analyst for updating revenue forecasts that will help organizational leaders plan and adjust planning future expense in support of operations and growth.