As mentioned in a previous post the four major expenses for most businesses are payroll, rent, advertising and insurance. One way that the Interim CFO can work to control payroll costs is through the use of forecasting tools like CashTell. The beauty of using a forecasting tool for the purposes of controlling payroll costs is that you can optimize both the headcount and the labor hours for different levels of sales.
For example, when forecasting, several different possible business scenarios should be assessed and analyzed by both the business owner and the part time CFO. One of those many different scenarios is different sales volumes. When forecasting one must look at what happens to the model when different ranges of sales volumes are entered. A good forecasting model should be able to determine the optimum headcount and the optimum amount of labor hours for each level of sales. This is a great tool because with this information the business owner and CFO know in advance as sales go up or down how to schedule workers helping to maximize efficiency and manage payroll costs.
Many times when the word “labor hours” is used we think of mainly manufacturing, however managing payroll costs through labor hours can be done in all types of businesses. When I was in the retail business, store managers were given a set amount of labor hours each week for scheduling employees. They could not go over those allocated labor hours unless they had permission together with a logical reason. My forecasting tools determined those labor hours and then if at the start of the week sales were deviating from the forecast I would issue or withdraw more hours as needed. It was also interesting that although the store managers complained about the small allocation of hours that they got it was amazing how the job got done with more efficiency and no sacrifice on service.