Payroll Forecasting

Sep 28, 2020

In college, I distinctly remember going to a steak restaurant for Valentine’s Day.  Several of us without a date decided to treat ourselves.  I remember it was a Monday.   We arrived and the hostess looked defeated.  We asked for a table.  She said the wait would be over an hour.  We could wait.  Then she said, “Oh, and we are out of steak.  Umm, and bread.  Oh, and potatoes.”  We left.  Fast forward a few years and I ended up marrying a boy who had worked in that restaurant.  He was there that terrible February 14th.  From him I learned the managers had forgotten that Valentines was coming and didn’t adjust the food order accordingly. They hadn’t scheduled extra servers that night either.  The lack of forecasting resulted in a lack of happy customers that night.

Meat and Potatoes

Planning is essential if you are running a business, cooking a meal, or just going to the grocery store.  Forecasting for human resources and payroll is just as important as other forecasting methods.  HR forecasting involves understanding the human needs of your company.  You’ll need to determine if you are growing your workforce or if it is a time of downsizing.  Perhaps, a significant number of your workforce is nearing retirement.  You’ll need to plan for succession.   Just like a restaurant can’t provide a meal without the meat and potatoes, your business can’t provide a product or service without people.

Payroll forecasting helps to accurately track your budget.  You’ll know exactly where the money is being funneled.  In turn, this gives you the ability to make solid decisions regarding transfers, terminations, and new hires.    Organization charts can help you define exactly where your human resources lie. Knowing each department and to whom it reports is important.  This helps you decide when to form separate departments or even combine certain roles.   You’ll want to maintain the highest bottom-line and forecasting will give your company the ability to do that, thus retaining the future financial reputation of your organization.

Bread dough

Payroll forecasting can help you ensure you have the “dough” to pay for those meat and potatoes.  I don’t work for free and neither do your employees.  When predicting your future workforce needs, you must think of  the costs. It goes without saying, the more employees you have the more it will cost to pay them.  But also think of the changing economy.  Planning for increases in the cost of living and healthcare coverage is part of the equation, too.

You’ll need to think about pay raises, bonuses, and incentives, too.  If you already have a procedure for awarding these, you can estimate the future payroll costs for each employee.

Icing on the Cake

Planning ahead can make or break you, but don’t forget to learn from the past.  The lessons you learn can be applied to your planning and make a difference for you and your organization. There’s always something on the horizon.  I bet the managers of that steak restaurant never forgot Valentine’s Day again.