Donna Genie walks through how to budget payroll so it stays at 20% of revenue, the target for profitability. Forecast revenue 2-3 months out, multiply by 20% to get your wages budget, then schedule hours to fit it. If you project $1,000 in revenue, that's a $200 wages budget, which covers 20 hours at $10/hr.
20% of revenue (owner pay excluded).
$200.
20 hours.
About two or three months (weekly forecasts).
Budgeting for payroll is always a challenge. So I want to give you some tips on how you can structure to budget for payroll. First off, remember that Payroll should be 20% of your revenue, no more, no less. We want to make sure that we target to get to that specific area because that is where we're going to maximize your profitability. If you have less, you may have less staff able to handle customers. So that's not necessarily a good thing. And if you have more, obviously that takes away your profit. So what you want to do to try to set up a budget for your payroll is first off, focus on projecting out what you think your revenue will be by the week for the upcoming weeks. Look out about two or three months at least, and look for this to manage your payroll. So we want to take and look at the forecasted sales for each of the next weeks. When you get that forecasted sales number, multiply it by 20%. That will tell you how much you're budgeted in gross wages for your payroll. Now, this does not include owner pay, so let's do a quick example. If you're budgeting that your revenue for next week is going to be $1,000, that means that you should have $200 allocated to spend on gross wages. So if your staff all makes, we'll make it real simple. They all make $10 an hour. $200 divided by the $10 an hour means that you can pay 20 hours to your labor. So that would mean that your schedule should show people working for a total of just 20 hours. Now, I know those are small numbers, but I wanted to use nice, easy math to make this a good example for you. So let's run through that calculation one more time. Take your projected revenue and multiply it by 20%. That is the gross wages number. Now, when you look at who's scheduled. So if you have one employee who makes $10 an hour, another makes $12 an hour, you'll want to account for their gross wages. If one's scheduled for 40 hours and one's scheduled for 30 hours, multiply and figure out how much their gross wages are. That's how you want to balance your schedule so that you're anticipating what payroll should be based on what you think your revenue is going to be. So have some fun with that. Give it a shot. Let me know how it goes. Let me know if you run into any questions, questions or any challenges. We're here to help.
