19 Sep CREATE WORTHY RETAIL LABOR RATES
Set it and forget it (Ron Popeil)! Do you remember those commercials, heck they may still be playing on some of the cable channels. Your supposed to set your slow cooker and forget it. At the end of the day you will have a fully cooked meal without really having to do anything.
The sad part is that is what most service oriented business owners do – they set their labor fees and forget them. Assuming that the fees they have set will cover their burdened labor costs. But just as with anything else within your business what happens when you forget it?
Burdened labor is the last thing of all things in your business that you should forget. In fact it should be on the tip of your tongue on a weekly basis. What are your burdened labor costs for each individual direct employee and the direct effect that has on your job costs.
The Apex eSuite Burdened Labor Costing SaaS was created to keep all of the numbers you have entered in the system. Providing you with the ability to easily change only the numbers that need to be changed – and there are numbers that need to be changed on a regular basis.
You should be running your Burdened Labor Costing for your direct labor employees on a weekly basis. Providing you with a weekly – monthly – quarterly and yearly averages. Now you are in the know!
Weekly Review & Update
I know what you’re going to say before you even say it! There can’t possibly be anything that needs to be changed on a weekly basis for Burdened Labor Cost….ah but there is! Percentage of billable time! Especially if you are into job costing and revenue creation for both current and potential.
Percentage of billable time ties directly into labor efficiencies…or how efficient are your direct labor employees? How many hours per day are being billed? You need to know this for both time and material jobs and flat rate jobs. The percentage of billable time has a direct correlation with revenue generation.
Even one more billable hour per day adds up to five more billable hours in a week. With five more billable hours a new Burdened Labor Costing report needs to be run to verify the Weekly and Annual Revenue Analysis.
Or the opposite one less billable hour per day adds up to five less billable hours in a week. With five less billable hours a new Burdened Labor Costing reports has to be run to find out what your Weekly and Annual Revenue Analysis is to be able to know what your monthly Income Statements are going to reflect.
Monthly Review & Update
We all know that our Overhead and Indirect Employee labor costs are continually changing. Both of these have a direct effect on our Burdened Labor Costs – both positive and negative.
Did you move to a new building? Did your insurance costs change? Did you purchase new office equipment? Did your rent go up? Did you invest in a new marketing program? Did gas prices go up? Did insurance costs go up?
Did you hire a new indirect employee? Did you lighten the load of indirect employees?
Have you decided that you want to allocate more or less of the overhead and indirect employee costs to one department or another?
All of these have direct effect on the Burdened Labor Cost for each direct labor employee. If you decide that you want to change the allocation for your service department from 25 to 50 percent a new report has to be run, analyzed and utilized.
Set it and forget it – is no longer an option. Create it and update it – is the new norm. In order for all of us to stay competitive and create the level of income required to stay in business we have to continually run, know and work our numbers. This may be just to know that you are covering all of your costs and that you don’t need to make any changes. Or it may be to know what services are profitable over the ones that aren’t bringing in the income you thought they were. Either way it provides you with the knowledge to make those informed decisions.
Weekly, monthly, quarterly and yearly numbers provide you with the averages for each employee. This is a wealth of information not only for that specific employee but for you if you’re looking at hiring a new employee, expanding your business, or sell your business. Whatever it may be you can answer those difficult questions with up to date correct answers – no more guessing.
The Apex eSuite Burdened Labor Costing SaaS provides you with the ability to run your numbers and reports every time you run an Income Statement. Run the two reports side by side.
Applied Management Group is here to assist you throughout the process to answer any questions you may have. We have the answers. And so can you.