To identify a slow leak in an automobile tire you can spread liquid dish detergent on the tire and then pour water over it. The air escaping from the leak will create bubbles in the soapy water. But if you own a small business with remote employees in the service industry, how do you pinpoint the slow leaks to your profit margins? A huge labor leak could be catastrophic.
You may bid on new jobs using bidding software, time and motion software or just plain ol’ experience. Then you win the contract and the rubber meets the road. You have to monitor and measure your labor costs against the contracted amount. Multiple employees who make different hourly rates may work that account, so how are you tracking the hours and costs? In addition to the employee hourly rate are payroll taxes, unemployment insurance, workers compensation, etc.
Customers of our online and automated timekeeping solution can now use our new Weekly Labor Cost Report. This report will accurately determine your labor costs for each location by factoring in overtime hours (up to 40 hrs/work week) and “fully loaded” pay rates. This fully loaded rate comes from a Labor Rate Multiplier percentage that is applied to all hourly pay rates. Real labor costs at each job site are compared to your budgeted costs showing the difference. The report does all the calculating.
Let’s say for example that you have contracted to clean a building for $1000 a month. Ideally, you want to keep your labor costs at 50% of revenue ($500 a month or $115 a week). What happens if your labor costs jump to $140 a week (less than 3 hours a week)? Do you want to wait until the end of the month to realize the labor spike or catch it right away? With every account you have to manage it could be easy to overlook 36 minutes a day. If you didn’t monitor, your labor cost could be $609 which is a 22% increase. And if you’re struggling to make a 20% profit ($200) after all other expenses, now your down to $91, a startling 54.5% dip in profits. This struggle is real and can be avoided.
Our new Weekly Labor Cost Report helps to identify this leak quickly to help you keep your profits intact and your business running smoothly. Stay tuned and stay in touch by following us on Facebook.