The Ultimate Guide to Budgeting for Labor Expenses

using bookkeeping to reduce labor costs
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The Ultimate Guide to Budgeting Labor Expenses Through Bookkeeping

While labor is an important aspect of any restaurant (we can’t have food without our cooks), it’s also the cause for large expenses to your small business.

Manage your labor budget with a few simple tricks.

Cross Train Your Employees

One major way of cutting back labor costs is to cross train your employees.

Cross-training is teaching your employees to do more than one job. This could mean that instead of being just a server, an employee could jump in and work as a hostess as well.

Keep in mind that cross-training involves matching employee’s current roles to new roles that would tie in well. For example, it doesn’t make sense to have a sous chef also working as a hostess. In contrast, it might make sense for a barista to jump in and help with dishes.

Having cross-trained employees allows you to make changes in labor without worrying that a position won’t be covered.

Convert Salaried Positions to Commission Positions

Salaries and wages account for a large percentage of labor costs. Full-time employee expenses add up, but they don’t have to. Look into contract labor or commission based pay to reduce the costs incurred by salaries.

The good news is, they don’t need to. Converting your salaried workers into commission based pay can help reduce your labor costs significantly.

For example, a salesman making a salary might be better suited to making a commission. This ensures that you pay him only when there are profits. It also incents him to work harder and make more sales for your company.

Installers or other part-time or salaried workers may be willing to work as contractors. Changing their pay structure will not only help you save costs, but it also places your employees in a position that is more suited to them.

When you decide to change the pay structure of employees, be careful. Use a reliable bookkeeping software to track cost reduction through salary changes.

Outsource Tasks to Cut Costs

Outsourcing tasks is a huge way to save on labor costs.

If you’re paying an hourly wage to an employee for a job that could be easily done offsite, you might be better off outsourcing for a lower cost.

Another way to outsource is to automate tasks. Paying an in-house accountant? Switch to a cloud-based bookkeeping software to manage your expenses.

Pay Overtime

Overtime might sound like a scary proposition but think about it for a second. Are you hiring new employees to do work that could be done by current staff?

It might be worth your while to pay employees overtime instead of hiring someone new.

You can use a calculator to help you figure out if you’ll save more by paying overtime to employees.

If you continue to have a high volume of work, eventually your revenue will increase enough to allow you to hire new employees.

The Bottom Line

The bottom line is, there are a number of ways you could reduce labor costs.

It can be intimidating to try to cut tasks without cutting a great team. Take a look at how you are spending your labor budget and get creative!

Taking the time to compare costs, weigh options, and apply these tips can save your business in the long run.

Don’t wait to get started cutting waste from your budget. Give us a call today and start staying on top of your expenses!

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