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Start Hiring For FreeTracking revenue per employee is crucial, but calculating this metric can be a real headache.
Luckily, with QuickBooks you can easily generate reports to automate revenue per employee calculations.
In this post we'll walk through the step-by-step process for leveraging QuickBooks to track this vital productivity metric. You'll learn how to export payroll and sales data, apply the revenue per employee formula in Excel, and utilize the results to benchmark performance.
Revenue per employee is a key metric that measures the average revenue generated by each employee at a company. Tracking this metric over time allows small businesses using QuickBooks to evaluate productivity, optimize hiring decisions, set performance goals, and identify high and low performers.
Monitoring revenue per employee is critical for small business owners to:
For example, if revenue per employee declines over a few quarters, it could indicate an issue with workforce productivity, staffing levels, or economic conditions impacting the business.
As a leading small business accounting software, QuickBooks enables easy tracking of revenue per employee over time. Business owners can leverage QuickBooks reports to:
By monitoring key metrics like revenue per employee in QuickBooks, small businesses can spot issues early and make data-driven decisions to control costs and drive profitability.
To calculate revenue per employee, you can use QuickBooks Payroll Summary report. Here are the steps:
For example, if the total pay for a month is $50,000 and there were 10 employees paid, the average revenue per employee would be $50,000/10 = $5,000.
This metric allows you to track revenue productivity over time. An increasing revenue per employee could indicate growing business efficiency. A decreasing revenue per employee may signal problems and require further analysis into why revenue is declining relative to staff levels.
Some limitations of this calculation:
Still, revenue per employee is a useful high-level productivity indicator to include in your QuickBooks reports. Monitoring it periodically can help identify positive or negative trends in how efficiently your workforce is generating sales.
The profit per employee ratio is a useful metric for businesses to track over time. Here is the formula to calculate it:
Identify the organization's total profit for a set time period (e.g. annually). This can be found on the income statement.
Identify the total number of employees working for the organization during that same time period. This can be found in payroll records or HR data.
Calculate the profit per employee ratio. Divide the organization's total profit by its total number of employees. The resulting value is the company's profit per employee.
For example, if a company had $500,000 in total profit last year and employed 100 people, the profit per employee would be $5,000 ($500,000 / 100 employees = $5,000 profit per employee).
Tracking profit per employee over time allows businesses to evaluate productivity and profitability trends in their workforce. If profit per employee rises, it may suggest employees are working more efficiently. If it declines, there may be issues with productivity, costs, or pricing to address.
Setting profit per employee targets can also help drive business strategies aimed at improving workforce productivity. For example, a company might set a goal to increase profit per employee by 10% next year, then implement workforce changes to help accomplish that target.
Revenue per full-time equivalent (FTE) employee is a metric used to evaluate workforce productivity by calculating the total revenue generated per full-time employee or equivalent. This provides insight into how efficiently your employees are generating revenue for the business.
To calculate revenue per FTE in QuickBooks:
The resulting number shows the average revenue being produced per full-time employee equivalent. Comparing this over time can indicate improving or declining workforce productivity.
Some tips when using this metric:
Monitoring revenue per FTE employee can help identify opportunities to improve employee output, set performance goals, and evaluate the return on labor investments. But it should be one part of assessing overall workforce effectiveness.
According to Klipfolio, a good Revenue per Employee benchmark ranges between $43,000 of revenue per employee for companies making less than $1 million total revenue, to $230,000 per employee for companies earning $50 million or more of total revenue.
To calculate your revenue per employee in QuickBooks:
Run the Payroll Summary report in QuickBooks Desktop. This provides details on number of employees paid each pay period.
Run the Employee Pay Rates report. This shows each employee's pay rate.
Multiply the number of employees by their average pay rate to estimate total payroll expense per month.
Divide your monthly revenue by the monthly payroll expense to determine revenue per employee.
Monitoring this metric over time shows how productive your workforce is. As you grow revenue with the same number of employees, you increase productivity.
Benchmarking against industry averages helps assess performance. The Klipfolio revenue per employee benchmarks provide a guideline. As a business earning between $2 million to $5 million in revenue, a target is likely $100,000 to $150,000 per employee.
Improving revenue per employee allows businesses to scale efficiently. Consider changes like price increases, higher margin products, better systems, and more if current productivity lags behind industry norms.
To calculate revenue per employee, having an accurate count of employees is essential. QuickBooks provides several helpful reports to determine current and historical staff levels.
The Payroll Summary report shows the number of employees paid each pay period. To access it:
This will display the number of employees paid per pay period. You can use this to calculate monthly averages.
The Employee Count by Month report provides a monthly breakdown of staff levels. To access it:
This shows the number of active employees per month. Calculate the average over a 3-6 month period for a solid benchmark of employees per month.
Having accurate employee counts is crucial for determining revenue per employee. Use QuickBooks built-in reports to easily access this data. Monitoring it regularly enables insightful workforce and financial planning.
In addition to the number of employees, you also need total net revenue over a given time period to determine revenue per employee. QuickBooks offers several reports to derive this figure.
The QuickBooks Profit and Loss report sums total revenue and subtracts expenses to provide net income for any date range - allowing you to calculate revenue.
To access this report:
This provides the total revenue figure needed to determine revenue per employee.
This sales report shows revenue generated from each customer over custom periods. Export the total figures to determine overall revenue.
To use this report:
This gives you total revenue over any period to calculate key revenue metrics like revenue per employee.
With the number of employees and total revenue in hand, you can now calculate the revenue per employee figure for any time frame using a simple formula in Excel or other spreadsheet software.
To easily compile figures, export your QuickBooks payroll and revenue reports to Excel for the selected date range:
This will give you the total revenue and number of employees month-by-month to use in your revenue per employee calculation.
In Excel, use this formula:
Total Revenue / Average Number of Employees = Revenue per Employee
For example, if your total revenue for January was $100,000 and you had 10 employees on average that month, your January revenue per employee would be $10,000.
To find the average number of employees for a month from the Payroll Summary report export:
This will give you the average headcount used in the revenue per employee formula.
Monitoring revenue per employee over time can show the impact of hiring and staffing changes on your business's financial performance. Comparing the metric year-over-year can also gauge growth.
Understanding the breakdown of employee pay rates and payroll expenses is crucial for accurate revenue per employee calculations and financial planning.
The QuickBooks Employee Pay Rate report provides a detailed overview of compensation rates across your workforce. This report can be filtered by employee, pay item such as salary or hourly wages, and date range.
Key details in this report include:
Reviewing this report allows you to analyze the average pay rate across your company. You can also assess trends over time if pay rates increase or decrease.
This provides the foundation for an accurate revenue per employee calculation. By understanding precise employee pay rates, you can determine the total payroll expenses required to generate revenue. This helps model the potential return on investment from hiring additional staff.
The Payroll by Pay Period report compiles compensation expenses for set pay periods such as weekly, biweekly or monthly. This includes:
Analyzing payroll costs per pay period allows you to correlate labor expenses with revenue generated during the same timeframe. This helps determine true net revenue after accounting for payroll.
Reviewing payroll reports by pay period over an extended timeframe provides data to calculate metrics like:
Combining the Payroll by Pay Period report with sales data gives the most accurate picture of how employee compensation impacts your bottom line. This helps model payroll costs when making new hires to ensure revenue scales appropriately.
Regularly updating your revenue per employee calculations allows you to track changes over time and optimize hiring and staffing decisions for your small business.
Comparing your revenue per employee ratio to industry averages can help set realistic goals for your team's performance. Some key steps include:
Benchmarking revenue productivity can motivate employees and guide strategic hiring decisions to optimize overall performance.
Analyzing revenue generation across individual employees allows you to pinpoint your highest and lowest performers. Some tips include:
Tracking individual productivity can help uncover training needs or opportunities to better align employee strengths and business objectives. This allows you to maximize revenue per employee over time.
Calculating revenue per employee is a useful metric for QuickBooks users to evaluate team productivity, profitability, and growth opportunities over time. By following the steps outlined to derive the number of employees, total revenue, and RPE formula, small businesses can leverage QuickBooks reporting to drive hiring and staffing decisions.
QuickBooks provides the necessary payroll and financial reports to determine average employees and revenue, which feed into the revenue per employee calculation. Monitoring this metric facilitates data-based decisions on hiring goals, employee targets, and performance management.
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