Tracking 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.
Introduction to Revenue Per Employee Metrics
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.
Understanding the Importance of Revenue Per Employee
Monitoring revenue per employee is critical for small business owners to:
- Assess overall workforce productivity and profitability
- Make informed decisions about hiring and staffing needs
- Set realistic benchmarks for employee performance
- Identify high and low performers to refine incentives
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.
The Role of QuickBooks in Tracking Financial Metrics
As a leading small business accounting software, QuickBooks enables easy tracking of revenue per employee over time. Business owners can leverage QuickBooks reports to:
- Calculate average revenue per employee for any date range
- Segment metrics by department, location, pay period
- Identify trends and fluctuations over quarters/years
- Optimize hiring to improve productivity
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.
How do you calculate revenue per employee?
To calculate revenue per employee, you can use QuickBooks Payroll Summary report. Here are the steps:
- Go to Reports > Employees & Payroll > Payroll Summary
- Select the date range you want to analyze
- Scroll down to the "Totals" section
- Locate the "Total Pay" and "Number of Employees Paid" fields
- Divide "Total Pay" by "Number of Employees Paid" to get the average revenue per employee
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:
- It doesn't account for profitability - high revenue per employee does not guarantee profits
- It's an average - individual employees may have higher or lower revenue productivity
- Revenue changes don't always correlate directly with numbers of employees
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.
What is the formula for profit per employee?
The profit per employee ratio is a useful metric for businesses to track over time. Here is the formula to calculate it:
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Identify the organization's total profit for a set time period (e.g. annually). This can be found on the income statement.
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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.
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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.
What is revenue per FTE employee?
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:
- Run the Payroll Summary report for the desired timeframe (month, quarter, year, etc.)
- Note the total number of hours worked across all employees over that period
- Divide the total hours worked by 2,080 (standard hours for 1 FTE employee per year) to get the number of FTE employees
- Run a Profit & Loss report for the same timeframe
- Divide the total revenue amount by the calculated number of FTE employees
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:
- Only include employees directly involved in revenue generation
- Use consistent time periods for comparison
- Factor in seasonality and external issues impacting revenue
- Combine with other metrics to avoid focusing solely on revenue per head
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.
How much revenue should I have per employee?
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:
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Run the Payroll Summary report in QuickBooks Desktop. This provides details on number of employees paid each pay period.
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Run the Employee Pay Rates report. This shows each employee's pay rate.
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Multiply the number of employees by their average pay rate to estimate total payroll expense per month.
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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.
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Utilizing QuickBooks Reports for Employee Data
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.
Generating a Payroll Summary Report in QuickBooks
The Payroll Summary report shows the number of employees paid each pay period. To access it:
- Go to Reports > Employees & Payroll > Payroll Summary
- Select the desired date range
- Run the report
This will display the number of employees paid per pay period. You can use this to calculate monthly averages.
QuickBooks Report: Number of Employees Per Month
The Employee Count by Month report provides a monthly breakdown of staff levels. To access it:
- Go to Reports > Employees & Payroll > Employee Count by Month
- Select the desired date range
- Run the report
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.
Assessing Total Revenue Using QuickBooks
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.
Analyzing the Profit and Loss Report for Revenue Insights
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:
- Go to Reports > Company & Financial
- Select Profit & Loss Standard
- Choose date range
- Scroll to Total Income section
- Export report to Excel
This provides the total revenue figure needed to determine revenue per employee.
Leveraging the Sales by Customer Summary for Revenue Data
This sales report shows revenue generated from each customer over custom periods. Export the total figures to determine overall revenue.
To use this report:
- Navigate to Reports > Sales
- Pick Sales by Customer Summary
- Set date range
- Scroll to end of report
- Export to Excel
- Sum revenue column in spreadsheet
This gives you total revenue over any period to calculate key revenue metrics like revenue per employee.
Calculating Revenue Per Employee in QuickBooks
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.
Exporting Data from QuickBooks to Excel
To easily compile figures, export your QuickBooks payroll and revenue reports to Excel for the selected date range:
- In QuickBooks, go to Reports > Company & Financial
- Select the Profit & Loss report
- Set the date range for the desired time period
- Click Export and select Excel as the file type
- Repeat steps 1-4 for the Payroll Summary report
This will give you the total revenue and number of employees month-by-month to use in your revenue per employee calculation.
Applying the Revenue Per Employee Formula
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:
- Sum the Number of Employees column
- Divide the sum by the number of pay periods that month
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.
Analyzing Payroll and Compensation Reports
Understanding the breakdown of employee pay rates and payroll expenses is crucial for accurate revenue per employee calculations and financial planning.
QuickBooks Employee Pay Rate Report
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:
- Employee name
- Pay item type (salary, hourly wage, etc.)
- Pay rate amount
- Hours worked (for hourly employees)
- Gross pay
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.
QuickBooks Desktop Payroll Report by Pay Period
The Payroll by Pay Period report compiles compensation expenses for set pay periods such as weekly, biweekly or monthly. This includes:
- Total gross pay
- Company payroll taxes
- Deductions
- Company costs
- Net pay per employee
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:
- Payroll as a percentage of revenue
- Revenue per payroll dollar
- Revenue per employee
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.
Strategic Use of Revenue Per Employee Data
Regularly updating your revenue per employee calculations allows you to track changes over time and optimize hiring and staffing decisions for your small business.
Benchmarking Against Industry Standards
Comparing your revenue per employee ratio to industry averages can help set realistic goals for your team's performance. Some key steps include:
- Research typical revenue per employee figures for your industry. Accounting industry averages tend to range from $125,000 to $175,000.
- Calculate your current revenue per employee ratio in QuickBooks using the steps outlined above.
- Compare your ratio to industry benchmarks to identify any significant gaps.
- Set clear revenue goals per employee aimed at reaching or exceeding industry standards over a defined timeframe.
Benchmarking revenue productivity can motivate employees and guide strategic hiring decisions to optimize overall performance.
Identifying Opportunities for Improvement
Analyzing revenue generation across individual employees allows you to pinpoint your highest and lowest performers. Some tips include:
- Run a QuickBooks Payroll Summary report filtered by employee over a set time period (e.g. monthly, quarterly, annually).
- Compare total revenue attributed to each employee side-by-side. Calculate variance from average.
- Identify consistently low performers for coaching or development plans to improve productivity.
- Recognize and reward top performers for exceeding revenue goals as an incentive and motivation.
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.
Conclusion: Maximizing Business Potential with QuickBooks Insights
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.
Recap of Revenue Per Employee Calculation Process
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.
