NEUBRAINER, the official blog of Neubrain

Budgeting for the Organization's Biggest Cost: Workforce!

Posted by Yana McConaty

Large and complex organizations maintain a strategic focus on processes and systems to manage their workforce. Despite being one of the largest expenditure items, workforce expenditures are typically neglected and left to finance to manage with a complex set of spreadsheets. Oftentimes there is not enough collaboration between HR and finance groups, leaving a huge disconnect between people and dollars. Greater control and a true picture of payroll dollars are more important than ever with organizational growth, changing priorities, budgetary constraints, and other factors that influence the workforce.  Organizations typically create personnel budgets annually.  Circumstances change during the course of the year which often require an up-to-date cost analysis, forecasting, and what-if scenarios to be able to respond effectively to operational changes.  While in most organizations annual payroll budget numbers are already tough to crunch; weekly, monthly or quarterly payroll forecasts are almost never practiced.

Modern organizations need to transform their financial paradigm in a way that will result in more dynamic and accurate expenditure projections, especially as they relate to workforce. Management can properly forecast pay and personnel related costs once positions and their attributes, pay rates, step and grade adjustments, re-classifications, longevity tables, benefits, taxes, overtime, union negotiated rates, requests for new positions, temporary labor, merit increases, special pays, vacancies, Cost of Living Adjustments (COLA), foreign currency impacts, and many other inputs and drivers are collected, processed, analyzed and included into the overall projections.

Workforce budgeting relies heavily on accurate data from many systems which is often manually entered into MS Excel, MS Access, or other home grown tools to perform analysis and budgeting. Such custom tools lack real-time data integration and the ability to combine & model data from all needed systems (e.g. payroll, HR, finance, time & expense, scheduling systems, etc.) in order to provide a comprehensive view of headcount, salary, performance and financials. They are also prone to error, difficult to maintain, and offer no analytical power to run complex analyses and what-if simulations.

Modern budgeting systems can help address these challenges by automating interfaces to all required data sources, modeling heterogeneous data into a comprehensive database, automating driver-based planning tasks, helping to create reports, visualizations, and what-if drills. By investing into modern systems and approaches, organizations can drastically improve capabilities to forecast their most valuable and expensive strategic asset — their workforce!


Topics: budgeting analytics, budgeting software, Workforce Budgeting, Pay and Personnel Budgeting and Forecasting


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