How Sunshine Coast Hotels Decreased Their Labour Costs by 4%
We are always looking for ways to bring value to our customers and after a chat with our partner, CFO One, we share with you a valuable explanation for how companies can decrease labour costs.
Many of our customers are also CFO One’s customers so we often hear firsthand how the CFO One team is helping companies decrease their financial and accounting costs while providing business leaders more accurate and timely company performance information.
With this in mind, we sat down with Tamara Cross and Mike Urness of CFO One with the goal to uncover any practical tips we could obtain to help you too, decrease operational costs, improve cash flow or improve customer experience.
We asked Tamara and Mike whether they knew of a strategy that our hospitality clients should be using that most are missing out on currently and without hesitation, Tamara replied that businesses should be properly using digital rostering. “Companies are spending way more money on labour costs than they should be. Many of the hotels we work with, taking into consideration their staff numbers, can reduce their labour costs by 10%, if not more! A great example of this kind of result is the Sunshine Coast Hotels group, headed by Scott Armstrong who would happily attest to this.”
CFO One are the outsourced finance and accounting department for Scott’s companies, and during one of their monthly strategy and performance meetings he asked for their help on improving employee experience around some problems they were experiencing with rostering. After a little research on the most appropriate tools and processes for their situation, CFO One implemented a digital rostering and time clock solution too, that resulted in many benefits ranging from happier employees to reduced time managing the rostering process.
Mike pointed out that they hadn’t initially set an objective on the reduction in Sunshine Coast Hotels labour costs, but quickly realised a significant cost savings in two main ways. Tamara continued, “the first was in the elimination of lost time. In their previous time clock system, employees could leave a little early or arrive a bit late and there wasn’t any accounting for the loss. The realisation was that there was more time loss than expected and the savings gets big when there lots of working hours each week. The second cost savings area revealed itself in the shifting management of Wage Costs to Labour Hours.”
As we all know hospitality businesses have a largely casual labour force, which means, a mix of ages, different classifications, pay rates and penalties/awards. It becomes a complex calculation if trying to work out manually how much one casual employee might cost you for the week. With an ever-changing roster, with cancellations or sick leave, you are suddenly covering shifts with a different casual, with different rates and your wage costs may blow out without you knowing it.
Mike and Tamara suggested an automated electronic costed rostering and timesheeting platform which allows you to template up your rosters and gives visibility of how much each hour, day, week is costing you based on your roster. For example, you can switch out a Level 3 employee with a Level 2 employee and see your cost savings immediately. They guarantee that by undertaking this activity, you can easily shave 1-2 hours off your rostered times each day and manage your workforce more effectively to reduce your overall wages costs by at least 5-10% just in penalties, overtime and scheduling of the more expensive or experienced staff just by having it visible and undeniably keeping you accountable on a daily wage cost target.
If you don’t have the wage cost monitoring weekly, daily, hour, by location, by shift by team, by individual data available, then you can’t effectively resource, manage or make cost changes/savings.
Most business owners and duty managers will set the roster and stick to it. Tamara asked, “Imagine if you had a live wage tracker that tells you the cost per hour of having X number of employees clocked in and working on the floor or in the kitchen. Are the number of patrons, meals, sales in line or indicative of your wage spend and number of staff?” Mike explained that this is where it's critical to know who is working, where and how much it’s costing. “Knocking off a staff member early each night by 30 minutes when its not busy can equate to over $5k of savings per annum!”, he said.
“If you want your head chef to be more accountable for their staff costs, show the labour hours in the kitchen versus the number of meals day by day or the average sales per day/week. Keep a relative number as a target visible and ensure they are kept accountable and rewarded for achieving these targets. A blind chef in the kitchen is as good as a naked waiter… not good for business!”
Moving to Wage Costs versus Labour Hours, we discussed how when wage creep sets in you usually compensate by increasing your selling prices and taking in CPI increments. But, as questioned by Tamara, “how do you know if it’s labour hours or cost? What’s your mix of full time salary versus casual labour?” She further explained that the more granular you get in terms of the cost drivers in your business, the better. With the best measure of where you might get costs creeping in and why, being labour. They asked, “Is the number of hours driving your wage increase or the rate per hour? Or is it you’re using more qualified staff? Or paying more penalty rates?”
Mike pointed out that labour hours removes all of these variables and by setting hourly targets for each shift or location in your business, means you can drill down when you start to get larger variances to budgets.
“This clarity allowed us to better manage Sunshine Coast Hotels rosters, labour mix and costs to a point they realised a +4% savings!”
We loved talking to Tamara and Mike, people who seem to have mastered their area of business, and feel that we have uncovered a valuable insight our customers can relate to and appreciate.
If you’d like to speak with CFO One about how your business could operate more cost effectively, please follow this link. The team at CFO One are so friendly and helpful and are more than willing to provide guidance and share ideas with you today.
We welcome your feedback and encourage you to share any successful strategies or ideas you have experienced with CFO One.