Though many retail businesses use cash-flow forecasting to enhance their trading performance, could they be doing more to envisage their staffing needs?
Could forecasting staffing requirements assist your future cashflow?
This quite possibly could be key to business survival in the coming months ahead. Particularly in the retail sector, staff costs such as recruitment and redundancy, can have a substantial impact on a business’ financial position. Forecasting staffing requirements two or three years ahead and using this information to make informed decisions can be a cost-efficient strategy. Thus, where should retail businesses start and how can they best use staffing forecasting to their advantage?
With changes in consumer behavior brought on by the pandemic, it has presented somewhat of a paradox for retailers when it comes to predicting their future staffing needs. On one side, COVID-19 has accelerated the existing ‘bricks to clicks’ trend, resulting in the continued decline in traditional stores and need for staff. It has also left retailers with a strong online presence or those making the transition to e-commerce needing to increase or adapt their workforce to meet increased demand.
Retailers needs to plan for every possibility
Though recently there has being positive news with the development of the a vaccine, uncertainty is still prevalent making it challenging for retailers to plan ahead; it’s impossible to know whether trading levels will ever return to their pre-pandemic levels or the timescale of the recovery. In the face of this, effective scenario planning can help retailers to prepare their workforce for a range of possible outcomes.
Recruitment can have a huge impact on the business without careful planning. For example, if a retailer has invested in the development of a team of skilled staff, is it really worth making a round of redundancies, only to have to begin a new recruitment drive a few months down the line? Owner managers are more likely to feel the financial effects of engaging an external recruitment company, utilising all-important cash reserves, just when they’re needed most. In these circumstances, temporary workers could be useful although this will still come with a time investment for training such workers.
When looking forward to their future staffing needs, businesses should consider both the best case and worst case scenario. Based on this, they should be able to estimate the staffing levels that will be required in each case, and what financial impact each of these decisions may have on their business. Furthermore, it’s worth remembering that forecasting isn’t about trying to predict the future. It is intended to help retailers optimize their financial position by better understanding their staffing capacity and associated costs and allowing them to react quicker to changes in the market as they have already planned out each scenario.
How far should you plan ahead?
Many retailers will tend to look one year ahead when conducting staffing forecasts. However, due to the current climate it is wise to plan at least two years ahead due to potential future cash-flow constraints. For instance, this timescale will consider payments, such as deferred VAT payments and government backed business loans when they become repayable. Whilst such government schemes have been a lifeline for many businesses in the short-term, they must remember these will need to be paid back. If tough decisions are required around store closures, these will also take time to implement, so it’s important to start preparing for such changes at the earliest possible opportunity.
Why is forecasting important for retailers?
Now more than ever, it is vital that businesses update their forecasts on a regular basis. The industry is extremely fast moving and therefore preparing a forecast once isn’t going to work, it must be regularly updated to get full benefit.
There may well be light at the end of the tunnel for the UK retail sector though the exact future remains unclear. By conducting forecasts and keeping them under regular review businesses will be better prepared for the undoubted challenges lying ahead.