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Forecasting future staffing needs

While many retail businesses use cash-flow forecasting to optimise their trading performance, could they be doing more to predict their staffing needs, both during and after the pandemic? Could this be key to their survival in the difficult months of winter trading ahead?

In the retail sector particularly, both recruitment and redundancy costs can have a significant impact on a business’ financial position, so forecasting staffing requirements two or three years ahead and using this information to make informed decisions can be a cost-efficient strategy. So, where should retail businesses start and how can they best use staffing forecasting to their advantage?

Changes in consumer behaviour experienced during the pandemic present somewhat of a paradox for retailers when it comes to predicting their future staffing needs. On the one hand, COVID-19 has accelerated the existing ‘bricks to clicks’ trend, which is contributing to the decline of traditional high street stores and leading to a reduction in staffing requirements for such businesses. On the other hand, retailers with a strong online presence or those making the transition to e-commerce may need to increase or adapt their workforce to meet increased demand.

While the last few weeks have brought hope in the form of positive steps towards a coronavirus vaccine, uncertainty is still making it challenging for retailers to plan ahead; it’s impossible to know whether trading levels will ever return to their pre-pandemic levels, and the exact timescales involved in the sector’s recovery. Despite this, effective scenario planning can help retailers to prepare their workforce for a range of possible outcomes, avoiding the high costs involved in last-minute, reactive decision-making.

Without careful planning, recruitment activities can have a significant impact on a business’ financial position. 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? It’s worth bearing in mind that for SMEs, the time investment needed to manage the hiring process internally is more likely to detract from the company’s core trading activities. Similarly, owner managers are more likely to feel the financial effects of engaging an external recruitment company, undermining all-important cash reserves, just when they’re needed most. In these circumstances, many businesses may opt to utilise temporary workers which will enable them more flexibility, until the future looks more certain. However, this in itself will still come with a time investment for training such workers.

When looking to forecast their future staffing requirements, retailers should start by considering a base scenario for their business, which would be their best guess at what the future looks like at that moment in time. From here, they can then adapt the base scenario to consider the best and worst-case scenarios in terms of their future trading activity. 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.

It’s worth remembering that forecasting staffing needs isn’t about trying to predict the future. Instead, this technique is designed to help retailers optimise their financial position by better understanding their staffing capacity and associated costs, in the face of a number of potential trading challenges and opportunities.

In many circumstances, retailers will tend to look one year ahead when conducting staffing forecasts. However, the current market conditions make it wise to plan at least two years ahead due to potential future cash-flow constraints. For example, this timescale will take into account 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, it is important to remember that these still need to be repaid at a later date and businesses need to ensure they have the cash available in order to meet these liabilities when they fall due. 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.

Now more than ever, it is vital that businesses update their forecasts on a regular basis. The fast-changing conditions of the pandemic and consumer behaviours can have a significant effect on businesses in the retail sector, for example the regular changes to the furlough scheme. Therefore, preparing a forecast once and relying on this going forward will not be beneficial as the assumptions used will quickly become outdated.

While the UK retail sector may be starting to glimpse a light at the end of the tunnel, the future remains far from clear. By conducting staffing forecasts based on a number of scenarios, and keeping them under regular review, businesses will be ready to react to the challenges that lie ahead, while keeping their cash position under control.


Roberto Lobue is a partner and Sadie Channing is a senior manager in the retail team at accountancy firm, Menzies LLP 

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