The entries you make on the Personnel page of your forecast will allow you to think through your current and future staffing needs. The way you represent your staff in the forecast is very flexible. You can list every employee by name or title, or you can also create group entries representing common roles or departments if that makes more sense.
Note: If you have no paid employees (as in an all-volunteer nonprofit group, for example), just skip this step.
You can add employees as either direct labor or regular labor. Use the direct labor option only for personnel whose salaries are directly related to your revenue. The regular labor option is for staff whose salaries are part of your overhead expenses. For more details, see What is the difference between direct labor and regular labor?
You can also add employees as either on-staff employees or contract workers. You'll pay taxes for on-staff employees but not for contract workers. As you add on-staff employees, their related tax expenses (also known as the Burden rate) will be calculated automatically to your financial statements.
Note: If you are a one-person business, remember to include a salary for yourself.
- Entering regular labor employees
- Entering direct labor employees
- How can I represent part-time personnel in my forecast?
Where does this entry appear in the financial statements?
Profit and Loss
Regular and direct labor entries appear in two different locations on the Profit and Loss because they calculate your margin differently. A regular labor entry will calculate into Operating Expenses, as shown below:
A direct labor entry, on the other hand, will calculate into Direct Costs, as shown below. For an animation showing how to locate your direct labor in the P&L, see How do I locate my salaries and wages in the Profit and Loss?
In the Balance Sheet, your personnel entries calculate as a negative number in your Assets. And then, because the Balance Sheet always has to be in balance, this value will also appear in the Liabilities and Equity portions of the table. In the example below, the forecast contains only two personnel entries (one regular labor and one direct labor) to represent where it appears in the calculations more clearly:
In the Cash Flow table, your personnel entries are calculated into the lines below: