Are you tired of spending days on headcount reconciliation? To improve this essential process, FP&A teams, HR leaders, and their business partners must work together to effectively manage all aspects of workforce planning, including a shared, accurate understanding of headcount.
Timely, accurate headcount reconciliation ensures that financial reports and forecasts reflect the best information available. You are better able to align your workforce plans with financial goals and strategic plans, ultimately driving improved profitability and growth.
By embracing collaboration and implementing finance and HR best practices, you can reclaim your time, reduce errors, and make better decisions.
Why headcount reconciliation matters
Headcount reconciliation is crucial because people make up the most significant component of operating expenses in many organizations–often up to 70%. An accurate understanding of your workforce–and where you stand versus your hiring plans–is vital for understanding the business’s capacity to achieve its strategic goals.
Workforce reconciliation connects actual headcount data in your HRIS (Human Resources Information System) with positions in the workforce plan. This process can reveal gaps in hiring plans which may impact company goals. Once completed you will know if you are behind in your hiring plan or ahead of it.
The implications of this analysis impact each function differently. For example, if the Engineering team has yet to hire critical software developers, will it be able to build products at the pace you’ve planned? Maybe Sales is quickly signing up new customers. That’s great news, but if you are behind on hiring for your professional services or other support team, those new customers might not have a great experience and opt to take their business elsewhere.
Accurate headcount reconciliation allows you to ensure your financial plans reflect the people capacity you actually have and make adjustments to talent acquisition strategy to meet goals. FP&A software tools like Stratify streamline workforce planning, including headcount reconciliation, making it easier for you to focus on the strategic implications of the data.
The challenges of traditional headcount reconciliation
For many organizations, reconciliation is a time-consuming and manual process. “It is often the worst part of a financial analyst’s job,” says Quy Dong, former finance professional at Workday and the Head of Customer Success at Stratify, “but you can’t do the job without the picture it reveals.”
Once an analyst understands gaps versus the workforce plan, she can have an intelligent conversation with her business partners about the strategic implications of missing or exceeding hiring plans. “Unfortunately, at many organizations, an analyst spends so much time pulling data and manipulating it in spreadsheets in order to reconcile actuals vs plan, they have no time to have that kind of strategic conversation with business partners,” says Quy.
Here are some common challenges faced during traditional reconciliation:
- Definitions: HR and finance may have two different definitions of headcount. For instance, HR may focus on all individuals including part-time, contractors and full-time employees while finance emphasizes budget allocation for full-time equivalents or “FTEs”. This challenge can create confusion and discrepancies when aligning workforce planning with hiring plans.
- Manual processes: Relying on spreadsheets and data entry leads to errors and inconsistencies. These mistakes can have significant consequences, including financial discrepancies, misalignment between departments, and a lack of trust in the data used for decision-making.
- Limited collaboration: A financial analyst needs HR’s assistance to map actual headcount to positions in the plan. She also needs input from both HR and business partners to determine the go-forward workforce plan. She may need to have multiple meetings with these stakeholders to come to consensus. When finance, HR, and business teams don't work together effectively, it's a challenge to identify and address discrepancies promptly, leading to prolonged reconciliation processes and incomplete input into forecasts.
These challenges underscore the importance of adopting a more efficient and accurate approach to reconciliation.
Best practices for effective headcount reconciliation
To overcome these challenges and enhance the efficiency of your reconciliation process, consider implementing the following best practices.
1. Create a Shared Definition of “Headcount”
A human resources team using HR best practices may define headcount differently than finance. But conflicting numbers will only frustrate your CEO. For workforce planning purposes, there can be only one number.
Therefore, strong collaboration between finance and HR reporting is essential for accurate and efficient reconciliation. Keep in mind that many recruiting or talent acquisition teams may be very transactionally focused--they’ve got jobs to fill, and they are focused on that! They are utilizing talent assessment tools and other workforce management software to achieve that goal.
So, start by fostering open communication, and work to agree upon terms. For example, does headcount include contractors? How will part-time workers be accounted for? What about interns? Aligning on definitions will help eliminate the chances that HR will have one number for headcount and Finance another. In this way, you can ensure that data is consistent and up-to-date, leading to more efficient and effective resource allocation.
2. Leverage Technology and Automation
Investing in the right technology can help streamline the headcount reconciliation process. It’s the best way to get Finance out of spreadsheets and enable HR to take an active role in the process.
Today, many financial analysts must download headcount data from an HRIS and manually upload it into a spreadsheet to compare actuals to planned headcount for the period. An analyst must do her best to connect the dots between the two data sets. She typically meets with HR’s talent acquisition team to get the answers she needs to do this accurately. E.g. Is this Level 1 engineer position that we hired the same as the Level 2 engineer position we planned for? The data is critical, but the process is inefficient, expensive, and a poor use of everyone’s time.
FP&A software pulls in HRIS data and compares it with the workforce plan in real-time. A simple workflow enables HR partners to walk through the reconciliation process themselves. HR can quickly see actuals vs. planned, match them up, and complete the reconciliation process in just a few minutes. With the time saved, Finance can focus analysis and discussion on the business implications of being behind or ahead of planned headcount. It’s an extremely efficient way to enable the work between strategic finance, HR, and other department heads to be focused on strategy, not data gathering.
“Headcount reconciliation has always been painful. Now with Stratify, Finance seamlessly syncs with HR & Recruiting.”
- VP of Finance, Jessica Lewis, Spotnana
Read Spotnana’s Story
3. Establish Clear Processes and Accountability
Having well-defined workforce planning processes that assign responsibility for defining planned positions and reconciliation tasks can help ensure efficiency. Creating a clear workflow and setting expectations for each team member can prevent bottlenecks, making the process smoother and more effective.
An FP&A platform like Stratify can help track accountability and keep cross-functional processes organized by assigning planning tasks to non-finance roles. All of these action items are tracked and accomplished on the platform with appropriate access controls. Examples of assignable tasks include:
- Finance assigns headcount reconciliation to an HR partner
- A business partner submits new planned positions and assigns review/approval to finance
- Finance requests that a business partner provide feedback on a new forecast
Adopting these best practices for effective reconciliation can streamline the process, ensure accurate data for your organization, and foster a more collaborative environment. This positive change ultimately leads to more informed decision-making and a stronger foundation for financial planning.
Compare the top 5 workforce planning tools for finance.
Save time and avoid headaches with workforce planning from Stratify
Leveraging Stratify's innovative workforce planning solution is one way to make the headcount reconciliation process efficient, giving you more time for strategic conversations. Stratify is the next-generation FP&A platform for strategic collaboration with business partners, including HR. Stratify enables finance teams to engage stakeholders across the organization in the planning process. With Stratify, you can have data and collaboration processes in one place, making it easy to report, analyze, and plan.
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