Automating headcount reconciliation for more streamlined, effective planning

Headcount reconciliation is the process of tracking and planning the hiring of employees for your business by aligning approved headcount with actual numbers. 

While the process may seem simple, it can quickly become overwhelming when a company scales and the number of employees rapidly increases or when there are unforeseen changes in the HR department’s recruiting strategy and hiring plans. It’s also not uncommon for employees to be promoted and/or to move from one department to another, both of which further complicate reconciliation. 

Finance teams often end up spending a lot of their valuable time reconciling actual headcount to forecasts and adding in new hires each month because the data is not always accurate or updated. 

This article explores the challenges of manually reconciling headcount data and shows how automation can transform this time-consuming task into a more effective and streamlined process.

The importance of headcount reconciliation

Headcount reconciliation refers to the process of tracking and aligning a company’s headcount with the actual hiring and staffing numbers. This is important for SaaS companies as it affects sales capacity planning, budgeting and forecasting, and financial planning. 

Here are some reasons why headcount reconciliation is important for SaaS startups. 

1. Financial planning and headcount reporting

Headcount reconciliation provides an accurate picture of your workforce in terms of the number of employees and their associated costs.

This data enables CFOs and finance teams to review and update the workforce assumptions in the annual budget and/or financial forecasts, as well as develop more reliable and insightful headcount reports, to inform  business decision-making or any changes to the existing talent acquisition strategy.

2. Cost management 

“In most industries, people costs are much higher than capital costs.” — Harvard Business Review

People costs are one of the biggest expenses for any company, and that is certainly true in the SaaS industry.

Having a thorough understanding of where you stand vs. what you’re planning is necessary to align the company's workforce requirements with its strategic business objectives and finances.

By knowing exactly how many people you employ and at what cost, you can better control your headcount expenses and also ensure sustainable growth and profitability.

3. Resource allocation 

Regular headcount checks ensure you have the right number of people in the right roles, preventing overstaffing and understaffing.

They also enable better alignment between your hiring plans and long-term business objectives.

The pain points inherent in manual headcount reconciliation

To fully understand all the benefits of automating your headcount reconciliation process, it helps to first look at the some the challenges associated with manually reconciling headcount data:

1. Errors in data extraction

Companies spend a lot of time manually pulling and validating data from multiple spreadsheets to review the forecasts with the actual numbers.

Manually cross-checking employee data from various sources is not only time-consuming but also prone to errors as even the slightest mistake or typo can lead to inaccuracies in financial and workforce planning and reporting. 

2. Discrepancies in data integration

The business of SaaS is quite dynamic, especially today with so many companies employing remote talent to get the skills they need their workforce to have. Roles often shift from one city to another, new hires often start later than planned, and employees sometimes leave unexpectedly. 

Making things even more difficult, the information related to employees is usually scattered across various systems: HR has one set of data, payroll has another, and finance has a third. Manually compiling data from all these systems is highly prone to errors and extremely time-consuming. 

Different systems and departments also often have different information regarding employees. These mismatches occur for various reasons:

• Lag time between system updates
• Manual data entry errors
• Delayed recording of new hires or departures
• Inconsistent categorization of employees across departments

3. Data latency

Any changes in employee classifications and details need to be immediately updated in the company’s human resources information system (HRIS), which is sometimes referred to as a human capital management (HCM) system.

However, the relevant departments may not always update this information in a timely manner, which impacts financial reporting and business planning (to some extent). 

This creates a cycle where finance teams are constantly playing catch-up with outdated or inaccurate employee data.

4. Historical data tracking

While HRIS systems show the current state of employee data, they often fail to maintain a clear history of how things got there.

When an employee transfers departments or gets promoted, the old information is overwritten. This makes it difficult to trace the employee's journey through the organization. 

It further forces finance teams to manually piece together employee movements from various sources, making it even more challenging to explain variances in headcount and compensation costs over time. 

5. Lack of collaboration among departments 

Headcount reconciliation requires collaboration among finance teams, HR personnel, and business leaders to ensure the data and reporting is accurate.

In most companies, these segments often function individually, making it difficult to address any discrepancies in data or assumptions and leading to a prolonged reconciliation process. 

Given the fact that so many of these challenges are rooted in data issues and repetitive processes, it’s no surprise then that technology and automation software can help companies easily overcome them. 

The benefits that come with automating your headcount reconciliation process

There are plenty of benefits that come with automated headcount reconciliation. We’ll discuss the biggest ones here. 

1. Reduces manual data consolidation and validation 

Automation eliminates the time-consuming and overtly manual task of gathering and consolidating data from multiple spreadsheets and systems. Implementing a workforce planning software helps you automate data collection from different HRIS systems and  different regions or departments. 

Automation also reduces the errors that invariably result from juggling multiple spreadsheets. 

Working through unwieldy spreadsheets and complex models to ensure accurate data for headcount reconciliation can take several hours or days even.

Leveraging automation, finance teams can instead focus on financial analysis, check for cost variances and track trends over time, get real-time visibility into historical and current employee data, plan for sales capacity, and provide strategic insights to leadership. 

More sophisticated software can even record the entire life cycle of an employee, through every promotion, transfer, and salary change.

Automated headcount reconciliation also makes it easier to compare the actuals vs. the forecast numbers, match them, review the variances, and complete the month-end or quarterly reconciliation process in just a few minutes. 

2. Enhances financial reporting

A workforce planning or strategic finance software will not only automate your headcount reconciliation process but also enable you to track your key metrics in real time to streamline financial reporting. 

The best solutions will provide the ability to customize financial reports and charts to make it easier to communicate results. 

Further, if you choose a software that gives you the ability to drill down into your data in different dimensions (e.g. by region, department, etc.), you’ll benefit from deeper insights that will help you make more informed business decisions.  

3. Improves forecast accuracy

Forecasting becomes much more reliable with the availability of employee historical data and real-time updates. However, to achieve this benefit, it’s important to choose a software that offers the ability to: 

• Track hiring patterns and turnover rates
• Monitor salary trends across departments
• Flag unexpected deviations from plans
• Provide data-backed insights for budgeting and financial planning around resources 

Build transparency and accountability into your larger process to make it even better 

Clearly, leveraging technology to automate your headcount reconciliation process offers some compelling benefits, setting the stage for faster, easier reconciliation going forward.  However, it’s also important to ensure the process is transparent, with clear roles and responsibilities to help avoid some of the frustrations that commonly arise during a headcount reconciliation between HR and finance teams. 

Most of those frustrations will go away once you automate the data consolidation and validation. However, the process of headcount reconciliation will ideally remain a  collaborative one. Thus, it’s important for all the teams involved to have clear roles and responsibilities and for everyone involved to have visibility into the process. 

The best software will provide a single source of truth, consolidating all the data into one system or platform to provide the visibility you need. What you need to decide is who does what. 

For example, it could be the responsibility of the HR or people team to manage all employee movements and roster updates, then feed this information into the required systems.

Once the systems are updated, the finance department could then focus on reviewing the assumptions in the budget and financial forecast and analyzing the cause and impact of any variances—rather than engaging in employee classification and data entry.

“Drivetrain has really helped speed up collaboration between stakeholders. They don’t need to wait on us (the finance team) to publish our monthly reports to make decisions or share our spreadsheet templates to input their data.” — Rajshekhar Patil, Manager of Business Finance, Airmeet

Streamline your headcount reconciliation process with Drivetrain 

Most companies still perform headcount reconciliation using multiple complicated spreadsheets and different HRIS systems. 

Automating the headcount reconciliation process means leveraging technology to bring all your data together into one platform that will allow you to work with it more effectively. 

With 200+ integrations, Drivetrain does this beautifully. 

‍Drivetrain is a comprehensive strategic financial planning and analysis software that seamlessly integrates with all the key systems that contain the data you need for headcount planning and reconciliation into a single platform with powerful features for leveraging that data further. 

In addition to eliminating all the manual efforts associated with headcount reconciliation, Drivetrain gives you the transparency you need for easy, effective collaboration between teams. 

Drivetrain also enables your finance team to slice and dice the data in any number of ways to more deeply understand, plan, and predict the financial impacts the employees you have now and those you plan to hire have on your business.  

Whether you're tracking 50 employees or 5,000, Drivetrain provides the automation and powerful features to help make informed workforce decisions. The platform is also simple to use with a familiar, spreadsheet-like UI and built-in formulas written in plain English. In Drivetrain, finance and non-finance users alike can:

• Monitor key workforce KPIs across different teams.
• Review financial forecasts and budget against actuals to understand and address the cause of the variances, and uncover hidden opportunities.
• Create more accurate headcount forecasts.
• Generate data-backed financial reports with easy-to-understand charts.
• Perform scenario analysis to create more accurate forecasts for workforce planning.
• Collaborate with different teams, via role-based access, making it easy for relevant users to access, review, and update the necessary information. 

If you’re still suffering with manual processes to perform your headcount reconciliation, it’s time to look at Drivetrain.