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Productivity Calculations and Other Formulas for Small to Medium Businesses

Using the data your company gathers daily to gain real insights is crucial to running a successful business.

Database management systems are an integral part of automating calculations on your data so you can see real-time statistics on your company and make informed business decisions.

Productivity defined

Employee productivity can be defined as the amount of work completed in a measured amount of time.

Productivity vs. cost in your company can be measured using a productivity formula.

The calculation can be added to your Database Management System to avoid repetitive, time-consuming manual calculations.

Calculating productivity helps businesses understand and optimize their workflow.

Reasons for using a productivity formula

There are many reasons a company will find value from a productivity formula, but here are some examples to get the ball rolling:

  • Measure and improve the use of employee time.

  • Find the true amount it costs to provide products or services.

  • Provide motivating goals for employees by utilising the productivity formula in KPIs.

  • Help companies make decisions based on productivity figures.

The productivity formula

There are different ways to calculate productivity across different activities, but the basic productivity formula is simple:

The output variable is usually a monetary amount. However, other measures may be used, such as the number of service interactions, telephone calls, the total number of products sold, etc.

The input variable is usually the amount of time worked in the form of hours.

Outputs and inputs may vary from industry to industry.

So just to clarify: productivity = total value of work / total time worked.

Let’s make sense of that with an example:

An accounting firm completes 192 accounting tasks in a month, handled by 5 employees.

We want to calculate the firm's productivity in handling monthly accounting tasks.

The productivity formula is 192 accounting tasks divided by 5 = 38.4.

In this case, the productivity of the 5 employees is the completion of 38.4 accounting tasks on average per employee per month.

Or you could calculate the productivity of each of those 5 employees:

The DataGrows accounting CRM and practice management tool contains a time-to-invoice report that gives you a detailed breakdown of each employee, the number of hours they have worked, and the amount of revenue they have generated for your firm at any point in the month.

This makes it easy to see who your highest performers are and which employees might need a little push. In essence, we do the calculations for you so you can focus on bettering your team’s performance.

Stock Turnover Ratio Formula

Another great example of where database management systems help companies to grow is the stock turnover ratio formula.

This formula helps to determine how well a company manages its stock inventory while generating sales over a certain period of time. It indicates how many times during a certain period a company can sell its inventory.

For example:

Let's say a company incurred a raw material cost of 100 million in 2019, direct labor costs of 90 million, and manufacturing overhead costs of 20 million. The inventory at the beginning of the year was 200 million and at the end of the year stood at 220 million. Calculate the stock turnover ratio of the company based on the given information.

Cost of Goods Sold = Cost of Raw Material + Direct Labor Cost + Manufacturing Overhead Cost

Cost of Goods Sold = 100 million + 90 million + 20 million

Cost of Goods Sold = 210 million

Average Inventory is calculated using the formula below:

Average Inventory = (Inventory at Beginning of the Year + Inventory at End of the Year) / 2

Average Inventory = (200 million + 220 million) / 2

Average Inventory = 840 million

Stock Turnover Ratio is calculated using the formula given below

Stock Turnover Ratio = Cost of Goods Sold / Average Inventory

Stock Turnover Ratio = 210 million / 840 million

Stock Turnover Ratio = 0,25

Therefore, the stock turnover ratio of the company for 2019 stood at 0,25 times.

Automate productivity formulas

Database management systems have been designed to simplify the storage of your company’s data and for you to use the data to generate insights, such as the ones discussed above.

DataGrows allows you to choose the outcomes you want to calculate and set up these formulas quickly and easily. Results can be seen at a glance from anywhere at any time. DataGrows will give you real insights based on your data, eliminating uncertainties or guesswork when it comes to numbers.

Request a meeting to find out more.