Am I spending too much on overhead?

Bottomline breaks down your overhead by category, including admin salaries, to show where fixed costs are eating your margins.

Are my costs scaling faster than my revenue?

Your report compares expense growth to revenue growth, flagging when payroll is a primary driver of cost overruns.

What does it cost me per job, fully loaded?

Bottomline calculates your total cost per job including labor, materials, and overhead allocation.

What am I spending on payroll?

Your report pulls payroll data from your accounting software and shows the trend over time alongside your revenue.

Should I raise my prices?

If you are understaffed and margins are thin, raising prices may be the better fix than hiring. Bottomline gives you the numbers to decide.

Am I overstaffed or understaffed for my current revenue?

Too many people and your margins disappear. Too few and you can't deliver. Here's how to figure out whether your headcount matches your revenue.

7 min read

The short answer

Is your team the right size? Calculate your revenue per employee and your payroll-to-revenue ratio. If revenue per employee is declining while payroll as a percentage of revenue is rising, you are likely overstaffed. If your team is burning out and you are turning away work, you are understaffed.

Staffing is the biggest lever you have and the hardest to get right

Payroll is the largest expense for most service businesses. It is also the stickiest. You can cancel a software subscription in a day. You can't undo a hire in a day, at least not without severance, morale damage, and operational disruption.

Hire too early and you are paying salaries before the revenue justifies them. Hire too late and your team is overwhelmed, quality drops, and customers leave. The sweet spot is narrow, and most business owners navigate it by feel rather than data.

Two numbers give you clarity: revenue per employee tells you how productive your team is, and payroll-to-revenue ratio tells you how much of your income goes to paying people. Track both over time and the pattern becomes obvious.

Two ratios that reveal staffing alignment

Revenue per employee. Total monthly revenue divided by headcount (including you). Declining over time means you are adding people faster than revenue.
Payroll-to-revenue ratio. Total payroll (including taxes and benefits) divided by revenue. For most service businesses, 25-35% is healthy. Above 40% is a warning sign unless you are in a labor-intensive industry.

How to check your staffing ratio in QuickBooks or Xero

1
Pull your monthly revenue
In QuickBooks, run Profit and Loss for the current month. Note Total Income. In Xero, go to Accounting → Reports → Profit and Loss.
2
Find your total payroll expense
On the same P&L, find the payroll line items. This typically includes Wages, Salaries, Payroll Taxes, and Employee Benefits. Add them up. In QuickBooks, these are usually grouped under “Payroll Expenses.”
3
Count your headcount
Include all full-time and part-time employees, including yourself if you take a salary. Convert part-time workers to full-time equivalents (a 20-hour/week employee is 0.5 FTE).
4
Calculate both ratios
Revenue per employee: $92,000 / 8 employees = $11,500 per person. Payroll ratio: $48,200 / $92,000 = 52.4%. That payroll ratio is high for most service businesses.
5
Compare to the last 3 months
Re-run the P&L for the prior 3 months. Is revenue per employee going up or down? Is the payroll ratio improving or getting worse? The trend tells you more than any single month.

Total time: about 15 minutes. The calculation is simple but you need to include all payroll-related line items, not just base wages.

Review staffing metrics before every hiring decision

Check these numbers monthly and always before adding headcount. If revenue per employee has been declining for 3 months, adding another person will make it worse unless you are confident the new hire will directly generate revenue. If the ratio is stable or improving, you have room.

Or track your staffing efficiency automatically

Bottomline connects to your accounting software and calculates your revenue per employee and payroll-to-revenue ratio every month. It flags when the ratio shifts significantly and shows you the trend over time.

Staffing efficiency

Revenue per employee

$11,500

Down from $12,800 last month

Payroll-to-revenue ratio

52.4%

Above 40% threshold

Payroll has grown 14% over 3 months while revenue grew 8%. Consider whether current team can handle more volume before adding headcount.

From a real Bottomline report. Staffing ratios from your accounting data, tracked monthly.

Instead of pulling payroll reports and doing the math yourself, you get a clear signal each month on whether your team size is generating enough revenue to justify the cost.