All posts by : Navin Mishra

According to the Staffing Industry Analysts, “Gross Margin and Bill Rate Trends” Report, staffing firms’ Gross Margins grew considerably, resulting in significant profits. Temp staffing agencies seem to be making a lot of money year after year. But there are instances where a few staffing agencies fail to make enough profit. 

Many staffing agencies do not perform as expected due to various major operational flaws. This article will cover some common reasons for this occurrence and offer suggestions for improving profits. 

1. Delayed Payroll & Invoice Generation

Temporary employees constitute the most important resource of a staffing agency, and payments to them are the agency’s biggest expenses. Any delay in processing payroll leads to major consequences such as late taxes, legal penalties, employee dissatisfaction, frustration, and reduced productivity. A firm needs to process employee payments accurately and on time as any mishap may result in client complaints that reduce its business.

Also, it is your responsibility as a service provider to raise invoices without any reminder from the clients. Clients are busy and may see no need to request an invoice. Following the invoicing cycle strictly should have a beneficial effect on your cash flow.

2. Payroll Processing Without Client Confirmation

Timesheets play a crucial role in temp staffing agencies, but if you process payrolls without confirming the timesheets with your clients, it will likely result in multiple losses. Payrolls are strictly processed based on hours spent working for the client. However, if you fail to consider the overtime, unaccounted time entries or leave, you are making big payroll mistakes.

Without an approval and verification system in place, many payroll rejections can occur. You can eliminate the risk of processing incorrect payrolls with BillMyTask. With an automatic timesheet approval process, you eliminate the manual errors in verification and approval of your employees logs with the clients. With automated software services, you can ensure the correct payroll processing in one go with accurate time entries and logs.

3. Low Trading Margins

When you think about efficient ways to increase your agency profits, you are probably thinking just ways to increase profits are cost reduction and increasing sales. However, another critical factor, trading margins, is frequently overlooked. Many staffing agencies can achieve higher profits through higher gross margins. If you are trading on a low margin, you have lost the half battle. 

Paying temporary employees at higher than market rates or charging clients lower than the market rates will also have an adverse impact on gross margins. There should be focus on increasing the gross margin after paying the temporary employees payroll, employee benefits, taxes and other operational expenses. 

4. Lack of Credit Control

Inadequate credit control can leave your firm with cash flow and liquidity problems and potential losses due to unpaid invoices.

Many staffing firms choose payroll factoring, in which they sell accounts receivable invoices to the factor for a fee and receive cash up front to pay employees, vendors and other obligations. In addition, staffing firms should establish clear payment terms with their clients, be proactive about payment and create a cash flow plan that outlines weekly and monthly cash flow, which determines the firm’s cash flow trends and allows it to plan accordingly.

They also use financial reports and credit monitoring to ensure they are doing business only with creditworthy customers. Proactive credit control also involves building robust relationships with customers and maintaining an excellent rapport based on trust and understanding.

5. Incorrect Payroll

Consistently failing to process accurate payments temporary employees will create employee dissatisfaction and reduced revenue, increase in the labour budget and late tax payments.

The UK has stringent laws regarding employers’ adherence to the national minimum wage. If you fail to comply with payroll criteria, there will be legal repercussions, which may compromise your reputation. Several processes can easily be automated, helping your business stay on track for growth. If you are a small business enterprise, BillMyTask software can help manage your Payroll process correctly. 

If your staffing company does not follow a strategic approach, your business will not make adequate profits. Accounting is an extremely important aspect of the success of any business. Contact the  ‘BillMyTask’ team to increase your profit margins with efficient automation solutions.

Manage your Staffing agency processes proactively to get the benefits you deserve!

Many factors affect your business’s success or failure. One critical factor is the hiring process, which is why there are several KPIs revolving around the employees of a temp staffing agency. 

Different temp staffing agencies may use different KPIs but there are some common to  everyone. The best way to keep your agency on the track to success is by achieving these different KPIs, but what are they?

This article will explore 10 KPIs that will help your business.

1. Cost per Hire 

Cost per hire is one of the most commonly used by hiring agencies that include the expenditure on the recruitment process, supporting equipment, travel, and administrative costs. When you look at the overall costs of hiring a temporary employee, you must also look at the hiring manager’s abilities as many hiring managers can be extremely good at marketing but fail to find the best talent.

2. Revenue per Employee 

The revenue per employee metric is a great way to keep your bottom line tight while not draining your organization’s cash reserves. Revenue per employee is a measure of the total annual revenue divided by the company’s current number of employees. This ratio is often used to compare the revenues with the competitors. By keeping an eye on these aspects, you will be able to maximize your profits. 

3. Average Hours Per Employee 

This is another important hiring metric to consider how much time your team spends interviewing every potential employee. If you are spending way more time hiring than the ideal process, you certainly need to implement a better hiring process to make the most out of your organization’s precious time. 

4. Employee Turnover Rate

When temporary staff are hired, they work on a contractual basis and get paid for their services only when hired. Hence, there are many risks associated with these employees as the possibility of them leaving a company within specific time results in high turnover. If your agency’s employee turnover rate is high, your staffing agency will have a bad reputation and huge impact of agencies finances.

5. Employee Demographic

You need to collect all the data from new employees working for your agency. You can also manage the potential candidate’s demographics to help you understand whether or not the candidate fits into your company’s culture and determine if that candidate has the qualities your business is looking for. This will enable you to analyze the location that supplies you with potential employees to fill the positions.

6. Cost per employee 

Another component that you can track is the cost per employee. If you’re a small staffing agency, then this ratio may not mean much to you. However, if you’re a large entity, then this metric can be significantly affected by your employees’ skill set. The more skilled your employees are, the more they are likely to charge you, which will create a pool of talent for your company’s growth in the long run.

7. Margins per Employee

The common profit model used by staffing agencies is Mark- up on hourly rate. Although the difference between Employee pay rate and billing rate is not direct to staffing companies. Agencies must factor in overhead cost directly associated with employee in pay structure. This approach is a pretty good alternative to bring in more returns and boost healthy working capital ratio. 

8. Back-office Costs per Employee 

Your back-office functions will include administrators, support staff, HR, IT, and accounting that supports your employees. This function is inevitable to run your business; however, they do not generate any revenue. Hence, you need to keep this ratio optimum to work efficiently. Data-driven staffing models and automation can save a significant cost on this metric. BillMyTask can provide you with an integrated Platform for back-office tasks such as CV collection and formatting, scheduling interviews with staff, and HR documentation.

9. Total Hours 

If you have employees who work on-site for your business, you need to track the amount of time they spend working. Use the average number of hours per week to determine your cost per employee. Do you have employees who work a minimum number of hours or overtime? Consider the average time they work per week and adjust your salaries to reflect this. Your cost per employee should be sensitive enough to provide an accurate picture of your expenses.

10. Average Days to Pay by Client 

Last but not least – this metric performs calculations on your client’s paid invoices to determine the average number of days for each client to pay invoices. 

• Average days to pay per client = Sum of the paid days for all invoices / Total number of invoices paid. 

This metric gives you a brief idea of the setting up due to date for the invoices depending on the calculated average days to pay. BillMyTask generates and sends the client invoices automatically by processing the timesheets after getting approved by Xero

Businesses are striving to survive in competitive markets where technological solutions solve problems faster than ever. The back office workload varies from industry to industry along with automation software.

There are seven basic steps to automate your back office to streamline your business and thrive in a competitive market.

Identify all manual processes in your back office

Identifying all repetitive manual tasks helps define specific automation goals for your firm. Document management, electronic requests, signatures, accounting reconciliation, and invoice processing are predictable and manageable work that can be automated.

Jot down all manual processes that are slowing down your business to identify the scope of automation in your system.

Identify the applications in use:

Streamlining your business workflow with applications will reduce manual work with easy sharing of documents. Using applications like excel, word, outlook, and access will ease compilation of a database for further data management.

Use applications that can smoothly integrate and compute data by importing from other systems.

Identify bottlenecks in your business system:

Bottlenecks in your business systems and processes will lead to

• Lost information
  • Database errors
  • Duplicate data
  • Missed deadlines
  • Miscommunication
  • Improper reporting and monitoring
  • Decreased efficiency

This will have a major impact not only on your front office operations and employee morale, but also on customer service and satisfaction.

What are your bottlenecks? For example, do several processes feed into a single channel slowing down the entire channel?

Digitizing the back office and manual processes can route the information more efficiently. Identifying unproductive activities and tasks in the system is a prerequisite for automation.

Matrix development to select the appropriate software

Develop a matrix to evaluate and prioritize the list of options you have for your precise requirement. Brainstorm the criteria for this operation and weight them in order of importance.  Shortlist the options based on the weighted criteria in descending order.

This matrix makes it easy for you to narrow down the list to a single final decision.

Identify Software

You will find plenty of software in the market to automate your manual back office. Find the software that can align with the business process and upgrade the system.

Use of the selected software tool must result in high efficiency, reporting transparency, and visibility for high performance.

You will want to look at costs, ease of implementation and integration, patches and upgrades, maintenance and service while making this decision.

Develop an implementation plan

The automation software in the business module will need a systematic implementation plan for easy adoption and utilization. These implementation steps may include:

• Identifying the staff who will be involved
  • Upskilling the employees thus identified
  • Testing the process
  • Evaluating the implementation decision

Proper implementation of the software will transform your business from a bicycle pushcart into a digital fleet which will trigger expansion of the business and its capacity.

Implement software to automate processes

This includes not just the actual implementation, but also post-implementation initiatives and strategies for continued success. Controls must be put in place, with continuous monitoring and evaluation till the new system is fully embedded. Timely corrective actions in case of deviation from expected standards will be an important component of this process.

Regular follow-up meetings with the staff who use this new technology daily, upskilling back-up staff, monitoring delivery deadlines and standards will all smoothen the flow of work and ultimately enhance the customer experience.