Bookkeeper for Background Screening Companies

Every check you sell produces an invoice, but a large part of that invoice is a fee you pass straight through to someone else. The way you handle that difference decides whether your books tell you the truth.

How does money come in?

You bill per report. A client asks for a background check, you run it, you send an invoice. The pricing is set by the depth of the search. Checkr's public pricing lists a basic package around $29.99 and a complete package up to $94.99 (checkr com /pricing). That is your product price.

But on top of that, you also charge your client the court and database access fees that the screening network passes through to you at cost. You do not keep that part. It is not a profit. It is a float: you collect it from your client, you pay it to your network, and the difference is what you actually sell. If you treat that pass-through as your own revenue, your books will show big weeks and then a big drop when you settle the network account.

The other reality is that your revenue is tied to hiring cycles. Not your own, your clients'. When employers slow down, your check volume slows with them. IBISWORLD says the whole industry is essentially flat over the last five years (ibisworld.com/united-states/industry/background-check-services/6058/). That is why a normal year over year report does not help. A rolling three month view is what you need to see motion.

What are the biggest costs?

The two costs that move with your business are the pass through fee to your data vendors and your staff. Your platform does not risk the official. Because the private and the national databases are a real cost per report, and you have no control over that. But you can at least see it clearly.

Which means you should treat that vendor charge as direct cost of goods sold, not as other office costs. A month of heavy volume, and you spend directly. That line should be visible alone on your income statement, not buried inside an 'other costs' number.

The second cost is payroll. Somebody has to review each result, follow up when there is a red flag, and answer when an employer is slow to reply. Employment verifications are the most common delay in a pre-employment check, and the time your team spends is a real operating cost. That is labor that scales with the volume of work, not just with sales.

What mistakes do I make in the books?

The trap that costs the most is counting pass through as earned revenue. Use what we do and that helps you with some of your clients.

• Record the full client invoice, but set the vendor's pass through as a payable. It is money you owe to the background platform. A separate 'pass through payable' line keeps it out of real income.
• When a client pays upfront for a batch, that money is unearned until you run each check. Put it in a deferred liability, and transfer each report when you run it. This removes the biggest shock a slow month can.
• Separate your own employee background checks. They belong in recruiting, if you are hiring, not in the cost of goods sold. If you don't, your gross margin lies about what you really make.

Get the pass through in particular. Or you will see a good P&L for March, and then unexpectedly get a cash flow hit a month later. That is not tax. It is misclassification of your own books.

How do I track profit per client?

Keep a separate line for every major client. That means their own revenue, their own pass-through cost, and their own staff time.

A low volume client can be a high effort client. Some clients raise exceptions every fifth check, and the time your staff spends on that is a cost. Employers who are slow to verify do the same. The gross margin per client will tell you which customers help your bottom line and which in the end cost you more than they bring.

You do not keep this for every $20 check you sell. But a typical? From what we see, the average cost in the industry is around $160 to $200 per check (from a recruiter discussion in /r/Recruitment). From Equipped we have no evidence of an own average, and we don't think you need one. What you need is your own slice. And your own slice is what a book can build for you: your numbers, not someone else's.

Which numbers should I watch?

The three that matter are a rolling cash flow, a per client gross margin, and a monthly P&L that honestly separates your pass-through fees from your gross fee profit.

• Rolling cash flow covers the spread of a slow two months. It calculates based on your volume lag and how long your clients take to pay.
• The per client statement shows where the margin is. It answers: which client is eating your team and which bring home money?
• A P&L with pass through as a separate direct cost shows the difference between gross sales and the fees you merely forward.

These are the only reports that let you decide whether to take on a large client that wants a deep discount for volume and a long payment term. You need to know the pass-through component before you price, and what staff time will cost. This is the decision your books actually support.

How do the books help me decide whether to hire someone?

If you know your average gross margin per report, you can do a break-even calculation: take the total cost of a new hire and divide by the margin per check. The number you get is the additional reports you need each month to cover them.

A compliance coordinator in charge of $50,000 in cost, and you are averaging a $20 gross margin, that's $2,500 in reports that month just to cover the new hire. That is a real number you can put in a budgeting meeting, and it comes from your books being real. If your numbers are buried by unreconciled facts, you don't have that number.

The same math works for pricing. If your direct costs shift and you don't see it, you may be quoting new clients a price you can't hold. With per report cost and per client cost, you can look at a renewal on numbers and say why.