Bookkeeper for Executive Search Firms

Executive search pay structures do two different things to your books. One engagement pays you on a schedule, the other waits until you place a hire. Your books have to treat those differently from the start.

How does money come in for an executive search firm?

The money comes in one of two ways. A retained fee is paid on a schedule, whether or not you make a hire. A contingency fee is paid only when a placement happens, so you can work for months and see no cash until the day a candidate actually starts.

Every placement fee is a percentage of the new person's first year compensation, not a flat service price. The percentages the trade talks about run roughly from 20 percent to 35 percent, with retained work usually at the top end. That comes from the firms themselves, so treat that as a starting range rather than a hard standard.

Which costs should I actually watch?

There is no reliable industry table that says what an executive search firm should pay for research, software, or client development. The published numbers are usually firms describing their own rates. The practical approach is to build your cost codes from your own ledger, not from a benchmark nobody can verify.

• Research tools and premium search databases, usually recurring subscriptions.
• Commissions or split fees for a partner, a researcher, or an outside recruiter who helps with a placement.
• Client development that looks small month to month but adds up across a whole search cycle.

The profitability data is not public, so your own profit and loss is the only honest way to set a target for your firm.

What bookkeeping mistakes happen in executive search firms?

A common mistake is treating a retainer installment as income in the month the money arrives. The money often comes before you finish the work, so a profit statement can show a good month when you have not found a single candidate.

The same mistake shows up with contingency. A busy search can produce no invoice for months, and then one placement brings a large check. Not a problem if the books show the work is still in progress, but it is when the record shows only a sudden lump.

• Recording the entire retainer right when the client signs.
• Putting research and interview costs in general expenses instead of tying them to a specific open search.
• Counting a candidate fee as a client expense when it is really part of the service you deliver.

What should I track separately for each search?

Each search has be its own project, with its own client and its own expected fee. The fee is based on a salary you cannot fully control, so the only way to know whether that client is worth the time is to let the numbers stand alone.

• The estimated fee for that open search.
• The retainer payments received so far.
• Any split fee you owe a partner or co-recruiter.
• The actual placement fee once the hiring firm agrees to it.

With the search kept separate, you can answer the real question: which client pays, and which search now costs more than it returns?

Which reports should I look at for my search firm?

The standard profit and loss report hides the thing you need most. A search firm needs to see open searches, the fees still to come, and the work in progress on the desk.

A report built on those search jobs would show the estimated fee, what you have collected, how much work is still ahead, and a realistic month when the invoice will arrive. That is a custom report, but it is the one that actually runs the business.

It tells you whether the work in progress will cover the cost of the people doing the searching, before you wait three quiet months.

How do I handle the slow months in the cash?

Slow months are real, because a placement can take longer than planned. The revenue line will go quiet, and the books need to reflect you that you are still working to stay ahead of it.

Retained money that arrives ahead of the work should sit on your balance sheet as a liability until you deliver under the contract. That keeps you from reporting profit early and then watching it disappear in a dry quarter.

The discipline is to track open searches against your cash position. A placement may not land for months, so the number that matters is the expected fee on an open search, not the fees that are already closed.