Bookkeeper for Healthcare Staffing Agencies

How does the money come in?

Healthcare staffing revenue comes in two very different ways, and the books need to treat them that way.

The direct hire stream is a one time placement fee, usually between 15% and 30% of the candidate's first year salary. You recruit the candidate, the client hires them, you invoice, and that is the end of it. The worker belongs to the client, so you never carry that person's payroll.

The temporary and contract stream works differently. You are the employer. You pay the worker every week, and you bill the client at an hourly rate above the wage. Markup rates run from 25% to 100% over base pay, depending on the role. The invoice goes out every week, and so does the payroll.

These two lines can look like the same business if the books mix them. A direct hire fee is one lump event. The month after the fee lands starts at zero. A contract is steady but carries weekly payroll and all its costs. If the books blur them, you cannot see which stream is paying your expenses.

Why isn't the markup my profit?

Because you are the employer of record, and the markup has to cover the taxes and insurance that come with every payroll. The gap between the bill rate and the pay rate is not profit. The profit is what is left after the employer's burden.

A commonly used example: you bill the client $38 an hour and pay the worker $24. That looks like $14 an hour. After payroll taxes, workers comp, and other employer costs, the $14 becomes about $9.74. The other $4.26 is what covers the burden.

The exact amount depends on your state, your workers comp class code, and your claims history, so the example is a picture, not a promise. But the direction is always the same. Burden is a real cost on every hour.

Healthcare staffing carries high employer, comps. A worker earning $24 an hour at a comp rate around $6.50 per $100 of payroll costs roughly $1.56 per hour. Clerical roles are lower, risker healthcare roles are higher. Agencies billing the same pay rate can have very different true margins because of class and history.

Where does the cash get stuck?

The cash sits in the gap between the Thursday you pay your workers and the 30 days the client takes to pay you.

Your workers get paid every week. Most clients pay invoices in about 30 days. You are floating payroll, taxes, and comp for weeks before the client pays for the hours you already paid. It is a cash waiting problem.

This is why young agencies do not run out of work, they run out of cash. A busy month of billing can be a month of negative cash if client checks do not land before the next payroll does. The books are the way to watch it happen in your own business.

What do the books get wrong most often?

The most common mistake is recording the markup as profit and leaving the employer burden out.

When the books show $38 billed against $24 paid, the margin looks like a fat 36%. Industry benchmarks can run 20 to 30% gross margin, so anything far above that signals a cost is missing. The owner reports a good month and then wonders where the cash went.

The second common mistake is treating a direct hire fee like regular monthly revenue. A placement fee is a one time lump. Putting it into the same account as contract billings inflates this month and deflates next. It should stay tagged alone.

A smaller habit is putting all employer burden into one miscellaneous line at year end. If workers comp is not tracked against the workers it belongs to, the books cannot show which assignment and which role actually make money.

What should be tracked separately?

In a temp staff model, track revenue and payroll per assignment, not just per office, so the books can tell you which clients and roles actually make money.

For each contract placement, the ledger should hold the hourly billing, hourly pay, employment class, and hours. That is the unit that produces margin. If all income lands in one line and all payroll in a scratch of another, you cannot see that one client's roles cost more than they collect.

Healthcare workers carry different comp classes. A nurse doing patient care and a front desk worker are not the same cost even at the same hourly rate. When the class is missed, the books will mark the wrong role as the profit engine.

What numbers should you watch every month?

The most important is gross margin on the temp side, what you keep after payroll and burden. The rest is overhead and tax.

Trade benchmarks help. Travel staffing agencies often target a gross margin of 20% to 30%. Per diem staffing often sits near 15% to 25%. If your books show a margin far above that band, a cost is probably missing. If the margin is below, the rates are probably low for the role.

Industry-wide, staffing agencies net profit margin are small, around 3% to 6%. Use these benchmarks as a check each month. If the P&L shows more, find the missing cost.

The second set of numbers is collections and aging. When a client pays late, you carry the float. The books should show how old each invoice is, not just the total receivable. A 50 day old receivable is cash that has been costing you for weeks.

The books also keep direct hire income separate. Watch the difference between a month of new placements and the slack weeks when the fee line goes quiet. A good forecast gap tells you how smooth the cash will be.

One test you can do yourself: take one assignment, subtract the pay, payroll taxes, employer comp, and class cost from the billing. If you land below the typical 20% to 30% range, pricing or classification is at work. That is exactly what the books should catch.

Related reading: pages for monthly and catch-up bookkeeping cover the monthly work. For a trade with tuition on the book, consider custom financial reporting for per assignment views.