Bookkeeper for Recruiting Agencies

How does money flow through a recruiting agency?

Money comes in two ways: placement fee income for permanent hires and hourly billing for temp workers. They behave very differently in your books.

Direct hire is like the one-time event. You place the candidate, you invoice the fee, and the client pays net-30-ish. You never touched the hours or the payroll, and working it off is straightforward. In the books it is a clean revenue line.

Temp work is where the float lives. You are the employer of the worker, you pay them weekly or biweekly, and y of. The client pays thirty days later or more, meaning the cash is out before it arrives.

• Direct hire: the cash is there and the engagement ends.
• State: the hour repeats, but you are one week in front of what the client hasn't paid yet.

That if you dial it in, every week your firm has permanent working capital committed to the float. How much cash you need to keep the run, and how long you can afford to let a client stretch past 30, is in the books.

Why is my spread not the same as profit?

The difference between what you bill the client and what the worker costs is the gross spread. Far from it being your profit, you are the employer of record, and the employer side costs come straight out of it.

Trade example: you pay a worker $24 an hour and bill $38. The markup looks like $14 an hour. Employer taxes, state unemployment, and workers comp all land in that gap. In a heavy hazard code that can be $1.50 an hour on comp alone. All told you walk away with near half of what the markup looked like.

Two agencies will run the same rate to the client and produce different real margins, simply because one has worse comp loss history or different tax treatment. That’s exactly why the books must separate the markup from the actual margin, or your margin gets lost at the WHIP level.

What is the difference between a markup and a margin?

Markup and margin are two different denominators for the same relationship. Getting them mixed is the fastest way to overstate your business by design in your own forecast.

Markup is (spread / pay rate). Margin is (spread / total bill). Because the pay rate is lower than the bill, the markup always comes out as well as the margin. In the common $22 an hour to $30 bill, the markup is about 36%, and the gross margin on the same contract is under 27%.

The damage is in planning. If you assume 36% forecast when the real number is 27%, the margin falls short. Keep finance manageable in a margin measure, and treat the markup as the number you quote to a prospect, nothing more.

What has to be tracked in its own line?

Every revenue type, every payroll cost, every billing line, and every fee has to have its own place, otherwise you can’t tell which part of the business makes or loses money.

• Placement fee income (direct hire) is its own line.
• Temp hourly billing is its own income line, not averaged into something else.
• Temp wages are their own payroll expense line.
• Payroll taxe s and workers comp get captured against the specific payroll they belong to.

When a line is mixed, you reduce the real placement economics. That narrows your decision making, and it is risk. The whole reporting game rests on the line structure, so it’s the very first thing a clean-up can fix.

What reports actually tell you the health of the business?

Staffing T industry is the margin report alongside the float report. The P&L by itself is one page, but it doesn’t see the boundary line unless you go by client, customer, and contract ID.

Everyone reads the P&L. Very few read the margin line that actually gives it a pulse. That is the difference between knowing your business and hoping.

What decisions should the books be able to support?

Should I keep this client? Should I raise this rate? Can I afford another recruiter, or a second full-time desk assistant? The baseline of the books is that they can answer these.

Add the margin by placement, and you see which client class you pay to keep. Estimate the new salary against the realistic margin of the placements, and the hire changes from a bet to a number.

It’s the same for how much temp volume you pull in. You can claim plenty, but the float calculator answers how much of a running the seller leaves you to see. Empties and late payments show up in higher working capital.

And that is done? We are the tools holds, not just the monthly debit complaint. The small healthy businesses in this industry are not great by margin alone - they are great by cash seats that match the payroll in front of them.