Bookkeeper for Staffing Agencies

Think about how the money actually moves. A contract worker fills a shift for your client, you run the payroll, and the client pays you later, on their own invoice terms. So the money going out and the money coming in are rarely in the same week. A good bookkeeper keeps those two streams in separate buckets clearly so you can see the real state of the business at any moment.

How does a staffing agency make its money?

You earn through two routes: an hourly bill on contract work, and a placement fee when a candidate goes permanent. The two are booked differently and should never be mixed together.

The hourly bill is the ongoing one. You bill the client at a bill rate, and that rate has to cover the worker's wage, the taxes and insurance on that wage, the recruiter's time, and then whatever profit is left. One agency published this breakdown from an example: at a $40.82 an hour bill rate, $28.63 went to the worker as their wage, $12.02 was the markup that paid for payroll taxes, benefits, workers comp, and recruiting, and $0.27 was left as profit. The numbers are just that one agency, but the shape of it is the same everywhere: most of what you bill is wage and burden, and the profit layer is thin (dahlconsulting.com/2025/06/06/understanding-staffing-firm-pricing-models-how-they-benefit-you/).

The placement fee works the opposite way. The client pays a one-time fee, usually 15 to 30 percent of the candidate's first-year salary, and the revenue lands all at once instead of spreading across hours worked (usastaffingschn.com/how-much-do-staffing-agencies-charge). It is a lump sum in the month the hire starts, and it carries its own set of recruiting costs that also arrive at that one moment.

Some agencies also take a flat retainer from a client for ongoing search work instead of billing per hour or per placement. That one is the simplest: regular monthly revenue, like a subscription, with no wage line underneath because you are not placing a worker under it.

Which costs actually matter for a staffing agency?

The single largest line is the wage you pay the contract worker, anywhere from weekly to every other week. On top of that wage sits the tax and insurance layer, and that second pile is where a lot of staffing owners lose track of where the markup went.

That layer is all of it: the employer share of federal and state payroll taxes, state unemployment, workers comp, and whatever benefits you offer. It is big. One recruiting firm ran the math: to pay a worker $17 an hour, it said it had to bill a minimum of $25.76 an hour to cover the wage, the mandated legal costs, and its own operating expenses (adventtalentgroup.com/2023/11/22/staffing-pricing-explained-what-goes-into-a-staffing-companys-bill-rate/). The pattern holds everywhere: most of the markup is not profit.

Then come the recruiting costs, which act differently because they do not scale with the hours: recruiter salaries and commissions, job board ads, the candidate database, and client meetings. And below all of that sit the usual fixed costs of rent, software, insurance, and marketing. The books should keep each of these in its own row, because payroll wages move every pay period while recruiting and rent move much more slowly.

What commonly goes wrong in staffing books?

The most common error is reading the bank balance as the story of the month. The account shows a large wage payout on the 1st, an invoice on the 10th, and the client's money only hits on the 25th, so the report of the month looks like a disaster even when the contract is actually carrying a healthy margin.

This is where cash versus accrual bites. On a cash basis, the payroll went out the month it went out and the client's money arrives in a different month, so a month with a payroll date and no payment run can look like a loss even when the contract is profitable. With an accrual basis, the wage and the invoice you will send land in the same month, and the profit for that contract shows clearly in the right period. That choice matters in a way it does not for a business that gets paid at the counter on the same day it spends.

A second common slip is reading the markup as the profit. The markup line has to pay for taxes, workers comp, benefits, and recruiting output before anything is left over. The $40.82 example shows only $0.27 left per hour; it would be risky to look at that bill rate and plan spending as if it were all earnings.

Third, the practices are mixed: some agencies keep the contract temp business and the direct placement in the same pot, so nobody can tell one side is losing money every month. Fourth, if you use a factoring company to get paid on invoices early, the advance the factor gives you is a loan, not revenue. The receivable you sold was, and the part of it you will get back later is still part of that receivable. Code the advance and the reserve as two separate rows, or the profit of a contract can be double counted.

What should I track separately for each client?

Each client contract should have its own profit-and-loss line, because the margin runs hotter and colder from one client to the next. For one client, your costs might already be covered; for another, the same contract just covers the cost of the backfill and the mistake you made.

Set each contract thoroughly: the bill rate, the wage rate, the tax and insurance on that wage, the recruiter's effort on the position, and the remaining margin. The difference between a client at 30 percent margin and one at 3 percent is the difference between a profitable agency and one that runs hours of work and stays in one place. The industry range is wide and the numbers move by contract; that is why the per-client view matters much more than a single company-wide margin.

Keep the direct placement and contract work in separate lines. A placement fee arrives once, and its cost is a recruiter's commission and ad spend that also arrives once, so it should not be averaged into the hourly margin.

Which reports should I look at every month?

Look at four things each month: your per contract P&L, your cash flow for the next six weeks, your accounts receivable aging, and a simple comparison of what you actually billed against what you quoted for the same hour.

If you factor your invoices, add a fifth view: the factor's fee and the reserve amount that will come back to you. That number belongs on the same schedule as your cash flow because it becomes money you have to work with at a deductible cost, not a mystery at the end of the month.

What decisions should the books support?

The whole point of a staffing book is to make the numbers visible so you can decide what the right next move is. The moves are big because the margins are thin.

When a client asks you to fill a new contract at a low rate, the per client P&L is what tells you whether it can pay its taxes and contribute anything at all. When you are weighing another recruiter, the cash flow projection tells you whether the payroll line leaves room for an extra salary. When you decide to factor or not, the aging report and the fee line say what that decision now costs.

The profitable agency is the only defensible way to answer the price questions: do we raise the bill rate for the next contract? Do we stop sending workers to a client who is already at the edge? Do we hire a second recruiter or is the placement fee already eaten? The books do not make the decision; they give you the real numbers so the decision is based on what the contract actually produces.

Related reading for other ways the same money flows through the business: temporary staffing, healthcare staffing, executive search, and recruiting agencies.