Financial and operational management is an important and sensitive matter for all recruiting agencies. No matter which industry you're in, whether it's hospitality, deliveries, catering, cleaning, etc., proper financial management is a key element in your ability to survive, and especially grow, in the current world of working.
With that in mind, we’ve collected 3 of the most important focuses for temp recruitment agencies in 2023:
1. Your margins are crucial
25% is the average gross margin on temp employment. Very good business to be at, but how about operational expenses? How many recruiters and schedulers do you need in order to stay efficient? What is the golden number? Demand changes so how can you keep your recruitment team flexible? And one of the most important ratios for all of it - what is your ratio for recruiters to bookings?
Recruiter to booking, or just RTB, is the ratio that determines the efficiency, speed and ROI of your recruiters or bookers. The greater the ratio, the more revenue the agency can generate from those employees, and thus save on operating expenses. We found that companies that maintain at least a 1:200 ratio are healthy and profitable businesses.
Businesses that do not utilize any tech solution internally have an average RTB of 1:40. Using a simple Excel sheet will grow your RTB to 1:50, and in order to get closer to 1:200 a lot of manual processes should be eliminated and replaced by software. A good and comprehensive software solution can grow your RTB to 1:500 and even 1:700. It may sound impossible, but there are already many agencies achieving such RTB results; reducing operating expenses, and increasing revenues - isn’t that our goal?
2. Payroll is a headache
Why is it so hard to pay hundreds of employees every week? 2023 is here and it still requires many hours of work every week. We call it Payroll Operational Costs (POC) - the calculation of How much money you spend every month on payroll operations. The POC market average is 1:10, 1 hour of work for every 10 paychecks. In other words, for 1,000 paychecks you will need to spend 100 hours! This can or will lower your margins significantly. In order to get to a 1:400 ratio, a lot of work needs to be done:
- Employees should have at all times a visible portal where they can view their payroll with explanations. That saves a lot of time and a lot of headaches in dealing with temporary workers who claim there is a problem with their payroll.
- Clock in and out times should be very well organized and transparent to workers in order to make sure not a single overtime hour was missed.
- Payroll queries of employees should be targeted internally through a system that will guide them how their payroll was calculated in order to avoid complaints and further communications.
- The process of having the data into the payroll system MUST be automatic. Manual process is a major source of human error, incorrect registration, partial registration and, in general, waste of time and operational resources.
We have to keep in mind, payment errors negatively affect your credibility with your workers and significantly reduce your ability to retain them. This creates a cycle of wasting operating resources on accelerated recruitment of workers, manual payroll entry, unpleasantness in the face of payroll errors and the loss of workers, which raises the need for even more accelerated recruitment of workers. We must break the cycle in order to succeed. This whole process must be streamlined and automated.
From our experience there are still many companies that are manually keying payroll information into their payroll system, if that’s you, then put this top of your business resolution list for 2023.
3. Your clients come first
Communication with your clients is crucial - from initial job order through to invoicing, it can take a lot of unnecessary back and forth:
- Job order - Usually done through email / phone call / texting - A lot of room for mistakes, miscommunication and changes to be done. Try to automate this process using a technical solution, even a simple Google Form can make this a more structured process.
- Who is going to work for me? Or “I want John to work again”. Try to share with your clients as much information as possible so they would feel comfortable with the team you shared with them, and prioritize the workers your client liked the most. Try using a system where you can highlight your clients preferred workers, or even better, use a system that lets your client highlight their favorites themselves, knowing it would be taken into consideration on their next job order.
- Timesheets - In your position you must make sure that both your workers and your clients are aligned with timesheet information. This can be achieved by using any system that makes the timesheet transparent between all sides. We say no more paper timesheets in 2023!
- Invoicing - It’s that time of the week/month and you need to share the invoice with your client. You need to make your invoice as detailed as possible and easy to read, so you will have no push backs from your clientele.
As a software that provides services to the world of temporary work that is changing its face these days, Ubeya sets itself the goal of constant improvement that puts the customers at the forefront of its affairs. It includes reinventing internal organizational initiatives and finding creative solutions to solve problems that arise from the customers; continuously and as quickly as possible. Ubeya understands that being good isn’t good enough, the system must be adapted to the needs of the customers.
Be on top of your game.
This thought leadership piece was written by Omri Dekalo, CEO and Co-founder of Ubeya.
Want to explore how you can improve the operational, financial, and technological management of your recruitment agency? Talk to our experts for help.