Finance and Operations- Best Practices to Grow Your Staffing Firm

When talking about business growth in staffing, the discussion sometimes tends to focus on business development and recruiting as the drivers of top line revenue. However, finance and operations processes and staff, can be the ‘unsung heroes,’ playing a pivotal role in protecting and growing bottom line profit.

Here are 5 key areas that warrant close attention. Keeping an eye on these, and identifying opportunities for improvement, can ensure that more of your firm’s top line revenue enhances your bottom line.

Timesheet Collection and Payroll

In no other context is the phrase ‘time is money’ more accurate. The hours that consultants work are the lifeblood of any staffing firm. The process your company uses to collect timesheets and calculate payroll is key.

Here are some considerations:

  • An efficient timesheet collection process Optimize the process itself. Put deadlines in place, and schedule reminders about those deadlines when necessary. This helps ensure that consultants submit their hours in a timely fashion, so that you can calculate payroll accurately. “When I joined Talent Group a couple years ago, there were delays in the time collection process. We reorganized our channels for escalations, getting the account managers in sooner than before. We also put in place certain quarterly objective key results (OKRs) centered around time collection for our operations staff to drive speedier time collection. These changes have helped reduce that delay.”
    – Natalie Valerioti, VP of Finance, Talent Group
  • Automation and import tools There are tools that can help, ones that generate automated ‘reminder’ communications to consultants, for example, and import tools that can relieve some of the administrative burden on staff. Invest in the right tools for your firm.
  • Policies for submitted vs. approved time Some firms require timesheets to be approved by the consultant’s manager for payroll. Others work with submitted hours. Whatever the case for your firm, the policies should be clear, and must take into account regulatory differences from one state to another. “Our process starts from California, since there’s no stricter state. We apply the same basis to other states. Our timesheets are due every Friday, and we make every attempt to get approved timesheets by Monday morning. California requires we pay all our consultants who are on a timesheet basis. In some cases, even if we don’t have timesheets in place, we are required to make estimates.”
    Abhijit Bhatt, Global Head – Corporate Functions, Intelliswift Software
  • Exempt employees vs. nonexempt employees and overtime compliance Ensure that your process is designed to efficiently deal with the differences between exempt and nonexempt employees, particularly when it comes to overtime.
  • PEO vs. full-service payroll providers External partners can be an important asset in refining and optimizing your processes. As a business, determine whether working with a payroll partner, or a Professional Employment Organization (PEO) is the right choice. “We’ve been members of a full-service PEO since about 2011. I’ve found it beneficial for the size that we are right now, because they offer the full services that a payroll service offers, but they do more, too. They’ve helped us with onboarding, with workers’ compensation, with HR guidance, and with unemployment management.
    Scott Poliziani, CFO – SSI People
Onboarding & Managing Consultants

The more efficiently you’re able to onboard your consultants the better your reputation becomes with both them and your customers. It also helps drive revenue.  A “high touch” program for communicating and managing your consultants is also a real differentiator and helps drive redeployment to new assignments.

Key considerations include:

  • Who coordinates the process Whether a single individual or a large team, an effective process requires clearly defined responsibilities, with milestones and timelines for each. “Our goal was 10 business days to get a person through a background check, all the payroll services and so on. We’ve gotten that time down to between 6-7 days. What we’ve done to do that is assign a specific member of our People Care Team to each individual consultant during the onboarding process.”
    – Scott Poliziani
  • Background checks and other timeline factors There are some onboarding processes, like background checks, that create unavoidable delays. Understanding and factoring in those delays, and minimizing them wherever possible, helps to shorten the time to revenue. “We have an SLA in place for each client, and every breach is reviewed all the way up to management level. It’s a balance that we try to strike. We want to meet our SLAs, but if you’re constantly meeting them, then you may need to reduce the timelines.”
    – Abhijit Bhatt
  • Tools to track and manage the entire consultant life cycle Automation can help even small staff teams manage relationships with consultants effectively. These tools help ensure that steps in the onboarding process happen on time but can also be used to strengthen the relationship with consultants – thereby increasing loyalty – with a personal touch. “We use automatically triggered surveys to measure Net Promoter Score (NPS) post onboarding to make sure that consultants are satisfied at that stage.”
    – Abhijit Bhatt

    “The People Care Team members stay involved with their consultants, and we use technology to automate this. Text messages, birthday greetings, anniversary greetings, those types of things.”

    – Scott Poliziani
Accounts Receivable

Top line revenue is important to any business, but unless you’re collecting that revenue in a timely manner, your cash flow can suffer, and the risk of bad debt increases. Here are some points for managing the process and mitigating the risk:

  • Proper aging and collections Having clear payment terms, and a well-defined process for ensuring those terms are abided to, is the first step. “Our weekly operations call is ‘all hands-on deck.’ That way, we have a good sense of where we are from a collections and AR standpoint. We go through the AR aging, starting with the oldest balances and working to more current. Our operations team members are each designated to different customer accounts, so we put them on the spot to give an update into the collection process, and if there are issues, we troubleshoot them together.”
    – Natalie Valerioti
  • Credit checks Does your firm conduct credit checks on all new clients, or only certain companies? The correct decision differs from one firm to another. Whatever the decision, however, the process must be consistently adhered to. “We only do credit checks for startups. We don’t necessarily do it for the larger customers that come to us. On the other hand, we steer clear of anyone who sends us a contract with 90-plus days payment terms. In our view, that’s the biggest red flag, bigger than credit checks.”
    – Abhijit Bhatt
  • Management oversight and escalation The management of each firm should have visibility into the AR status of the firm, and -in some cases- may be involved as one step in the escalation process.  “The Accounts Receivable people on top of your collections have a certain responsibility, but there have to be additional steps when it’s necessary. I like oversight processes that dictate that when accounts receivable are ‘X’ days past terms, here’s how it gets escalated to the salesperson, the sales manager, or even the CEO.”
    – Tom Nunn, President, Tom Nunn Consulting, LLC
  • Tracking Days Sales Outstanding (DSO) There’s a 3-step formula that can help you very quickly keep an eye on the health of your AR: Days Sales Outstanding. The formula to calculate this metric is:
    1AR at the end of a given period
    2Divided by total sales for the period
    3Times number of days in the period

    “The TechServe Operating Practices Report shows that a typical DSO is 45 to 50 days. But take a closer look at your DSO.. If you’ve got a 45-day DSO but all of your customers have terms of 30 days, then you’re not really on time. So, look at your DSO then take a hard look at the terms you’re getting from your customers. How often are they paying within those terms?”

    – Tom Nunn
Commission Processing

Sales and Recruiter (Producers) commissions are an important expense to monitor. Having clearly defined and well understood compensation plans and payout processes, ones that are spelled out in employment contracts, is the first step. Here are a few things for firms to consider:

  • One plan vs. multiple plans To attract top producers, you may be tempted to offer highly customized compensation and commission plans to your employees. While it may be effective in some respects, this can make your overall compensation structure too complicated, and challenging to administer. “It’s a mistake to have separate comp plans for different people at the same level. You pay what it’s going to take to bring someone in the door – a much higher salary, a totally different commission plan – and you’ve got all kinds of exceptions. Exceptions equal massive headaches. A better approach is to have two or three, maybe four salary levels for producers that are based on both experience and performance.”

    – Tom Nunn
  • Clawbacks and right of offset  Do you pay commissions on close, or wait until payment? If a client doesn’t pay, are commissions clawed back? If a consultant incurs specific expenses, how will your firm approach that? Once again, different firms approach these situations differently, but it’s important to develop and communicate a clear policy and apply that policy consistently across the board. “For commissionable folks who are on payroll, we will pay regardless of collection. For any past due commissions, we shift over immediately to collections in case there’s a payment risk on the client side.”
    – Abhijit Bhatt

    “We normally don’t have a heavy clawback policy. We do give nonrecoverable draws on the front end, and we don’t tend to claw those back. We do have right-of-offset, though. If there are certain expenses that are generated that are tied to the consultant – costs related to immigration, for example – we do reduce commission for those expenses.”

    – Natalie Valerioti
  • When commission structures change Compensation plans change, but it’s important to plan ahead. Map and model a 3-6 month pathway for that change to help your employees manage the change. “It’s pretty typical when you change plans to say, okay, everybody’s going to be on one plan, but I’ll give you a 3 to 6 month runway on the old plan to get to the new one. Or to say for all of your billing consultants, you’re being commissioned on the old plan, but anybody new starting from today, you’re being commissioned on the new plan. Have that all spelled out.”
    – Tom Nunn
  • When a producer leaves There are a range of ways that firms deal with commissioned producers leaving the firm. Most simply pay up to the last day of the producer’s employment. Some -on the perm placement side, mostly- even pay commission owed even after the producer leaves. Determine the right policy for your firm, communicate it clearly, and apply it consistently and put it in the compensation plan/employment contract.
  • Typical burdens To effectively manage your overall payroll expenses, it’s important to understand the burdens incurred by the employees and consultants on your payroll. “I do an annual survey across 50 or 60 companies. The average W-2 burden these days is about 18%. Some are as low as 15%, some as high as 20%. Almost everybody in the survey has a 3 – 5% burden on corp-to-corp.”
    – Tom Nunn
  • Tools and automation Here again, technology can help with the administration of these compensation plans, taking some of the burden off staff and making the process more efficient. “Because we’ve grown by acquisition, we do actually have a few compensations plans in place. But we use technology to do the brunt of the data gathering, the gross profit, applying the appropriate burdens and pulling in those offset costs as much as possible.”
    – Natalie Valerioti
Monthly Close

All of these processes culminate in the month-end closing. Tom Nunn shares the following advice when designing and optimizing this aspect of your operational plan:

  • Understand what goes into it. Create a critical date schedule, with tasks assigned to the appropriate staff person.
  • Stay on your timesheets. Be as relentless as you need to be with reminders so that employees have them approved and submitted on time.
  • Accept that the process won’t be perfect. A timely process with a 1-2% margin of error is acceptable.
  • Use tools and automation to support your staff. Create recurring vouchers or journal entries, for example, for transactions that are the same every month.
More helpful resources

The concepts and tips above were discussed at length in a recent webinar presented to TechServe members. The roundtable was moderated by Tom Nunn, with Natalie Valerioti, Abhijit Bhatt, and Scott Poliziani as panelists. If you missed the webinar the link to the recorded version is available for members here.  

During that webinar, Nunn shared two additional resources to help your firm optimize its finance and operations practices.

  • Depth Chart
    A depth chart is used to highlight the level of experience and capability for each of the critical functions in finance and operations. You can use it to isolate single points of failure, highlighting priority areas for cross training, to help ensure continuity in case of unforeseen events.
  • Systems and Process Map
    This chart is a map of the finance and operations processes, and the flow of information. It can assist in identifying optimal and suboptimal processes, especially those that are candidates for reengineering.

Examples of both these tools were included in the PowerPoint presentation. Members can download that presentation click here. 

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