Beyond the Numbers, Volume 1 Issue 1

Beyond the Numbers, Volume 1 Issue 1

In this issue:

Gaining control of variable costs, improving efficiencies, how to shorten your receivables time frame and how Tricom can help you manage your costs.

 

 

It's All About (Cost) Control

One of the biggest challenges facing staffing agencies today - or any company for that matter - is cost management.  The cost of doing business gets more expensive each day.  While there are some fixed costs that are more difficult to manage (rent or property payments, salaries, etc.), there are other variable costs that staffing agency owners and managers can actively control.
 
Variable costs are those that increase or decrease in response to the level of business activity, and while some are harder to control than others, there are ways you can work to reduce them. Closely managing variable costs can help your firm become more efficient, which in turn can allow you to more easily invest in things such as future growth or better compensation for team members that contribute to your company’s success. The first step in this process is identifying these costs and exploring ways to reduce them.
 

Internal Controls

 
Look around your organization and examine your procedures—are there ways you can reduce waste or increase efficiencies? Even small things like printing fewer documents can lead to reduced paper and toner costs. Encouraging the involvement of all team members and tracking everything in your office can help reveal where savings exist.
 

Take All Discounts

 
If you receive a discount for paying invoices early, do all you can to take advantage of those savings. Even discounts of two or three percent can begin to add up.
 

Worker’s Compensation Expenses

 
After employee wages, Worker’s Compensation is a staffing agency’s second largest expense. The number one way to control this expense is to lower your Worker’s Compensation modifier by reducing your claims. One effective way to reduce your claims is to implement a Risk Management Program through a service provider or by designing a program in-house. A Risk Management Program will give you tools to review current and potential customers to assess their level of risk. Based on that assessment, you may decide that their risks are too high and choose not to do business with them, or you may make recommendations to help reduce those risks. These recommendations are also used in ongoing training for your staff. For example, you may do an assessment of a customer and find that their forklift operators have to work in very tight corners. You recommend installing mirrors to see around those corners. You would then also conduct ongoing training for your employees to improve their forklift skills.
 
Another aspect of a Risk Management Program involves insurance. Insurance carriers look favorably on clients with Risk Management Programs and will often provide discounts to companies
 
with programs in place. While there is a cost to implement the program, in the long run it can help your agency save money by reducing injury-related claims. If you’re interested in more information about Risk Management Programs, Tricom can provide you with a list of reputable service providers.
 

State Unemployment Expenses

 
There are a few key measures you can take to help contain state unemployment expenses:
 
  1. Understand the rules of your state. Each state has different criteria for qualifying for unemployment benefits, and knowing the rules is half the battle in controlling unemployment expenses. Oftentimes there are seminars you can attend to have these rules explained.
  2. Respond to notices you receive in a timely manner. For example, someone may have worked with your firm for a day in order to list you on their unemployment claim, even though you had work for them for an entire week or more. By not responding to this claim, you’re essentially indicating that you didn’t have work for that individual and will have to pay on that claim. Tracking claims closely and responding in a timely manner can eliminate these unnecessary expenses.
  3. Check to see if your state offers voluntary contributions to change your state unemployment rate.  If you receive a notification that this option is available to you, Tricom can help you evaluate if it is worthwhile to pursue.
  4. All things being equal, when you’re looking to place a candidate in the second half of the year, consider a candidate who has already been working with you instead of a new candidate. The existing employee may have already reached his or her unemployment limit, versus starting fresh with someone new. Again, this is with the understanding that both candidates are equally qualified for the position.
  5. Finally, if you find that keeping up with unemployment claims is getting to be too much to handle, look to outsource the process to a service provider. This can be expensive, but if you are a large agency with a lot of claims, outsourcing the management of those claims—and all the paperwork and court dates that go with them—can be worth it in the long run.
 

Evaluate Your Customers

 
As tough as it may be to admit, not all customers are created equal. Some may not actually be profitable at all. Those are the relationships that are critical to review. Is this a short-term challenge or a chronic problem? Is your staff spending an inordinate amount of time servicing a customer that doesn’t bring in much revenue or profit? While letting go of a customer may reduce your volume, you may also find that it will increase your profit margin. Sometimes it’s best for your business to let go of customers that aren’t profitable and focus your energies on growing relationships with those that are.
 
 

When Time Is Money: Shortening Your Receivables Timeframe

The old business cliché “time is money” is never more true than when talking about receivables. It’s the lifeblood of a staffing business. But you have to keep that blood flowing to keep the business strong. The longer a customer takes to pay an invoice, the higher the cost to your business. Essentially, your customer is using your money—money that you could be using for other things, or earning interest on. And, depending on how your funding is structured, you could also be paying interest on those outstanding receivables.
 
So how can you better manage your receivables without jeopardizing customer relationships?
 
First, discuss terms with customers up front. Be clear about your expectations and detail them in a signed agreement. This way you both have a clear understanding of the expectations, and you have supporting documents to reference in case there are any questions.
 
For existing customers, use the tools available to you to work within your existing terms. One such tool to use is your Aging Report, which Tricom provides on a weekly basis or is accessible at anytime online. Look closely at the Invoice Payment Average (IPA) on the report. This number represents the average number of days it takes your customer to pay an invoice. If your customer normally pays invoices within 33 days, but has stretched to 45 days, that can be a red flag. More often than not, you’ll find it’s usually an issue with the invoice or problems with processing invoices on their end. However, it can also be indicative of cash flow problems, which can result in much larger costs to your firm. Another indicator to watch on your Aging Report is underpayments. A customer may underpay an invoice if the rates are wrong or if there’s a time card issue with an employee. Closely monitor why these underpayments are occurring.Follow up on them to ensure that any issues are resolved so that payments can be remitted in full.
 
When customers are behind in their payments (especially if you sense a pattern forming), don’t be afraid to use collection services or the free receivables management service Tricom Funding offers our clients. Tricom calls on behalf of you, the client, and does not disclose that we’re calling from Tricom. As we call to check on payment status, our approach is soft—not aggressive—so you can be assured that your customers continue to receive the same standard of service they’ve come to expect. If you opt to follow up on outstanding receivables yourself, be sure to ask for the following information: when the check is being mailed (not when it’s being cut), the check number, check amount and invoices it’s paying. Keep detailed notes on each customer you speak with including the name, date and time of the conversation, as well as what was stated. Don’t be afraid to question customers on what’s owed to you. You both agreed to the terms at the beginning of the relationship, and you have a right to follow up on those terms in a courteous, respectful manner.
 
Another important aspect of receivables management comes after the invoice is paid. If you’re working with a funding partner other than Tricom Funding, be aware of how much time it takes once a payment is received until the invoice is actually credited. With some funding providers, there are clearance delays during which time you still pay interest. These can be anywhere from two to seven business days from when the payment reaches the lock box until the time it’s credited to the invoice. Review your funding contract carefully and monitor your receivables closely. Tricom clients are able to monitor their receivables in real-time by accessing their accounts online. We post receivables the day they are received, six days a week, so clients can see exactly which invoices have been paid and when.
 
 

How Tricom Funding Can Help You Manage Costs
(And The Service Is FREE For Full Service Clients!)

Tricom Funding is always on the lookout for ways our expertise might be of assistance to your staffing agency. We talked about our free receivables management service as a way to shorten your receivables time frame in the feature “When Time is Money.” Featured below is another such offering geared toward helping you manage costs more effectively.
 

FREE Financial Statement Preparation:

 
There’s no need to pay an outside accountant to prepare your financial statements—it’s free for full service clients.
 
Our Accounting staff is second to none. Plus, as your partner we’re already an integral part of your company’s financial picture. So it’s a natural fit to have Tricom Funding prepare your financial statements.
 
Simply provide your check register along with an explanation of what the payments were for and a bank statement. This information allows us to prepare a monthly financial statement with the following:
 
  • Balance Sheet
  • Income Statement (Profit & Loss Statement)
  • Actual to budget (when a budget is provided)
  • Year over year comparison
 
These reports will provide you with invaluable tools to better manage your business, and allow you to make informed financial decisions for your company. For those clients who are currently using a bookkeeper or accountant, why pay additional fees (up to $150 per hour) when this service is offered to you at no cost? Frequently, RFP’s require financial statements, and the information will be available at your fingertips instead of being held by your accountant or bookkeeper. In addition, financial reports at year-end may significantly reduce your tax preparer’s time and thus cost you less for your tax preparation.
 
For more information about Financial Statement Preparation, please contact Mary Jo Heim, Director of Accounting, at 262-509-6214 or 1-800-348-4815 extension 214, or via email at mheim@tricom.com.
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