Customer Relationships By The Numbers: Ensuring relationships make cents.

Customer Relationships By The Numbers: Ensuring relationships make cents.

You finally got a commitment from that big, new customer. Congratulations!

It’s a big sales win, but how do you make sure it’s going to be a financial win for your staffing company, as well? A new customer doesn’t come with a guarantee of increased profits for your staffing company. You never know what ups and downs you may encounter. But, you can lessen the financial impact of those unexpected challenges (or eliminate them altogether) by taking steps at the beginning of the relationship to help ensure your sales efforts result in a mutually beneficial partnership.

1.    Customer Vetting.
Know your customers well. It’s important to do your due diligence before you sign a customer to make sure you know who you’re working with and how well they fit your business model in terms of their profitability and risk. How quickly do they pay their vendors? Do they have any tax liens or other judgments against them? Do they have items sent to collections? These are all areas that would be cause for concern since they show a pattern of poor business practices that could potentially put your business at risk.

2.    Markup.
If you send a temporary worker to a job, you pay that worker $10 an hour, and your standard markup is 40 percent, then you should charge the customer $14 per hour for that temporary employee, correct? Wait. The hourly wage is only a portion of the cost of that employee to your company. When determining markup, it’s important to consider the full burden of that employee. The full burden takes into account all payroll costs associated with that employee, including state unemployment taxes, federal unemployment taxes (including any FUTA rate reductions), social security, Medicare, workers’ compensation, and more. If you’re not taking into account all these associated costs when determining your markup, you could be putting your staffing company’s bottom line at risk.

3.    Establishing Payment Terms.
Before services are rendered, it’s important to clearly inform and discuss with the customer the expected payment terms. Do you charge interest after 30 days? Do you offer a discount if the invoice is paid within a week? All of this should be in writing, with your customer indicating that they agree to the terms.   

4.    Billing.
Each customer may have different billing requirements that must be met in order for invoices to be processed and paid. It is important to know these specifications before services begin, or customers may become upset with your staffing company for not following these requirements, potentially jeopardizing the relationship. Also, if you do not follow their specifications, it may result in invoices needing to be adjusted, and ultimately delayed payments. Some examples of billing requirements include:

  • Invoice should contain only one employee per invoice or only one department of employees per invoice
  • Invoice should contain a PO Number and/or department numbers
  • Invoice should be sent in a specific manner, i.e. emailed or mailed to a specific person or group of people
  • Invoicing frequency (weekly, bi-weekly, monthly)
  • How adjustments or late billings should be submitted — sometimes customers prefer that you adjust an invoice already billed, other times the customer will not accept an adjustment and you need to credit the invoice and re-bill with a new invoice number or make the adjustment on a future billing
  • Late billings sometimes need to be on separate invoices, meaning you cannot have one invoice with multiple week-ending dates being billed

Customer relationships can impact your bottom line in a multitude of ways. By taking into account as many of these factors as possible before you begin the relationship, you can help to ensure that your next new customer is a great financial fit for your staffing company.