Fractional CFO for Staffing Agencies

The cash float problem is existential. A staffing agency with $50K in weekly payroll and 45-day DSO needs $300K in working capital just to keep the lights on — and that scales linearly with growth. Add a new $200K client and you need another $130K in float before you collect a dollar. We've seen agencies grow themselves into bankruptcy because nobody modeled the cash gap before signing the contract.

Gross margin looks healthy at 21-25% average across temp staffing, but the full range is 14-41% depending on segment. IT staffing runs 23-26%, healthcare staffing higher. The problem is that most agencies track margin at the book level, not the placement level. One staffing agency we analyzed had 40% of placements running below their cost of capital after accounting for payroll taxes, workers comp, and benefits — their 'profitable' book was subsidizing money-losing accounts.

DSO in staffing runs 35-75 days, but the spread tells the story. Agencies at 35 days operate fundamentally differently than those at 75 — the difference at $5M annual revenue is $548K in additional working capital tied up in receivables. Every 10 days you shave off DSO reduces your financing costs and frees cash for growth. The best agencies escalate collections at 30 days, negotiate net-15 terms with new clients, and maintain credit policies that would surprise most operators.