Reading your temp margin from the ledger
How an agency sets each run's temp wages beside what it invoiced clients for the same weeks, to read its real margin and find the weeks that lose money.
By Achekam · · 4 min read · For Recruitment businesses in South Africa, Nigeria, Kenya
A temp desk can look busy and still lose money. Hours are up, invoices go out every week, the payroll is the biggest it has ever been, and yet the bank balance does not grow. Somewhere between what you pay the temps and what you bill the clients, the margin is leaking: an overtime premium not passed on, a rate increase given to the temps but not to the client, a week of hours never invoiced.
The answer is in your own books. Achekam records both sides of the temp business in the same ledger: the wages each approved pay run posts, and the invoices each client receives. This article shows how to set them side by side, week by week, and what to do when they do not line up.
The wages journal each approved run posts
When a pay run is approved, Achekam posts it to your own ledger as a wages journal. The amounts owed to the tax authority and to statutory funds are shown as liabilities, so the journal captures not just the net pay that reaches the temp but the full cost the agency carries.
That is the cost side of your margin. For temps paid weekly, there is one wages journal per week, dated to that run. Keep your temp runs separate from the run for your own consultants and office staff, so the temp cost is not mixed with the agency's overheads.
Payroll reports of cost by month and department
Payroll reports show cost, headcount and staff movements by month and by department. Two ways to use them for margin:
- By month, the report gives you total temp cost for each month, to compare with temp revenue for the same month.
- By department, it can show cost per client, if you organise your temps in departments that follow your main client accounts. Agencies with a few large clients often find this the simplest route to a per-client view.
Headcount and staff movements matter too. A month where headcount rose but billing did not is a month where new temps started before their hours were invoiced, or were not invoiced at all.
What each client was invoiced: statements and the receivables list
The revenue side comes from receivables. Each client's statement of account, which Achekam produces as a PDF, lists every invoice issued to them. The receivables screen lists what every client owes, aged into 0-30, 31-60, 61-90, 91-120 and over 120 days.
For margin, you want the invoiced amount for each week, whatever has been paid. Pull it from the statement: each weekly invoice, its date and its value before VAT. VAT is not your income, so leave it out of the comparison.
For the agency as a whole, management accounts give you an income statement for any period beside the period before, added up from your own journals and exportable as PDF or CSV. Temp revenue less temp wages, for the same months, is your gross margin on temps. Investopedia's explanation of gross margin covers how the figure is calculated and what it tells you about the share of each sale you keep after direct costs.
Setting wages beside billing, week by week
The monthly figure tells you whether you made money. The weekly comparison tells you where you did not. Build a simple sheet, one row per week, from the CSV export and the client statements:
| Week ending | Temp wages posted | Client invoices issued, before VAT | Difference | Comment |
|---|---|---|---|---|
| Each Friday | From that week's wages journal | From the statements, for that week's hours | Invoices less wages | What explains it |
Use the same week for both sides: the wages for hours worked in that week, and the invoice for the same hours. If you invoice clients a week after you pay temps, line them up by the hours they cover, not by their posting dates, or every week will look wrong in the same direction.
The difference column is your weekly gross margin in money. Most weeks it should sit within a narrow, predictable band for each client. The weeks that fall outside that band are the ones worth your time.
Investigating a week where wages ran ahead of billing
When wages exceed billing for a week, or the margin drops well below its usual level, work through the likely causes in order:
- Unbilled hours. A timesheet signed by the client but never invoiced. Check every signed timesheet for the week against the invoice lines.
- Rate changes. A pay increase given to temps without the matching increase in the client's charge rate.
- Overtime and premiums. Night shift, weekend or public holiday premiums paid to temps but billed at the normal rate, or not billed.
- Unrecoverable costs. Travel, uniforms or training paid through payroll as allowances, which your terms do not let you recharge.
- Timing. Hours paid this week but invoiced next week, which corrects itself, unless it keeps happening.
- Mistakes on the pay side. Hours paid twice or to the wrong temp. These are fixed on a later run, since an approved run is never recalculated.
Write the cause in the comment column. After a few months, the comments tell you which clients and which kinds of assignment are worth keeping on their current rates.
The same discipline applies to contractors billed by the day; see contractors billed by the day. And because temps are paid weekly while clients pay later, a healthy margin can still sit alongside a tight bank balance; funding weekly temp wages while clients pay later covers that gap.
Start with last month. Export the management accounts as CSV, line up each week's wages journal with that week's client invoices, and look at the three weeks with the smallest difference first.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
