Funding weekly temp wages while clients pay later
How an agency sees the cash gap between temp wages paid every week and clients who pay on monthly terms, using payment schedules, ageing and budgets.
By Achekam · · 4 min read · For Recruitment businesses in South Africa, Nigeria, Kenya
A temp agency is, among other things, a lender. Every Friday it pays its temps for the week they have just worked. The client who used those temps pays for them weeks later, on monthly terms, sometimes later still. In between, the agency has financed the client's workforce out of its own bank account.
That works until it does not. A new contract that doubles the temp headcount is good news on the income statement and a strain on the bank. A large client who slips from paying in thirty days to paying in sixty can empty the account without any loss appearing in the books. A growing agency can run short of cash this way while still making a profit.
Achekam does not produce a cash flow statement from your books today, so the picture has to be assembled. This article shows where each piece comes from and how to put them together.
Weekly wages out, monthly receipts in
Picture the timing for one new client:
- Week one to four. You pay the temps every Friday. The client receives a weekly invoice, each with terms of payment.
- End of the month. The client's finance team batches your invoices for their payment run.
- The following month. The client pays, perhaps for all four weeks together.
By the time the first payment arrives, you may have paid five or six weekly payrolls for that client. Customer invoices in Achekam default to 30-day terms, and you can set others in your terms of business, but the gap exists whatever the terms: wages leave weekly, receipts arrive monthly. Your job is to know how big that gap is at any moment, and whether it is growing.
The payment schedule for each approved run
The cash going out is the easier side. Each approved pay run has a payment schedule that downloads as a CSV, listing who is paid and how much. Marking a run paid only records the fact; Achekam moves no money, and the payment itself happens through your bank.
For cash planning, that schedule is your most reliable number. It is exact, it is known a few days before payday, and it repeats every week. Keep the schedules for the last few months: they tell you what a normal week costs and how fast it is growing.
Do not forget what sits behind net pay. The tax and statutory deductions from each run are also cash that leaves, on the dates the authorities set, and they are often a single large payment once a month that a weekly view can miss.
Ageing on client invoices
The cash coming in is less certain. The receivables screen ages what clients owe into 0-30, 31-60, 61-90, 91-120 and over 120 days, with overdue totals.
For a temp agency, the shape of the ageing says more than its total:
- A client whose weekly invoices sit mostly in the first bucket is paying as agreed.
- A client with invoices spreading into the second and third buckets is stretching you, and every week of wages you pay for them adds to the gap.
- A client with anything over ninety days owes you money you have already paid out in wages. Decide whether you keep supplying them.
No cash flow statement from the books, so build the view yourself
Because the books do not produce a cash flow statement, build a simple weekly cash view yourself. ACCA's article on cash budgets explains why a business prepares one and how to build it from expected inflows and outflows, with a worked example. For an agency it can be very plain:
| Week | Opening bank | Wages due (payment schedules) | Statutory payments due | Expected client receipts (from the ageing) | Other costs | Closing bank |
|---|---|---|---|---|---|---|
| This week | From the bank statement | Known | Known | Invoices you expect to be paid | Rent, salaries, overheads | Calculated |
| Next weeks | Last week's closing | Estimated from recent runs | By due date | By each client's real paying habit | Estimated | Calculated |
Use each client's actual paying behaviour, not their terms, for the receipts column. If a client always pays ten days late, plan for that.
Look ahead at least two months. The weeks where the closing balance dips lowest are the ones to plan for, whether by chasing a payment, arranging a facility with your bank before you need it, or delaying a cost that can wait.
Credit control and budgets that keep the gap visible
Two tools inside Achekam help keep the gap from growing quietly.
Credit control. It is on for new workspaces. Once a day it e-mails overdue reminders and a monthly statement to customers with a balance, by default at 7, 14 and 30 days overdue with the invoice PDF attached. It never charges anyone and records whether each e-mail went out. It needs working e-mail settings, so check that before you rely on it. For temp clients, those reminders do the routine chasing so your consultants can concentrate on the clients who need a phone call.
Budgets. A business can set a budget per account and period and compare it with actual figures from the ledger. Set a monthly budget for temp revenue and temp wages from your plans; when actual wages run ahead of budget while revenue does not, the gap is growing before the bank shows it.
Weekly invoicing is the other half of the solution, because a client cannot pay an invoice that has not been sent; see invoicing clients weekly for temp hours. Whether the gap is worth carrying depends on your margin, covered in reading your temp margin from the ledger, and the payday side is in payslips and pay schedules for temporary workers.
This Friday, after the run is approved, start the weekly cash sheet with that payment schedule and the current ageing, and update it every week from then on.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
