Lone Oak Payroll director of payroll funding, Ashlee Mikesh, provides insight into common financial mistakes that staffing agencies make and how to avoid them in 2019.
At Lone Oak Payroll, I help many different types of staffing agencies avoid some common financial mistakes when it comes to their operations. Here are some of the most common ones that I’ve seen in my role at Lone Oak Payroll:
Financial Mistake #1: Not setting aside money to pay taxes.
The world could stop turning on its axis and you’d probably still have to pay your taxes. There is no reason that tax payments should blindside you. Plan for local and state taxes on the front end rather than scrambling for money when payments are due. When you don’t set aside the money to pay taxes, it’s easy to fall behind.
Financial Mistake #2: Falling behind on new hire reporting.
If you’re not doing new hire reporting in a timely manner, you’re putting your company at risk. If you fall behind on new hire reporting and your new employee has a child support garnishment that you don’t know about, your staffing agency is responsible. New hire reporting is crucial to ensuring compliance with the Personal Responsibility and Work Opportunity Reconciliation Act of 1996.
Financial Mistake #3: Not planning for unexpected expenses.
Failing to plan for unexpected expenses such as workers compensation claims is a common problem for many staffing agencies. It’s a best practice to set aside an amount to cover these types of expenses so that you have a reserve in place should you encounter unplanned expenses.
Financial Mistake #4: Lacking the cash flow to make weekly payroll.
Does 75% of your revenue come from one client who has 75-day pay terms? How do you cover weekly payroll costs while you wait for your client to pay? If you don’t plan for payroll costs when your client has longer payment terms, it’s very easy to quickly fall behind.
Typically, this is when staffing agencies resort to payday lenders and merchant cash advances. This type of financial arrangement can work short-term in a pinch. Due to the daily interest charges from merchant cash advances, it means that’s it’s not financially sustainable for your staffing agency long-term. If you need to optimize your cash flow operations, payroll funding could be a better option for your staffing agency as you wait for slow-paying debtors.
How to Avoid These Financial Mistakes
My recommended best practice for how to avoid these mistakes is simple: Plan ahead!
There are three main categories for which staffing agencies should always be prepared to cover:
- Payroll costs
- Taxes – Local, SUTA, FUTA
- Workers compensation fees
At Lone Oak Payroll, we help our clients plan for these types of expenses. Our experienced back office and tax management team helps clients manage reserve funds to make sure they have enough money for local and state taxes. Lone Oak Payroll also helps clients allocate reserve funds for unplanned expenses that may vary from month to month. In addition, Lone Oak Payroll gives our clients access to a cutting-edge suite of staffing software at a considerable discount to track worker compensation claims, invoices, payroll, and more. With our years of experience with different staffing verticals, you can rest assured that Lone Oak Payroll understands how to help our clients achieve success and aggressive growth goals. Contact us to learn more about our payroll funding services and back office support services!
About Ashlee Mikesh, Director of Payroll Funding
Ashlee started in payroll processing in 2011 and has extensive experience partnering with clients on a vast array of financial areas including payroll, collections, taxes, underwriting, credit analysis, risk evaluation, and account and receivables management. From developing processes and procedures for fraud prevention, underwriting, and payroll, Ashlee makes sound financial decisions with the goal of providing safe, secure funding for our clients. Ashlee treats every client partnership with care. Her end goal is to help clients realize their goals – no matter how big or small.