Temp, perm and contractor margins: three businesses in one agency

Blended revenue lies cheerfully

Agencies often celebrate top-line billings while cash and margin tell a different story. Temp payroll is high volume with thin retained margin. Permanent fees are lumpy but richer. Contractor placements sit in between and carry IR35 and umbrella complexity that generic dashboards ignore.

One blended dashboard encourages the wrong behaviour: chasing revenue that consumes cash, or ignoring the desk that quietly prints cash every week.

Separate the engines in the accounts

Report each line with its own cost of sale, bad debt and consultant commission logic. Watch debtor days on temp and contractor billings closely; volume without collection is theatre. Permanent fees need pipeline visibility and clawback tracking when candidates leave early and fees reverse.

Directors should see contribution by desk after realistic overhead allocation. Otherwise successful teams subsidise noise without anyone naming the problem in the board pack.

Use numbers in ops meetings

Weekly sales meetings improve when finance provides a one-page margin view. Consultants respond to clear contribution figures more than to abstract warnings about cashflow after the fact.

When temp, perm and contractor engines are visible, hiring and marketing spend can follow contribution rather than last month's loudest win.

Making finance useful on the sales floor

Give consultants a one-page view of contribution by desk and a short take-home comparison they are allowed to share. Pair that with the IR35 or CIS checklist so compliance is part of the placement conversation, not a later correction. Review debtor days alongside billings so volume targets do not hide collection risk. Agencies that let finance teach the floor in plain English lose fewer candidates to payslip surprises and fewer placements to avoidable status disputes.

A note on timing

Do the unglamorous work in quiet months: tidy records, agree policies, and book the mid-year review before winter pressure or year-end deadlines arrive. Most expensive accountancy problems started as postponed admin. A ninety-minute planning call in summer often prevents a frantic March. Build the habit even when nothing feels urgent, because urgency is usually a sign the calendar was empty of planning.

If you want this handled on a fixed monthly fee with sector-aware support, get a recruitment quote.