Increasing margins by decreasing processing costs

Eddie Young writes ...’A wise man pointed out to me many years ago that for every pound of unnecessary expenditure, it takes two extra pounds of revenue to return it to profit.

Competition has never been greater than in the staffing world. The fight for margin is a tough one, especially where clients hold the upper hand on billing rates. This situation tends to focus the mind of staffing companies on the ‘coalface’ of sales negotiation. With the hope that volume negotiated there, will offset low unit margin. It is the service industry equivalent of ‘pile them high, and sell them cheap’.

Basic bookkeeping teaches that revenue generation is just one half of the equation. Controlling costs is equally important. Many employment businesses find their processes have grown around ‘necessity’, without regard to cost. Volume business, discounted or not, might improve the gross margin but can severely impact the bottom line. Support systems responsible for the processing of the payroll for workers, and the raising of invoices to clients, and cash collection, can struggle to keep up. The solution is all too often an increase in headcount, or squeezing even more commitment out of staff in the middle or back office.

It is time to take a step backwards and regroup.

Firstly, there should be no ‘sacred cows’. Laissez-faire should  absolutely the last option.

Secondly, how much of the additional strain is there on systems which process data the business collects? Could these strains be eased by thinking a little bit smarter? How much of your data is collected and keyed into computer systems multiple times? The days of duplication should be put firmly behind us. Such duplication is not only inefficient, it breeds error.

Thirdly, can the increased efficiency of such a systematic review only benefit your staffing business? Can efficiency also improve the level of service to stakeholders, such as the clients, workers, and suppliers you interact with?

Fourthly, business systems are already available to address the challenges of the modern staffing world. It is not unchartered territory.

Finally, you can bet your bottom dollar that even if you eschew any consideration of change, your competitors probably won’t. Change can be for the better of your business, and can sometimes even put you ahead of the competition.

Go on. Make the change. Feel the benefits!

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