Staffing agency bookkeeping: weekly payroll out, monthly receivables in, margin visible

You are financing your clients' payroll

Every temp placement makes you a lender whether you meant to be or not: gross pay, employer CPP, EI, and vacation pay leave your account weekly, while the client's payment for those same hours arrives one to two months later. One placement's cycle looks manageable; a hundred running at once is a permanent block of working capital that grows every time sales does. The books have to make that gap visible before it becomes a crisis.

We run a rolling cash forecast against that cycle, and where an agency uses payroll funding or factoring, we reconcile the funder's advances, holdbacks, and fees to the ledger every month — assigned receivables that nobody reconciles are how agencies lose track of what they actually own.

Margin lives below the markup

The rate card says the spread; the books say the truth. Between the bill rate and the pay rate sits the full statutory burden: employer CPP, EI at 1.4 times the employee premium, vacation pay, public holiday pay, Ontario Employer Health Tax once payroll clears the exemption, and WSIB premiums in rated classes. A placement that looks healthy on markup can be underwater once overtime and burden are loaded in.

Overtime is the silent killer in that math. When a temp crosses 44 hours in an Ontario week, you pay time-and-a-half whether or not the contract set an overtime bill rate — so agreements need OT terms in writing, and the books flag every placement where paid overtime outran billed overtime.

So we cost placements the way the business actually runs: margin per hour, per placement, per client, per recruiter — bill rate less pay rate less burden and overtime, straight from the payroll and invoicing data. That report is what tells you which client relationships deserve more candidates and which rate cards are overdue for a hard conversation.

Perm fees are big invoices with strings attached

A permanent placement fee — typically a percentage of first-year salary — arrives with a guarantee: if the candidate leaves inside the window, you owe a refund or a replacement search. We keep perm revenue on its own line, separate from temp billings, and track every fee's guarantee period so clawback exposure is a known number rather than a surprise debit. Recruiter commissions are accrued in the same month as the fee they relate to, which keeps a strong perm quarter from flattering one period and bruising the next.

Remittances are trust money, and HST rides on everything

Source deductions are the one liability an agency can never float. Amounts withheld from pay are deemed to be held in trust for the Crown, directors can be personally liable for shortfalls, and payroll-heavy businesses hit CRA's accelerated remitter thresholds quickly — meaning remittances up to twice or four times a month, on dates that do not care about your receivables. Our rule in the books is simple: withheld amounts and the employer share are set aside at every payroll run, reconciled to the PD7A, and never treated as available cash.

HST discipline matters just as much: staffing services are taxable, and the tax applies to the full invoice — including the payroll costs you recover — not just your markup, a point clients sometimes push back on. The stack that holds all this together is unglamorous: QuickBooks Online, a payroll engine like Wagepoint or ADP, and hours flowing from your ATS or time system into billing without rekeying. When placements cross the border — TN professionals into US clients, USD billings, classification questions at scale — the tax side is covered in our cross-border tax guide for staffing agencies, and the month-to-month engagement is described on our bookkeeping services page.

Source: CRA — Payroll deductions and remittances.