Best Practices For Invoicing In Staffing Agencies

You push a button, send an invoice, easy-peasy. 

But if you have a staffing agency, you know that this is not how things work for you. You already have dozens of contractors to handle, and your clients all want a different billing format, so invoicing alone can be a full-time job. And what happens when something goes wrong? Payments don't come on time, and your cash flow stalls.

Approx. 47% of B2B invoices in the U.S. are overdue by 30 days or more. – Clockify, QuickBooks

The main problem is that so many agencies treat invoicing as something they do at the end of the month, when everything ‘important’ is already done. But invoicing is where the money actually moves, and if the process isn't tight, it all falls apart, regardless of how much work you put into it.

At least 5% of all business revenue is lost to bad debt. – CreditSafe (survey)

Luckily, there are ways of making this less of a headache, so keep reading if you want to see which the best practices for invoicing in staffing agencies are and how you can make invoicing less stressful.

Building a Consistent, Clear Invoicing System

If you have a bunch of contractors and clients at once, it can all get really messy, really fast. 

Each client expects something different, and each contractor might log their hours in a different way, so the invoicing ends up feeling like playing jigsaw. It goes without saying that you absolutely must be consistent; otherwise, you'll make errors left and right. 

At a minimum, each invoice needs to have the basics – your agency's information, the client's details, the contractor's hours, the rates (which you agreed upon earlier), taxes, deadlines, and payment terms. Those elements need to be in the same place every time, and that way, you don't have to guess anything. 

You can make this easier on yourself by using standardized templates. 

Creating invoices from scratch every time takes a lot of work, so why not use a format you already know works? 

And if you add automation into the mix, the recurring fields like client names and addresses fill in on their own. Hours of work become minutes, and you and your staff are free to focus on more important things. 

Matching Invoices to Client Agreements

One of the biggest mistakes any staffing agency can make is assuming that invoices exist separately from client agreements.

U.S. firms often pay their staff on a weekly/monthly basis, but wait to pay clients 30-90 days. – American Receivable

In reality, every single invoice should be a mirror of the contact. If those two don't line up, expect problems. Think about how often issues come up, like overtime rates or payment schedules. If the contract says that overtime kicks in after 40 hours at a time-and-a-half, but the invoice shows something different, you'll get into an argument with the client.

That means that the payment will go through later than it was supposed to, so you end up hurting your business on two ends – you get unhappy clients and less cash flow. 

But this isn't just about the clients or cash flow. Tax laws and regulations affect what you can and can't bill for, and how you need to present it on an invoice. 

If your documents don't follow those rules to a T, you might get fined or even have legal problems. 

The safest thing you can do is to make contract alignment a non-negotiable part of your invoicing system. That means that you should build templates that can be adjusted to match different agreements and train your team to double-check the terms of the contract before they send anything out. 

If you use software that links contracts directly to invoices, you lower the chance of making mistakes even further.

How to Use Technology to Make Billing Easier

Technology has totally changed the way businesses deal with invoicing, and your staffing agency should take advantage of that. Yes, you might be comfortable with your piles of spreadsheets and manual entry, but do you realize how much time you waste on that and how often you make mistakes? 

Here is how different tools make billing a lot easier. 

1. Time Tracking Links

Making sure hours line up with what was actually worked causes about 85% of invoice-related headaches, and it's glaringly obvious why. 

If all you're using to pull hours is a spreadsheet or if you're chasing contractors for their timesheets, it's a nightmare, and you're guaranteed to make mistakes. 

On the other hand, if you link your time tracking system directly to the software you use for invoicing, you cut out the middle step. Hours go straight into invoices, which means fewer mistakes and faster payments. 

2. Syncing Payroll and Accounting

Invoices aren't alone in the Universe. 

They're tied to payroll, taxes, and accounting. If these systems aren't connected, your team needs to re-enter the same data in several places, which is a humongous waste of time, and even worse, it increases the chances of making errors. 

Invoicing software should always be synced directly with payroll and accounting platforms to keep everything consistent. 

Invoices can automatically reflect details on payroll, and your books are balanced without anyone having to double-check the numbers across all systems. 

3. Tracking and Reporting

Billing gets you paid today, but it's also how you plan for tomorrow. 

Any invoicing software worth its salt has tracking and reporting features that give you a clear view of which clients pay on time and what's overdue. This information will help you make better business decisions. 

A lot of businesses already use APIs to get useful data from outside sources, like a logistics company using a weather forecast API to reroute their trucks or an e-commerce company using a payment gateway API. 

Keeping Communications Clear with Clients

The numbers on the invoice are important; nobody is arguing about that. 

But communication with the client is just as important because every good business relationship starts with setting expectations up front. If both sides are clear on payment terms before you even send the first invoice, then you've already removed a lot of uncertainty that causes problems later on. 

Once you set the terms, stay consistent. Send invoices quickly at the end of each billing cycle to show your clients that you run an organized, dependable agency. This will also help the clients keep their own accounting on track. 

Flexibility is another big factor because different clients have different systems. You want to offer several payment options so they can pay without delay. Even with crystal clear terms in place, you could still get late payments, which is why you need to have a reminder and a follow-up process. Don't be rude and aggressive, though. A polite nudge before a due date is all you need, and if payment passes overdue, then you can be more direct. 

Naturally, nobody expects perfection because there's no such thing as a perfect system. Mistakes happen to everyone, but what matters is how quickly and transparently you handle them. If your client sees an incorrect charge or a detail that's missing, fix it right away. This will make the payment go through faster, and it will also keep the client's trust intact. 

Trust is one of your biggest assets, and clients are way more likely to stay loyal if they see that you take accountability for your mistakes. 

Conclusion

Invoicing isn’t exactly the glamorous part of the job, but it's definitely one of the most important aspects. 

That's what keeps everything running and, when it goes smoothly, the rest of the work follows along. If invoicing has been chaotic so far, this is your sign to make some changes because there's no need to take Tylenol every time that part of the month rolls around. 

It should be relatively effortless and, if that's not how it is for you, you're not doing it right.

Cover Photo by Mikael Blomkvist