2. Uncovering Hidden Costs in Contracts

Profitability begins in the details because when your margins are tight, dollars and cents add up.

When reviewing a contract of a potential customer, it is not enough to skim it over. “Hidden” costs in contracts can add up and ultimately impact your bottom line in ways you might not expect. Here are a few hidden costs to look out for in staffing contracts:

  • A large quantity of holidays or unpaid days
  • You pay extra for background checks
  • Unreasonable additional insurance requirements such as very high general liability coverage
  • The requirements for your workers are extreme
  • Tight overtime restrictions
  • Discounts in VMS contracts

Bottom line, review your contract very carefully before agreeing to anything! Little costs can add up and affect your profit margin.

REAL LIFE EXAMPLE

Understanding the Gross Margin Gross Profit report and how to take fast corrective action when things don’t add up.

Our client, *Lisa, from Smith Staffing, had just begun working with a large new, and complex customer. At the same time, she added two additional in-house support staff. Between recruiting, training, and filling the new customer positions, and acclimating her new staff to office routine and processes, Lisa’s review of her weekly Gross Margin Gross Profit report got buried at the bottom of her very long ‘to do’ list. When she finally surfaced to focus on her weekly reports, two weeks had gone by and she realized something didn’t add up. She knew she should be more profitable on the new account, but numbers don’t lie.

Closer scrutiny revealed that, while her new contract prohibited billing for overtime labor, her temporary workers were actually working overtime hours that she was obligated to pay. This one discrepancy was eating up every bit of profit on the account. Lisa immediately scheduled a site visit where she spotted several opportunities for increased efficiencies. Implementing small on site productivity changes resulted in her workforce completing their tasks within a regularly scheduled shift. Moreover, her customer was so impressed with her actions, they agreed to a contract amendment, adding an on-site supervisor to ensure top efficiency moving forward, which also increased her overall bill rate.