Payroll Cash-Flow Gap Calculator
Payroll Cash-Flow Gap Calculator
Example value. Use your own FICA, FUTA, SUTA, and comp load.
Days after the week closes before the invoice goes out.
How far past terms your clients actually pay.
Peak cash needed to float payroll
$100,800
You run 5 weekly payrolls before the first client check lands on day 33 (3 lag + 30 terms + 0 late).
Week by week: cash out vs. cash in (cumulative)
Measured right after each weekly payroll run. The gap between the two bars is cash your agency has fronted. Once collections start, each week's gross profit ($6k) chips away at it.
What if your terms were different?
| Terms | First payment | Payrolls floated | Peak gap |
|---|---|---|---|
| Net 15 | Day 18 | 3 | $60,480 |
| Net 30(yours) | Day 33 | 5 | $100,800 |
| Net 45 | Day 48 | 7 | $141,120 |
| Net 60 | Day 63 | 9 | $181,440 |
Why Profitable Staffing Agencies Still Run Out of Cash
Staffing is one of the few businesses where you pay for the product before the customer pays you, and you do it every single week. Your margin can look great on paper while your bank balance heads the other way. That's the payroll float, and it scales with every worker you add.
The math behind the gap
Weekly payroll cost is what leaves your account each week:Workers × Pay Rate × Hours × (1 + Burden %)
Payrolls floated is how many of those go out before the first client payment arrives:ceil((Invoicing Lag + Terms + Days Late) ÷ 7)
Peak gap is the two multiplied together. After that, each week's collection covers that week's payroll plus your spread, and the hole slowly fills.
A worked example
25 workers at $18/hour for 40 hours is $18,000 in wages. Add a 12% burden and payroll costs $20,160 a week. Invoice 3 days after the week closes on Net 30 and the first payment lands on day 33. By then you've run 5 payrolls, so you need about $100,800 on hand before that first check clears. Push terms to Net 60 and the same crew needs nearly twice that.
Ways to close it
- Invoice the day the week closes. Every day of invoicing lag is a day added to the float, and it's the one variable entirely in your control.
- Negotiate terms before the first order, not after. Shorter terms, or a deposit on a large ramp, are easier to ask for at the start.
- Chase late payers early. Use the Days Late input above to see what a habitually slow client actually costs you.
- Line up funding before you need it. Bank lines of credit, invoice factoring, and staffing payroll funding arrangements all exist to bridge this gap. They differ a lot in cost and terms, so compare real quotes against the number above.
FreshStaff runs native payroll and invoicing from the same approved time, so once the week's hours are approved the invoice is ready to send without re-keying anything. It won't make your clients pay faster, but it does take the invoicing lag off your plate.
Frequently Asked Questions
Why do staffing agencies need cash to float payroll?
Temps expect a paycheck every week. Clients pay invoices on terms like Net 30 or Net 45, counted from the invoice date, not from the day the work happened. Every payroll you run before the first client payment arrives comes out of your own cash, so a new or growing agency carries several weeks of payroll on its books at once.
How do you calculate the payroll cash-flow gap?
Add your invoicing lag, the client's payment terms, and how many days late they typically pay. Divide by 7 and round up: that's how many weekly payrolls you run before the first dollar comes back. Multiply by your weekly payroll cost (wages plus employer burden) to get the peak cash you need. Example: 3 days lag + Net 30 = day 33, which is 5 payrolls. At $20,160 a week that's $100,800.
Does the gap go away once clients start paying?
For a steady book, yes: once collections start, each week's incoming payment covers that week's payroll plus your gross profit, so the gap stops growing and slowly shrinks. But it comes back every time you add workers, win a new client, or a client starts paying late. Growth is exactly when the gap bites hardest.
What are the options for funding staffing payroll?
The common ones are your own cash reserves, a bank line of credit, invoice factoring (selling or borrowing against receivables), and specialized staffing payroll funding arrangements. Each has different costs and strings, so compare the actual quotes you receive. Negotiating shorter terms and invoicing faster shrink the gap before you pay anyone to fund it.
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