How a staffing agency can overcome business challenges through process optimization

Higher expenses, operational burdens, and a struggling economy – are just a partial list of challenges facing staffing agencies. This article examines how automation can transform operations, reduce expenses, and give agencies a competitive edge, enabling them not merely to survive but thrive in the years ahead.

Introduction. How staffing agencies operate in current business environment

Staffing agencies are critical bridges between employees and employers. However, their role is plagued with significant challenges. Navigating a constantly changing workforce is a requirement, but agencies are bogged down by internal bureaucracy and operating complexities. The needs of the industry with irregular work, project hiring, or skill shortages call for efficiency as a paramount need.

The growing deficit of skills makes these issues worse, as agencies have to bid for fewer and fewer qualified leads. To stay competitive, they must optimize operations and meet satisfactory client demands. An effectively planned strategy not only increases the lead pool but also allows agencies to function better in the employment market.

The economic struggles of a staffing agency

Today, staffing agencies are offered a wide range of challenges. Across the world, the most significant challenge is a struggling economy, as firms reduce budgets and slow down hiring. The 2024 State of Staffing survey found that 90% of staffing agencies reported the economic environment had a negative impact on their companies. With fewer orders for work, agencies are faced with decreasing revenues while still being required to cover operational costs. Meanwhile, candidates have more options than ever, using the internet to find work on their own terms, and increasingly it is becoming harder than ever before for mainstream employment agencies to find and hold on to talent.

Inflation adds to costs, further increasing the overhead of the operations of the agencies. Office overhead, salary, and other operating expenses increase while revenue is unpredictable. Temporary staff also contributes to payroll that the staffing firms have to pay even before clients pay their bills, further burdening finances. Back-office activities such as invoicing, taxation, and reporting for regulatory compliance are also onerous with labor-intensive manual processes.

Reliance on experienced workers handling complex, non-mechanical processes is yet another issue. These workers look for higher compensation, and agencies fear that they will ask for raises as inflation erodes purchasing power. Without automation, staffing agencies continue to rely on a limited pool of experienced staff to handle tracking time, billing, and payrolls, tying up work and slowing progress. If all these procedures continue to be manual, the agencies are vulnerable to higher costs, inefficiencies, and challenges in expanding their business in a bad economic environment.

Staffing agency’s process optimization and automation

Process automation and optimization are necessities for staffing agencies that seek to cut costs and stay competitive. KHMARKA addressed this issue by conducting a comprehensive business process audit of a staffing agency, which highlighted inefficiencies that increased operational expenses. The result was optimization that involved developing a mobile application for time tracking, which automated back-office operations, time tracking, reporting, and invoicing. These innovations reduced administrative workload significantly, allowing the agency to become more efficient.

Staffing agencies, according to Bullhorn's GRID 2025 Industry Trends Report, are twice as likely to grow revenue when leveraging automation. For example, businesses that automate job matches are 96% more likely to see revenue growth in 2024. No wonder, then, that top-performing businesses are 57% more likely to be in the advanced stages of digital transformation than those that dropped revenue in 2024.

By automating payroll, staffing agencies can eliminate one of their largest recurring costs. Manual entry, errors, and delays in the approval of timesheets have a tendency to create money inefficiencies. However, with automated billing and tracking, accuracy improves in payroll, and processing expenses decrease. KHMARKA’s solution ensured that labor data was captured in real-time, reducing errors in billing and eliminating the need for expensive manual monitoring. This shift not only saved time but also decreased payment disputes, thereby making financial operations more efficient.

The key benefit of automation is reducing the need for highly skilled personnel to operate complex, manual procedures. With advanced software handling payroll, compliance, and reporting, the agency can operate effectively with fewer, less experienced employees. With this flexibility, businesses can shift to changing markets without relying on costly experts to operate complex back-office functions. By automating manual procedures, staffing agencies reap operational flexibility and cost benefits.

Automating invoicing eliminates the inefficiency of manual billing, and agencies get paid more quickly and effectively. Real-time labor tracking combined with invoicing enables agencies to generate accurate timestamped invoices, reducing disputes and speeding up approvals. This not only enhances cash flow but also retains back-office employees on more value-added activities. With automated invoicing, the agency has a clearer picture of its finances – ultimately enabling profitability and operational stability.

The following is a summary of the business metrics that improved, following the implementation of KHMARKA’s solution:

Business metric	Improvement rate	Comment
Compensation processing time	- 76%	Getting rid of paperwork significantly reduced payroll processing time
Payroll errors	- 97%	Autogenerated invoicing nearly completely wiped out errors that regularly occurred when doing it manually
Invoice processing time	- 63%	Similar to payroll, invoicing is now paperless and much more accurate
Back-office workload	- 57%	Employees are no longer swamped with tons of paperwork. There is no need to hire additional, highly-skilled back-office employees
Net promoter score (NPS)	+ 38%	NPS improved from 6.5 to 9, meaning an average client is now a promoter of the staffing agency

The move from human to automated procedures has already proven itself valuable in reducing operational costs and improving efficiency. Staffing firms willing to make this transformation today will not only survive economic hardship but thrive when the economy rebounds with rapid expansion.

Conclusion. Automation as a strategic advantage

Automation is no longer an operational upgrade. It's a strategic advantage that sets industry leaders apart. Through automating payroll, reducing reliance on specialized personnel, and reducing operating costs, staffing agencies can build a more resilient and expandable business model. While automation technologies continue to advance, agencies that implement these tools now will become more competitive in a constantly changing marketplace. The shift from conventional processes to intelligent automation ensures long-term sustainability, putting businesses on the road to growth and success in the post-crisis era.

Want to cut operational costs and grow faster? Reach out to us — and let’s take your business to new frontiers.