Payroll float

Definition

Paying workers weekly while clients pay in a month or two, a gap the agency has to fund.

Why It Matters

This is the cash trap of the trade. Growth consumes money rather than producing it, because more placed workers means more wages paid weeks before the invoices clear, so an agency winning a large account can run out of cash while doing everything right. Size the working-capital line as carefully as the earnings, and find out whether the seller has been funding it with a facility that will not transfer to you.