Safeguarding Your Firm Against Fraud

Temporary staffing companies seek to grow their businesses through placing temporary employees in reputable companies. But how do you ensure you’re placing your employees with legitimate and reliable businesses and not leaving your staffing firm vulnerable to fraud?

Kylie Dore, vice president of credit at TemPay, says even if you’ve known a potential customer for a long time, you still need to perform due diligence to protect your business.

Think Defense
Dore says the first line of defense for firms that want to prevent fraud is the customer vetting process.

“A temporary staffing firm, in particular the smaller ones, need to be especially selective in order to place people in businesses where you can be certain you will get paid for your services,” she says.

TemPay performs comprehensive due diligence on new customers for all of its clients. This includes assessing their credit, references and trade and debt histories.
In the temporary staffing industry, the biggest areas of customer fraud involve:

  • billable hours
  • time sheets
  • invoices for employees

Factoring companies such as TemPay use a systematic vetting process to spot any red flags in a company’s payment history, such as skipped invoices, late payments, lawsuits or negative references.

Expect Exceptions
Due diligence often helps companies identify and rule out risky customers; however, there are some cases where a customer has legitimate reasons for late payments, lawsuits or debt.

“If somebody is establishing a history — the past behavior is an indicator of what’s going to happen in the future,” Dore says. “Yet there may also be something catastrophic that happened to the company that caused them to be late for a period of time, and maybe now they’ve resolved the problem.”

Ultimately, there is a fine line between protecting your business from fraud and cutting off a viable revenue stream. If a business is cooperative and compliant with the verification process but its past performance is questionable, take its character into consideration as well. Still, Dore suggests working with that customer on a trial basis or asking for a deposit before you commit a significant number employees or resources.

“Use common sense, caution and diligent research,” Dore says. “If you’re not familiar with a company, don’t put a lot of people in there and risk not getting paid.”
When it comes to fraud, Dore says the biggest mistake businesses can make is being too trusting.

“Clients want to be trusting, but the reason they’re hiring companies such as TemPay is that we provide the service of finding the information, uncovering anything that could be negative and helping them assess and mitigate that risk,” she says.

Prior to joining TemPay, Dore served as assistant vice president for Franklin Capital Holdings LLC in Chicago, where she performed underwriting, deal documentation and due diligence in addition to monitoring credit for the company’s factoring portfolio. Today, her role involves monitoring accounts receivable for TemPay’s portfolio and managing the credit and collection department. She is also responsible for helping vet customers for potential deals and closings.