Knowing the creditworthiness of your clients is a crucial question in the staffing field, especially if you’re regularly providing clients with temp workforces while you retain financial responsibility for wages, withholdings and benefits. While your use of a factoring company can alleviate the weekly cash crunch, you must still feel confident about getting paid — on your terms, if possible.
Here are some steps you can make to gain greater assurance of the creditworthiness of new clients.
- Consult a lawyer. An effective credit application must include enforceable penalties, and that’s where an attorney specializing in creditors’ rights comes in. Be wary if new clients balk at sharing their credit history or providing references, or if they want to significantly renegotiate the terms and penalties.
- Remember that reputation matters. The elephant in the room, when it comes to the enforcement of your credit terms, is the imbalance of power issue. If you’re doing business with a start-up or a smaller company of unknown risk, you can demand the credit terms that make you feel as confident as possible of getting paid. But if the client is established, much larger than your company and has a good reputation, consider whether it’s worth pushing your lending terms and application procedures quite so hard. If your credit application form and process are perceived as being too onerous, your client may simply go elsewhere for staffing services.
- Do your due diligence. There’s a lot you can learn about a company behind its back, so to speak, with a Google search. Have other vendors brought lawsuits for slow payment or nonpayment? Has there been a lot of management turnover? Is there an abundance of customer complaints, public spats or other controversy? Talk to current and past vendors, and ask about problems with slow payment or constant renegotiation of bills. (Past vendors are likelier to speak freely, but take their complaints with a grain of salt. They might have other motives to badmouth past clients.)
- Enlist a payroll factoring company. Even when you’ve done all you can to assure timely payment, there will be sleepless nights spent wondering if you’ll make your next payroll. To put those worries aside, explore the benefits of engaging a factoring company. With a factoring company, you can immediately sell your accounts receivable invoices for valuable upfront cash. TemPay advances 90 percent or more of a total invoice, among the highest rates in the industry. And through our full-service factoring services, we’ll provide the added services of cutting paychecks, printing out invoices, filing payroll taxes and undertaking related tax and payroll duties.
Following a few sensible suggestions gives you greater assurance that the check really is in the mail — and your bottom line won’t suffer until delivery.
As a full-service factoring company providing payroll funding, invoicing, payroll taxes and credit monitoring, TemPay enables staffing agencies to focus on growing their businesses.