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COLLECTIONS & COMPETITION - MARTY ORENSTEIN, CEO FUNDING FANATICS

  
I've been in the staffing industry for more than 45 years, the first six as credit and collection mgr. for a National.  I noticed in an e-mail the other day that ASA is coming out with a sort of "White Paper" in order to educate end users to pay their staffing source on a more timely basis. This is a result of more and more corporations paying their suppliers on a slower basis.  As a funding broker in the industry we have placed dozens of staffing firms for financing. We continue as a consultant to the staffing owners who we encourage to call us for advice.  More than 1/3 of the questions center around speeding up payment of their invoices.
My first response is to initially do thorough checking to be sure you're dealing with "CREDIT WORTHY" companies. Also, establish a credit limit that you feel the client is worthy of. Of course, be sure that your invoices are perfect.
After that, many folks won't agree, however, part of your competitive situation deems that you "grin and bear" with these companies slowing down on paying your bills. As a staffing owner for 16 years the message on our invoices read
"Labor- Please pay within 10 days".  We found that sophisticated companies knew that we were supplying a service and not direct labor. Also, the hierarchy  of your client and not their A/P or Human Resource department dictates when their suppliers should be paid. We found that very strong collection efforts just drove our "CREDIT WORTHY" client to a competitor with "deeper pockets" who allowed and even encouraged the end user to pay between 60 and 90 days.
This is another reason that the well capitalized staffing service or any other business that has ample credit lines to draw upon has a distinct competitive advantage in today's economy.  Awaiting the postman to deliver checks from your clients each day to enable you to meet payroll just doesn't "cut it" anymore.
MARTY ORENSTEIN ,  CEO
FUNDING FANATICS -  Funding Finders for Business Owners
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Marty Orenstein, CEO
06-04-2013 16:36

MARTY ORENSTEIN - Tom, you are an exception in the manner that you collect your invoices. I'm sure you provide highly technical personnel that your clients couldn't do without.
Dale, I qualified as collections from "Credit Worthy" clients. Utopia is when clients pay according to the terms a staffing company would like. More times than none it doesn't happen that way. A/P treats staffing invoices as a Service and not as labor. That's why companies with an ample credit line with a flexible funding source have a competitive advantage.

Thomas Sarach, Jr
05-29-2013 08:42

Marty, thanks for the post. I would add that during all my negotiations of late, terms are playing a major role. While our clients are putting enormous pressure on our margins this is one are we push back hard with a good bit of success. We only negotiate a new rate if they agree to Net 10 or the like. This has worked very well for us lately.

Dale Busbee
05-24-2013 10:17

Great analysis Marty! As a previous staffing owner, I never looked at a "sale" as being complete until the client paid the invoice. We have seen with our staffing clients, and with the economic conditions being as they are, client payments extending. As a staffing owner, it is imperative that you set the expectations up front that payments should be made in net X days (preferably in 15-30), and that they understand that the staffing company is "fronting" the payroll burden and insurances for these employees. Staffing owners are not banks, so when their clients extend their payments, that can put the staffing company in a cash crunch situation. Having a funding partner to ease that cash crunch is desirable, but quicker payment cycles is always preferred, versus longer payment terms.