Adams, Evens, & Ross Newsletter #9: HOW DO I KNOW IF MY STAFFING FIRM HAS A CREDIT AND COLLECTION PROBLEM?
Owners of staffing firms repeatedly ask, "How do I know if my staffing firm has a credit and collection problem?" To respond, I asked our credit risk department at Adams, Evens & Ross to create a test to rate a staffing firm's exposure to credit risk. The department was thorough and produced the following evaluative tool:
Do you have a written credit policy in place?
Yes= 0 No = 3
Do your new customers fill out a credit application?
Yes= 0 No = 2
Do you have safeguards, such as the right to charge interest, late fees, or collection costs, built into your credit application?
Yes= 0 No = 3
Do you check the credit application?
Yes= 0 No = 4
Do you re-review the credit application every 6 to 12 months?
Yes= 0 No = 2
Do you write off more than 1% of your annual sales to bad debt?
Yes= 0 No = 2
Do you have a collection process in place?
Yes= 0 No = 2
Do you set credit limits?
Yes= 0 No = 3
Do you require Personal Guarantees to be used with companies younger than 3 years old?
Yes= 0 No = 3
Do you contact overdue clients before they are 30 days past-due?
Yes= 0 No = 2
Do you file a UCCI to become a secured creditor on your accounts that have credit lines over $20,000?
Yes= 0 No = 5
Do you allow salespeople to set credit limits and/or collect their own accounts?
Yes= 4 No = 0
Do you check public records for lawsuits?
Yes= 0 No = 2
Have you had more than one client file for bankruptcy within the last 18 months?
Yes= 4 No = 0
Do you have a liquidation clause on your time sheet stating that they owe a fee if they hire your temp?
Yes= 0 No = 2
Now, let's see how your company's doing. Add up your score. If you tally 8 points or less you're probably in pretty good shape. If you totaled 9 to 14 points you may want to improve some of your processes. If you scored over 15 points you are at high risk and your accounts receivable is a nightmare poised to happen.
If you would like a free video CD on How to Turn Your Credit Application into a Credit Contract, e-mail your name, address, and phone number to request@staffingdebt.com and a member of my staff will send it out to you free of charge.