“Every time you extend credit, you are lending money.”
In our 30 years in business with the staffing industry, we’ve learned that one of the top reasons why staffing firms struggle to collect debts is because they chose to work with a client who was meant to be a pain even from the very beginning.
We have dealt with not just hundreds, but thousands of cases where a grueling situation could have been avoided if the problematic client was identified early on.
Our expert advice – have your client fill out a credit application.
It is important that you, including your client, understand that extending credit equates to lending money. And as a businessman who makes intelligent decisions, you wouldn’t lend to someone who cannot pay back, right?
Another important thing to do is to get a personal guarantee.
A personal guarantee should be non-negotiable considering that almost half of new businesses fail after five years of operations. Some are trickier than others and dodge bullets by opening up a new business with a different name. You may still know the location or the contact information of the owner, but as long as you do not have a personal guarantee signed, the chances of you getting paid are as good as none.
Have the owner or, at least, the vice president of the company sign the guarantee and not just the bookkeeper or the other officers. If a client refuses to sign, it only means one thing – they are not confident about their business and are not willing to take a risk, which clearly shows that they are not fit to be your client at the moment.
Now, we are not saying that you should ask for cash-in-advance or to disregard the possibility of working with these businesses in the future. Find the balance between being too forward and being incautious by having a separate form of credit application, obtaining a personal guarantee, and by having your credit department recheck prospects every 6 to 12 months to make sure that, before you engage with a business, their credit is holding up well.
Adams, Evens, and Ross offers unlimited credit screening services so you can avoid dealing with problematic clients in the future. Click here to know more.
If you’re one of the cautious ones, you will definitely be getting a credit application and a personal guarantee signed before moving forward with a client. After all, prevention is always better than cure.
Struggling to collect a past-due debt? We have a No Collection, No Charge policy. You can place the accounts here.
For more information, email us at firstname.lastname@example.org.