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A True Story about a Staffing Firm in Financial Trouble
February 18, 2005
It’s not uncommon for me to get an unreasonable request
from a prospective client every day of the week. Last Monday (February
7, 2005) was no exception. A staffing company owner, strapped for cash
and worried about making payroll by the end of last week, told me last
Monday that if I couldn’t advance his staffing company any funds
against last week’s billings by this Friday (February 18, 2005), he
would be out of business by today.
Ordinarily, I dismiss such gloom and doom predictions
as the ravings of a guy under a lot of pressure. I explained that
ordinarily, I can advance funds in as few as three to five business
days, but that I couldn’t make any promises until I got further into
the deal. But this prospective client wasn’t having any of it. He
needed a commitment—and fast.
Apparently, his temporary staffing firm had grown so
quickly over the past several months; an unexpectedly large placement
of temporaries with one of its largest clients strained its internal
capital resources to the breaking point. Indeed, when I did a quick
review of his Invoice Aging Report and his projected immediate cash
needs, it was plainly evident that unless I could get this guy funded
within the week, his temporaries would go without pay and he would
likely be out of business.
Luckily, this staffing firm had only three major
accounts and they all had good credit. Also, the owner informed me
that his receivables were free and clear of any liens. Both of these
facts worked in his favor, and reluctantly, I promised funding by that
Friday so that he could cover his payroll. Here’s how last week went:
February 7, 2005
MONDAY A.M.
I immediately sent a factoring proposal via e-mail to the
prospective client. I gave him instructions that if he liked the
proposal to accept it by replying to the e-mail and by submitting an
application on line through our web site. I told him that if I
received the application the same day (Monday), I would have time to
have my assistant overnight a set of documents to him.
MONDAY P.M.
Late on Monday afternoon, I received the application
via e-mail. I sent him our standard documents overnight and e-mailed a
copy of our Factoring Agreement to him, so that he would already be
familiar with the document by the time the Fed Ex packet arrived
TUESDAY P.M.
By Tuesday afternoon, I had conducted a “tele-closing”
(an explanation of all our documents with instructions on where to
sign each one) and an orientation in which I described the factoring
process in detail. I also did a demonstration of our on-line services
including a demonstration on how to submit credit approvals on line
and how to access our reports on line.
I also had my support staff perform a lien search to
ensure that the staffing firm’s accounts receivable were unencumbered.
In the mean time, I had requested an updated copy of the staffing
firm’s Invoice Aging Report, Articles of Incorporation, and Proof of
Liability and Worker’s Comp. insurance coverage.
WEDNESDAY A.M.
On Wednesday morning, I received the results of our
lien search from the Secretary of State and luckily, it was clear. You
never know when an unexpected surprise may show up on a lien search
only to slow down the process. Also on Wednesday, I received a Federal
Express package from the client that contained that week’s billings.
Enclosed in the package was a dozen or so invoices (printed the day
before), together with the corresponding time sheets signed by the
supervisors for the previous week’s work performed by the temporaries.
Now, all I had to do was to confirm the outstanding
balances reported on his aging report with his customer’s figures to
make sure that his report was accurate. For this, I enlisted one of
our best collection professionals who was able to quickly find the
Accounts Payable personnel who had this information at their finger
tips.
Once we confirmed the accuracy of the information
contained on the client’s Invoice Aging Report, we notified the
Accounts Payable personnel that the payments had been assigned to us
and to begin remitting payments to us until notified otherwise.
THURSDAY P.M.
On Thursday morning, we wired 90% of the invoice amount
to our client, mailed his invoices to his customers and chalked up
another victory.
FRIDAY P.M.
Secure in the knowledge that his payroll checks would
clear his bank, and that with our help, cash flow was no longer a
concern, he began spending time on more profitable endeavors, like
expanding his business and increasing revenues.
By: 1st Commercial Credit,
Account Representative
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1st Commercial
Credit, a
nationwide
factoring company headquartered in El Paso, Texas. Provides accounts
receivable financing in the US, Canada, and the UK; offers
export trade finance to clients in every major world
market and can convert receivable finance transactions in 17
currencies.
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