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Review: A true Story about a staffing firm in financial trouble

Roy Vera MBA, RT  VIS Medical
Nov 2006
A True Story about a Staffing Firm in Financial Trouble
By 1st Commercial Credit
February 18, 2005

The following story is taken from 1st Commercial Credit.  The story is based on their
experience working with a staffing company strapped for cash and how they overcame the
challenge.  Many staffing agencies use Factoring to help them alleviate billing shortages.


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
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.

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

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.

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.

On Thursday morning, we wired 90% of the invoice amount to our client, mailed his
invoices to his customers and chalked up another victory.

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
Start Factoring Today!
About 1st Commercial Credit, LLC
1st Commercial Credit is a provider of factoring services for the staffing industry. Invoice
finance programs available in the USA, Canada and the United Kingdom.
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