Abstract:

Receivables are one of your greatest assets. They can have a direct impact on your company’s cash flow and ultimately determine the health of the business. It’s also an area that can be highly targeted for fraud. TRICOM’s SVP shares ways to protect your receivables and ultimately your staffing company.

Article:

Receivables are one of a staffing company’s greatest assets. Your receivables have a direct impact on your company’s cash flow and ultimately can determine the health of the business. That also means it’s an area of your business that can be highly targeted for fraud. We spoke with TRICOM’s SVP Chief Credit Officer, Amanda Jadro, to get a better understanding of how to protect your receivables and ultimately your staffing company. Amanda has been with TRICOM since 2007, helping clients build strong relationships with their customers and healthy bottom lines through smart, diligent receivables management.

Q.: How do a staffing company’s receivables reveal the health of their business?

Jadro: Healthy receivables and AR turn leads to a profitable business. The more quickly you get paid and can realize cash flow to your bottom line, the better. The reverse leads to loss. That’s why it’s so important to watch your receivables closely both in terms of length of time to payment, as well as a jump in receivables from a specific customer. Make sure the uptick makes sense. Is that in line with the market? In a down environment, expect fraud to increase, which means business owners need to be even more cautious and follow their procedures even more closely.

Q.: What does “due diligence” mean when it comes to your receivables?

Jadro: “Due diligence” can mean a lot of things, but ultimately it means doing your own, independent customer analysis. Research any company that reaches out requesting temporary staffing services. Validate that the individual you are speaking with is acting on behalf of the company. Also, research what locations the company shows on their website. Check the phone number(s) listed and the email domain of the business. Contact the company directly using contact information separate from the requester’s email signature. Visit their company location(s).

You should also obtain a Business Credit Application from all customers. Follow through by pulling the customer’s credit report and reaching out to trade references. Be sure to obtain a signed services agreement before starting to conduct business with them.

Q.: It seems like fraud is becoming increasingly rampant within the staffing industry. What are some of the common types of fraud when it comes to receivables?

Jadro: It’s tough being a business owner these days because it can feel like fraud lurks around every corner. We’ve seen individuals posing as a representative from a reputable business requesting temporary staffing or payrolling services. The staffing company will pay workers, invoice the customer, and may even receive invoice payment(s) that later get returned. However, when the staffing company tries to contact the customer to collect on the invoices, they discover the business did not engage in the staffing company’s services. The funds sent to the workers are no longer in the direct deposit bank account to be recalled.

We’ve also seen workers submit fraudulently approved timecards. The staffing company pays the worker and bills the customer, only to discover that the worker did not work the hours, and the manager did not approve the timecard.

Another common type of fraud occurs when a staffing company still uses paper checks. These can be intercepted, fraudulently signed over to an individual, and cashed.

We’ve also seen email hackers contact customers via email to change ACH instructions so that deposits are made to the fraudster’s account. The funds are not collectable as the accounts are swept daily.

Q.: How can staffing company owners protect their businesses from fraud?

Jadro: The number one thing is to trust your instincts. Question things that don’t sound right or line up. Pay attention to markups that sound too good to be true or contract terms that may be inconsistent with industry standards. Be extra wary of any request to payroll. The second most important tactic to prevent fraud is to follow your procedures closely. Have independent contact with any employees requested to move to your payroll. Obtain all standard new hire information.

To avoid fraudulent check cashing, request customers use ACH transfers at the onset of the relationship. Customers who refuse electronic payments and insist on mailing checks should have fraud protections in place, such as Positive Pay, to ensure bad actors cannot fraudulently cash checks payable to your staffing company.

Be sure to review employee direct deposit information when bringing on staff from another provider or customer. For example, it would be unusual for multiple employees to bank in the same location. Be sure to follow all your standard practices and don’t cut corners or fall victim to rush requests.

To avoid email hackers with fraudulent ACH transfer information, inform your customers your company uses a dual verification method to make bank account changes. For example, requests must be made in writing and then have a verbal confirmation from another individual at the company.

Also, call or visit new customers early on. Not only does this help deter fraud, it’s a good way to build rapport with a new customer. Follow up with a call after placements go out and the first billing is sent. You would also expect to complete a new vendor or set up packet with a W9 request for the customer’s AP or Procurement department. Be diligent about obtaining your first payment.

While it can be easy to focus on sales or other aspects of running your staffing company, don’t forget to keep a close eye on your receivables. As the lifeblood of your business, your receivables can offer you insight into the health of your business, but can also be a target for fraud. By staying diligent, following procedures, and trusting your instincts, you can help ensure this lifeblood continues to stay strong and healthy.

TRICOM is a leading provider of administrative and financial services exclusively for the staffing industry. For over 35 years, TRICOM has offered a wide array of services and resources tailored for independent staffing companies of all sizes.