When The Economy Slows...It Does Not Slow For Everyone

By: Wilson Cole
Date: 3/1/2008

I am not one to talk down the economy, and I am a perpetual optimist. Let me first give a disclaimer: I am also a firm believer that when the economy slows, it does not slow for everyone. What I am going to discuss is a general observation and is in no way meant to be viewed as the gospel that a recession is on the horizon. Let me explain why.

About every 2 years we see a little hiccup in the industry that peaks my interest. It typically lasts between a month to 8 weeks, then levels out. With that being said, I am seeing a trend in economy that makes me nervous for our clients. It started in the 4th quarter of last year and it has continued well into the 1st quarter of this year. The number of accounts that we are collecting has doubled in the last 12 weeks. Good news for us but not good news for our clients. Before I cover what I recommend what our clients should do to protect themselves, I want to cover the timeline of what I typically have seen over the last 16 years of collecting for this industry. First you have to understand our client base. We have 1500 clients, 40% are recruiters and 60% are staffing firms. On any given month we are collecting 60% of the time for staffing firms and 40% for recruiters. Whenever there is a slow down, we see a large increase in recruitment debt. Companies will back door hire a candidate or they refuse to pay the recruiter for various reasons. The second thing we see in an economic slow down is a spike in 6-figure balances that have been placed for collection by staffing firms. Then we see debtor companies that have sold all of their assets and started over. We also see a spike in bad checks from accounts that have been placed for collection. In deep slow downs this cycle will run for about 6 to 12 months. In the last slow down, we saw our payroll funding clients turning over their clients (Staffing firms) for collection. Then as the economy improves, we typically have our payroll-funding client outsource the entire open invoice to us for the client that had gone out of business.

Over the last 4 months I have seen a lot of these signs. We have had a 300% increase in recruiting debt. We have seen a 133% increase in 6 figure accounts placed for collection. I had a debtor write more bad checks in the month of January than for the last 6 months. I have also seen a 500% increase in companies that have been sold and no assets where left to pay our client. So what do I recommend you do to protect your company? Follow up with the basics. To help make sure you do not need our collection service, you NEED to do the following. Get contracts signed, make sure that you have the safe guards in your contract or time sheet that help you recover your collection costs, attorneys fees and late fees. I also want you to check out a company's credit before you deal with them. You can pull a D&B: go to www.credit.net, go to www.knowx.com. You can also go to our website at www.staffingdebt.com and search our database for free. We also send out a free email called Credit Alert. This email is sent out once a week. You can send me an email at Wilson@staffingdebt. com and request this free email.

What do I recommend if you find your self with a delinquent account?

1st send them a letter or email with a very specific date to get the issue resolved. Do not use vague language like, "This must be resolved soon." State in your letter this must be resolve by March 5th at noon. If the client calls you, try to resolve it. DO NOT DISCOUNT YOUR INVOICE. If you do offer a discount that will be the best you will be able to do short of suit.

If they fail to resolve it by that date, or ignore you, then turn the account over to someone to collect. It does not matter if you use me at Adams, Evens & Ross, your attorney or another collection service but, you MUST act quickly. If a company gets into trouble, your invoices are the first ones they do not pay. When they run out of cash, and stop paying their main suppliers, and they stop paying for raw material, they are out of business. So in a slowing or uncertain economy, time is of the essence. You must make sure you are first in line while your debtor still has the ability to pay you. If they are unwilling to pay you, we can change their mind, but if they have lost their ability to pay, then unfortunately, filing suit will be a waste of time.

If you would like a copy of these safe guards for your time sheet or contract, please email me Wilson@staffingdebt.com and put safeguards in the subject lien. If you think you may have a collection issue please call me at 800-42-5287 Ext 6578