Many staffing agencies are looking for the secret of a painless collections process. The accounts receivable (A/R) collection process can be long, arduous, and thankless for your staffing agency’s team. From our Lone Oak Payroll team of accounts receivable experts, here are the top secrets to streamlining your collections process:
1. Do your homework on the initial vetting process for new clients.
Before you accept any new clients, you should know what kind of customer you’re doing business with. It’s easy to get caught up in the initial excitement over placements but it’s equally important to have an approval policy in place. We recommend doing a credit check on all new clients. Here are some questions you should know the answers to before you sign a new client:
- What industry is your client doing business in?
- What are the client’s payment terms?
- How is the client going to treat their temporary employees?
- How does the client intend to pay their employees?
2. Build a relationship with your VMS/MSP partners.
Payment terms for VMS/MSP partners can be a slow process, generally 60 days or more. The benefit to VMS/MSP partners is that their payments are likely more predictable than other clients. If their payment terms are Net 60, you’re likely to receive payment on day 60. On the other hand, if you incorrectly upload an invoice, getting your payment can become an uphill battle. This is why developing a strong relationship with your VMS/MSP is crucial. Make sure you’re not just another nameless client that needs to be paid and you’ll have an easier time getting your payments on time.
3. Customize your invoice set-up for each client.
Does your client have a specific invoice set-up that they need to receive to make payments on time? For example, do they need a purchase order number or a job title on the invoice in order to process payments? Setting up an invoice specifically for each client can make collecting on those invoices a smoother process overall. This may take more time on the front end depending on how your back office software system is set up, but custom invoices can help to prevent delays in receiving client payments.
4. Set a credit limit for clients when you do their billing set-up.
Based on your initial vetting process, as well as how much you think you’re going to bill monthly or weekly, you should set a credit limit for clients. Here are the recommendations from our Lone Oak Payroll accounts receivable team:
- Set a credit limit to monitor clients who may be outside of their payment terms and base the credit limit on the terms.
- Set the credit limit up in your back office software system so that it is flagged during the invoicing run if the credit limit is reached.
- Allow room for growth. Remember that you want the invoices to grow if your client is growing so make sure to give your client some room for future growth but keep it conservative.
- Re-evaluate the credit limit as they get close and determine why they are hitting the limit. Is your client experiencing true growth or is there a problem? The answer to this question will determine your next steps.
These tips may seem like a significant amount of work at the front end of the collections process but implementing these processes will save your team headaches in the future. If you’d like more information on how our Lone Oak Payroll team can help you with your payroll services, contact us today!