Avoid Loss with Credit Insurance

The economic downturn wrought considerable damage among staffing companies, highlighting an opportunity for The Staffing Edge to better safeguard itself and the member companies it serves with knowledge and protection of credit insurance.

 

Industry:

Staffing

Challenge:

Protection against catastrophic loss

Policy Benefit:

Safer sales growth

Challenge

During the 2008/2009 recession, staffing companies providing skilled labor to businesses on open credit terms were left with significant loss in bad debt. Given the industry’s thin profit margins, a company with a profit margin of 2% to 5% margin would have to generate new revenue of up to 50 times the amount of any bad debt just to break even. “There were situations where staffing companies, including our own, lost money even when accounts receivable was only 20 days old,” said Stacey Duggan, COO of The Staffing Edge. “We needed to find a way to prevent this from happening in the future.”

The Staffing Edge, a back office service provider dedicated to the temporary and contract staffing industry, not only wanted to identify credit risk solutions for itself, it also wanted to offer them to its 150 member companies. The staffing industry carries two major loss risks: non-payment and worker’s compensation claims. By offering member companies a credit insurance policy, The Staffing Edge would be able to remove one of these loss factors and help them to secure their accounts receivable.

“After the recession, it became clear that the days of using the typical business information service providers had played out. That’s why it’s so crucial to have a partner that proactively collects financials on companies,” - Stacey Duggan, COO 

 

Solution

The Staffing Edge structured a unique credit insurance program with Euler Hermes that it offers its member companies as part of a bundle of other support services. The Staffing Edge itself maintains a conservative risk mitigation strategy to avoid losses wherever possible, and it encourages its members to do the same.

The company understands that a major benefit of credit insurance is protection from sudden and unexpected customer insolvencies, but it also greatly values the economic information and proprietary company intelligence that Euler Hermes can provide about prospective customers and industries. “After the recession, it became clear that the days of using the typical business information service providers had played out,” said Duggan. “The old ways of collecting data had let people down because the information was often six months to a year old.” Even when working with customers with well established brand names, there is no guarantee that those customers will pay their invoices on time or at all. “That’s why it’s so crucial to have a partner that proactively collects financials on companies,” she said.

Results

Working with The Staffing Edge’s unique business structure, Euler Hermes collaborated with The Staffing Edge’s leadership to craft a policy that fit its specific needs. “We don’t buy based on price alone,” said Duggan. “The best part of this relationship is that it’s a program that runs itself and one where we can truly avoid loss.”

The fact that member companies have access to the same type of credit insurance solution as The Staffing Edge has added a new dimension to these customer relationships. “We participate in our customers’ growth, and our success is lockstep with theirs,” said Duggan. “Only if they grow do we succeed. Credit insurance has been critical in this process. It brings our business and our members’ immense value.”