To continue with our Risk Management topic for the week, these tips discuss safety steps you can take before accepting a client as well as procedures and the capacity of your tax software.
Tip 6: Know Your Client
You should consider steps to ensure you do not take on any “clients” that are fraudulent companies, “payroll jumpers”, or companies that are financially unstable. Consider running credit checks on new clients, visiting their offices, calling to obtain references from other vendors with which they process, calling their former payroll service bureau, etc. And don’t forget to do background checks on corporate officers.
Tip 7: Establish procedures for client NSFs
Your procedures should help ensure that you recover the funds as soon as possible. The procedures should include escalating NSF fees, procedures for holding or reversing payroll tax deposits, procedures on when to terminate a client for NSF activity, etc. Follow your procedures to the letter and don’t fall into the “he’s good for it” trap. Do not let your clients put your business at risk by soliciting unsecured loans!
Tip 8: Consider the capabilities of your tax compliance software
You may be able to offset risk by holding payroll tax deposits in the event of a client NSF. It is important to know the capabilities of your system in order to set your risk management policies. Does your system automatically track $100k payrolls? Does your system allow you to place clients on hold for NSFs? Does your system automatically hold payroll tax deposits if funds have not been received?
Once you have taken into consideration all factors that will contribute to your potential risk and your ability to control it, you need to establish written guidelines that are published, known and practiced by all employees.
Check back every day this week for more helpful tips regarding Risk Management that could potentially save your company a lot of time, money, and stress.