Credit risk, agent won't pay unless client pays it first? Credit risk, agent won't pay unless client pays it first?
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    Default Credit risk, agent won't pay unless client pays it first?

    I've been approached about a contract with airline. The major issue is the agent can’t insurance for its credit risk with the airline so is proposing a contract where my company only gets paid if the agent get paid.
    Is there any way for my company to mitigate this risk? If the end client choose not to pay then my company has agreed not to be paid. I don’t think I can factor the invoices or if IPSE Plus would cover this. Sounds too risky to take forward.

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    Which airline? Some are more solvent than others but I would be cautious with all of them.

    I think CitiBank did an analysis of airline solvency recently, see if you can hunt that down to get a feel for the state of the one you could be working with.

    I'd be asking the agent what payment terms they have with the airline as I'm sure they will try and get them as short as possible. That'll give you some idea of the hoped for payment cycle and then invoice to match that. You and the agent should try and work together on this as it's in both your interests.

    Consider the cost of factoring your invoices which will mean you receive less but at least get something. There's a risk they will refuse to factor due to the client, or impose larger fees, but you won't know until you ask.

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    Check IPSE+ business interruption cover. If your situation is eligible it would cover a month of lost revenue.
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    Find out the terms. I would take the risk if I was invoicing weekly with 10 day terms.

    If it was monthly invoice with 30 days or longer terms you could end up being in a situation where you work for 2+ months for free. That's just too much risk for me personally.

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    Quote Originally Posted by ladymuck View Post
    Which airline? Some are more solvent than others but I would be cautious with all of them.

    I think CitiBank did an analysis of airline solvency recently, see if you can hunt that down to get a feel for the state of the one you could be working with.

    I'd be asking the agent what payment terms they have with the airline as I'm sure they will try and get them as short as possible. That'll give you some idea of the hoped for payment cycle and then invoice to match that. You and the agent should try and work together on this as it's in both your interests.

    Consider the cost of factoring your invoices which will mean you receive less but at least get something. There's a risk they will refuse to factor due to the client, or impose larger fees, but you won't know until you ask.
    Factoring won’t help. If the money never gets paid the factoring company claw it back. Factoring is there for cash flow not bad debt insurance.
    Last edited by Lance; 3rd May 2020 at 12:36.
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    Only accept weekly payments.
    That’s it really.. limits your exposure to 2 weeks.

    Mind you. Is there any other work available? If not then it’s not going to cost you directly anyway. And if you’re doing a good job for a project with some future they’re going to continue paying.
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  7. #7

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    OP,

    IPSE Plus does give Agency default cover, but it's capped and I'd check whether it excludes known risks and has qualifying periods.

    If the Agency can't get credit assurance then that's a red flag. Better to not work, than work and not get paid.

    IMHO, Invoicing monthly and then waiting 30 days or more for payment is too much exposure.

    NB I've had IPSE Plus cover and Agency failed with two months owed, insurance paid out less than half.

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    It depends on the market, if you can go for weekly payment and the market is bad you're still better off with a contract and the risk of losing a weeks pay than being on the bench. Obviously if there are alternatives you should go for them.
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    Part of it depends on your costs for this too. If you can do it from home and the alternative is trawling through Jobserve, you're risking a little rather than a lot.

    You can still keep an eye out for a better gig (sorry NLUK, but this is what's best for their company's business model) and move if the opportunity arises.

    As someone else has already said, see if the agent can get weekly terms from the client given the credit risk involved.
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    Quote Originally Posted by LondonManc View Post
    Part of it depends on your costs for this too. If you can do it from home and the alternative is trawling through Jobserve, you're risking a little rather than a lot.

    You can still keep an eye out for a better gig (sorry NLUK, but this is what's best for their company's business model) and move if the opportunity arises.

    As someone else has already said, see if the agent can get weekly terms from the client given the credit risk involved.


    if agent can't get insurance , and end client is in one of the most impacted COVID (read cashflow) industries, the best I'd say is as someone suggested above 1-2 weeks min, with a turnaround time of 5 days from invoicing.

    I work (well just finished lol) in airlines, and my payments were always paid less than 4-5 working days from invoicing.

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