Reply to: Agency looking doomed....

[TheFaQQer]

Bear in mind that if you have invoiced the agency, depending on how you account for VAT you may still be liable for the VAT amount.

[DaveB]

Perhaps that's how the client know they agency is having trouble. The client has decided not to pay some large bills from the agency just yet.

Or the Agency have been chasing the client for outstanding payments and let slip they have cash flow problems as a result.

[NotAllThere]

Probably many/most, in fact - it's one reason agencies get into trouble in the first place as they need quite a substantial buffer to accommodate slow-paying large clients.

Perhaps that's how the client know they agency is having trouble. The client has decided not to pay some large bills from the agency just yet.

[Safe Collections]

Word is from the client that my current agency may be having some "cashflow" problems. There are 5 of us here working through said agency, who pay monthly i.e. invoice at end of 4 weeks and payment received for 4 weeks the following week.


Anyone come across this before? How can you get out of this without breaching some handcuff clause?


I don't fancy losing 5 weeks money so how can any agency demise be pre-empted?

It should be noted that whilst it *may* be possible to agree a mutual withdrawal of any handcuff clause between YourCo and the Agency, it is by no means guaranteed to hold water if the company is placed in to formal administration or liquidation. An administrator or receiver could theoretically challenge the agreement if they consider it to be "to the detriment of creditors".

It is unlikely in our opinion given that most dodgy agencies simply cease to trade (with the directors/shareholders pocketing the contents of the current account on their way out of the door) but it still remains a potential risk.

We would be very interested to know exactly how ClientCo found out the agency has financial problems, we can't imagine a circumstance when it would be appropriate for a supplier to inform a client of it's potential insolvency.

Could it be a rumour started by a different agent? It wouldn't be the first time we have seen a competitor try and blacken the name or reputation of a company to win business...

[d000hg]

In addition some agencies pay their contractors before they get paid themselves by their client.

Probably many/most, in fact - it's one reason agencies get into trouble in the first place as they need quite a substantial buffer to accommodate slow-paying large clients.

[SueEllen]

Invoice the agency for their fees ONLY not the contractor money IME when an agency is going under the temptation for them to disappear with the contractors funds or use it elsewhere to prop up another of their failing businesses is huge IME a lot of smaller agencies are run by people who also run several other small enterprises at once!

This way the agency still gets their precious hard earned fee(s) & the contractors get their essential salary win win why does the agency need to hold onto the vast majority of the contractor money for a few days the interest cannot be that much anymore

Contracts are enforceable by law so what you are suggesting won't work especially when the administrators come on board.

In addition some agencies pay their contractors before they get paid themselves by their client.

[d000hg]

Invoice the agency for their fees ONLY not the contractor money IME when an agency is going under the temptation for them to disappear with the contractors funds or use it elsewhere to prop up another of their failing businesses is huge IME a lot of smaller agencies are run by people who also run several other small enterprises at once!

This way the agency still gets their precious hard earned fee(s) & the contractors get their essential salary win win why does the agency need to hold onto the vast majority of the contractor money for a few days the interest cannot be that much anymore

What the agency charges as fees is none of your business.

[uk contractor]

Interesting point raised about NOT invoicing the agency, so that they never get the money from the client, but as pointed out this will likely exacerbate their problems.

I agree you should - collectively if at all possible - approach the agency and state that you have concerns over their ability to pay you. When it's only rumours this is a bit tricky, and knowing if you can trust what they say is also tricky.

You could demand a switch to billing weekly but switching agency based on a rumour, if they have paid you to date, wouldn't be contractually OK.

Invoice the agency for their fees ONLY not the contractor money IME when an agency is going under the temptation for them to disappear with the contractors funds or use it elsewhere to prop up another of their failing businesses is huge IME a lot of smaller agencies are run by people who also run several other small enterprises at once!

This way the agency still gets their precious hard earned fee(s) & the contractors get their essential salary win win why does the agency need to hold onto the vast majority of the contractor money for a few days the interest cannot be that much anymore

[d000hg]

Interesting point raised about NOT invoicing the agency, so that they never get the money from the client, but as pointed out this will likely exacerbate their problems.

I agree you should - collectively if at all possible - approach the agency and state that you have concerns over their ability to pay you. When it's only rumours this is a bit tricky, and knowing if you can trust what they say is also tricky.

You could demand a switch to billing weekly but switching agency based on a rumour, if they have paid you to date, wouldn't be contractually OK.

[uk contractor]

Salaries?

Regardless, that isn't going to work. The contract is client -> agency, NOT client -> your accountant.

What would the client do if/when the agency chases them for their money? "We gave it to UKC's accountant, honest guvnor!"

If the agency are going bust they are unlikely to chase the money somehow! The end client will lose out as 5 contractors walk away they need to hire replacements ASAP!!


Contracts are almost worthless once the agency goes under who is going to chase them for payment it will take months for creditors to take legal action if its not a large agency they usually vanish & the directors turn invisible suddenly to avoid the blowback !!


At the end of the day the point I was trying to make is paying 5 large salaries to a failing agency means the funds are unlikely to filter 100% through to the contractors are they?

[Sausage Surprise]

Sadly it does happen. I do find it unusual that the client would inform you about a cash flow issue.

Ultimately, until they fail to pay you they have not breached the contract so your options are at this point limited to waiting for that to happen or moving on.

Good luck. Hope the worst doesn't happen here.

This is what I've concluded too. Nothing to do but sit it out and hope I don't need to invoke my IPSE insurance.

[Andy Hallett]

Sadly it does happen. I do find it unusual that the client would inform you about a cash flow issue.

Ultimately, until they fail to pay you they have not breached the contract so your options are at this point limited to waiting for that to happen or moving on.

Good luck. Hope the worst doesn't happen here.

[kingcook]

<snip>

If the end client pays the oustanding invoices in full its dead money if the agency is going bust anyway they will be in deep financial trouble probably for months now forget what contracts say as the agency creditors will ignore those you will be lucky to get anything if they go under. Ask the end client co if they would pay your salaries direct to your accountants & just pay the agency their fee I am not going to say why but you can use your imagination on this one

<snip>

Salaries?

Regardless, that isn't going to work. The contract is client -> agency, NOT client -> your accountant.

What would the client do if/when the agency chases them for their money? "We gave it to UKC's accountant, honest guvnor!"

[SueEllen]

Did any of you do a credit check on the agency before starting the contract?

I did on my current one and found they had a very poor credit rating "cash transactions only" which was quite interesting.

GE

Credit check only shows the agency's current status.

To be honest if an agency doesn't pay me within 14 days of invoicing I automatically think they have issues.

Direct clients I view differently.

[SpontaneousOrder]

If the agency doesn't pay then they are in breach, the contract is broken and you can ignore the handcuff clause.

Don't see how you could avoid this just on hearsay though.

I'm assuming that SS means that if he bails he won't be able to re-contract through a different agency.