A little over a year ago, we took on a new client who was a spin off from another successful company. The client specializes in software development and utilizes engineers from Mexico to service and maintain operational efficiencies. The idea behind using these engineers from Mexico is similar to companies outsourcing work to India. It is cheaper.
During the underwriting process, we were aware of a payment plan this client had with the IRS for past due payroll taxes. The plan included an agreement to keep current for 2009 with their quarterly payments. We received confirmation of these payments throughout the year as we watched them grow! They continued to increase their business while recruiting employees from Mexico.
Towards the end of November when we were happily collecting holiday cards in the mail, the IRS slipped one of their “cards” in and it is safe to say, it wasn’t a holiday card. We received a levy from the IRS on this specific client’s A/R. Unfortunately we had to stop funding our client until we could figure out what had happened.
The IRS Agent handling the case noticed the payroll tax payment for 3rd quarter was significantly less than the two prior quarters which was an indication to her that potentially our client’s business was going out of business and therefore she pulled the trigger. She filed levies on the client’s A/R and sent letters to their customers directing payment to the IRS. Our client had been reducing costs and as they continued to migrate their work to the engineers from Mexico, their payroll taxes continued to reduce. They were doing everything right to continue to make their business successful and now not only was the client struggling to deal with a cash flow shortage since we had to stop funding for a short time; they now had major PR damage control to deal with.
Just when we wonder if all those IRS seminars we have attended are worth it, it is safe to say and our client can now vouch that they are worth it. Information we had learned through these seminars helped us weed through the red tape of the IRS and allowed us to start funding our client within 48 hours of the levy. Once Factors Southwest started funding again, our client was able to use this as part of their damage control to their customers and just last week our client submitted a new contract with an existing customer that increased the monthly volume by double.
Singing the IRS Blues? Go to www.factors-southwest.com