Author Archives Marilyn Miller

Accounts Receivable Management: Not a Spectator Sport

Posted by Marilyn Miller on June 25, 2019  /   Posted in Uncategorized

Accounts receivable management is essential to the financial health of a small business. All too often small business owners forego accounts receivable management, claiming that they are too busy with sales or day to day operations.

Everything is fine, they will say. We grew our sales by 50% this past year, and we have to focus on servicing our customers. If we keep them happy, they will pay us. 

Famous last words. All the sales in the world mean nothing if they are only sales on paper, i.e, if you are not actually receiving money. I have seen too many business get into a cash bind because they were not paying attention to receivables.

Certainly happy customers are more likely to pay you than dissatisfied customers. However, I have built a business on collecting from people who have never disputed the product or service they received.

Design an accounts receivable program and stick to it.

Do you have an aging report? If not, you must get one immediately.  An aging report shows you which customers owe you money, and how long each customer account has gone unpaid.  It is likely that you already have the software to construct an aging report. If you do not, accounting software such as QuickBooks will do the trick.

Once you have your aging report in place, live with it. Review weekly and come up with a plan to contact delinquent customers. Bring in key staff and assign weekly tasks for follow up. I once had a client tell me that they were in such a cash bind that they were having trouble paying their bills. They began small group meetings every Friday that lasted only 30 minutes but reviewed delinquent customers, which steps had been taken, and what the next step should be.  Just paying to attention and calling customers or sending them a collection letter made a dramatic difference.

We recommend, as a rule, a 90-day process for accounts receivable management:

After delivery of product or service – Customer service call to ask if customer happy service. Use the opportunity to confirm billing information.

  • Thirty days – Friendly reminder letter or notice
  • Forty five days – friendly reminder phone call
  • Sixty days – Second letter. You can draft a completely different letter or simply send the first letter with a stamped, “Second Notice” on it. Be creative here. Use a different color paper, or a sticker in a bright color that lets them know they need to pay you.
  • Seventy- five days – Phone call from management.
  • Ninety days – Final notice to pay within ten days or be turned over for collection.

You may want to wait a little longer, say 120 days for some customers, especially if they represent repeat business to you. You may forego outside collection and take them to Small Claims Court yourself.

The specifics are not as important as having a process and having the discipline to stick with the plan. Consistency is key.

Even if you are lucky to have an accounts receivable department, do not sit back and assume everything is fine. Get involved. Lend support. Let the accounts receivable team know you are available to help when needed. Let them know they are a vital part of your company.

Accounts receivable management is not a spectator sport!

 

 

 

 

Medical and Dental Debt Collection and Large Deductibles

Posted by Marilyn Miller on June 19, 2019  /   Posted in Uncategorized

Medical debt collection is different today as larger insurance deductibles and higher out-of-pocket costs are passed on to consumers.  

Now more than ever, communication with patients is important. 

Health insurance policies are confusing. Many medical debt collection problems can be avoided if you clearly communicate your payment expectations and policies. Also, while it is true that patients should know what their policy covers and how much they can expect to pay out of pocket, in reality, you really need to help them understand. 

Whenever possible, verify insurance  before each visit. Review benefit terms and limitations in writing with the patient. Ask them to sign the review and keep it in their chart.

The number one question I hear from patients placed in collections is, “Why didn’t my insurance pay?”

When we take the time to walk someone through the insurance billing – sometimes explaining what terms like deductible, co-insurance, etc mean – most of the time they pay the bill or enter into a payment plan.

If a patient has a large deductible, ask them to sign an acknowledgment of that fact, as a separate document and keep in their chart. This one step will save problems down the road.

Make it easy for patients to pay you.

Clearly indicate your hours of operation if you allow patients to make payments in person. Consider an online payment portal. 

If patients enter into a payment plan with you, make certain the plan is in writing and that the patients signs the form. Remember that a signed payment plan is a sort of contract, and a contract must be bilateral, meaning both parties must agree. Oral contracts are not enough – they subject you to the memory of someone else. Get it in writing!

Explain to patients that patient responsibility is based on their insurance policy, and that you are simply following the terms and conditions of their policy. I am not sure why, but some patients want to blame their physician, (and by extension, the collection agency) for any out of pocket costs. Patients should be informed (and agree, in writing) that their insurance contract is between insurer and patient, and that they are responsible for the cost of treatment. 

I know, I know…you do not need more paperwork. However, if you set your systems up right at the beginning, the process should flow smoothly, and the documentation will benefit you in the long run. 

 

 

Small Business Debt Collection: How to Get it Right

Posted by Marilyn Miller on June 17, 2019  /   Posted in Uncategorized

Small business debt collection is too often and afterthought. In many small businesses, management, sales and customer service functions are not distinctively defined which could make it difficult to assign responsibilities and tasks. Sales is king, particularly in competitive fees, and new customers are often not assessed to determine if they ared creditworthy. Monitoring accounts receivable becomes too difficult, and “bean-counters” who advocate for caution are seen as the enemy of new business growth.  Small business owners often tell me they are simply “too busy” growing and managing their business to worry about customers not paying. Unfortunately, the inattention often becomes a crisis when cash flow suffers. In these cases, panic ensues and the business will pull back credit lines, which of course, makes them less competitive. New hires or investments in technology or equipment become more difficult.

How do you juggle your many hats to include small business debt collection?

Small business debt collection involves a commitment to a process. Small business owners must promote a culture that emphasizes smart credit risk management as much as it emphasizes new business growth. It is team effort involving management, sales and customer service.

Small business debt collection can be successful in a business of any size.

Entrepreneurs who “do it all” can and must commit to spending a block of time on making sure they are getting paid on time, and following up on delinquent customers. If you are lucky enough to have a staff, you must design a process to monitor your accounts receivable and empower one person in your organization to manage it.

If you are going to extend credit to customers, you must do it in a smart way. Think like a bank. Gather information on your customers and use it to make a sound credit decision.

Customer credit arrangements must be in writing, in the form of a customer contract. If you do not have time for complex contract, simply outline (in writing) the details of your arrangements – when you expect payment and what happens if payments are not made on time – in an email. Ask customer to email back their consent, and you have a simple contract.

Set your process to recover payments from delinquent customers. Use a collection letter as your first step and do not delay to hire a debt collection agency if you need to do so.

Small business debt collection does not have to complex. It merely needs to be a priority.

Collection Agency: Don’t Fault Them If…..

Posted by Marilyn Miller on June 12, 2019  /   Posted in Uncategorized

The right collection agency can benefit your business. It is important to hire an agency that shares your goals and reflects your style. A collection agency does a great deal more than phone calls and credit reporting.

There are things, however that a collection cannot do.

If you do not have a contract that allows for costs of collection, you cannot expect your collection agency to pass those costs along to the delinquent customer. You want a collection agency that follows the law, always and adding fees without a written contract is simply not in compliance with the law.

You can reduce your costs of collection by taking the time to make sure your customers to agree to pay collection costs in writing in advance of a transaction. If you do not want to take the time to put together a contract, even a simple one, you cannot fault your agency when they tell you they cannot add fees.

A collection agency cannot collect a debt that has been discharged in bankruptcy. or a debt that is so old that the statute of limitations has expired. If you wait years to hire an agency, not only will you pay a higher collection rate, but you also may miss the opportunity to collect it at all.

Trust me, I really hate telling a client I cannot collect a debt. If I cannot collect it, I cannot be paid for collecting it, so I am going to do everything I can to find a way. However, I am a realist and there are things – like the statute of limitations – that I just cannot change. The frustrating part is that most times, the inability to collect or to reduce the cost of collection is entirely preventible.

For creditors, a little planning goes a long way.

There are measures creditors can take that will empower their collection agency to do a better job for them:

  • Customer contract that allows (in writing) for collection costs or accrual of interest
  • Less delay in sending files to a collection agency. After 90 days, bring in the experts
  • Share any information with collection agency that might help them do a better job.
  • Stop billing customers once they have been sent for collection. Send any inquiries from customers back to the agency and let them do their job.
  • Communicate your collection goals to the agency. If you would like customers back once they have paid their debt, you may want a softer approach to collection. On the other hand, if someone bounces a check on you, or disrespects your business, your agency should know you have cut ties.

If your are unwilling to plan a bit, you cannot fault your collection agency. The fault will belong to you. If you DO take some simple steps to plan and assist your agency, you will be delighted with the results.

Small Business Credit and Collections: Top 5 Missteps

Posted by Marilyn Miller on June 10, 2019  /   Posted in Uncategorized

Small business credit and collections is the process of juggling giving customers credit and making sure that customers stick to the credit terms by paying on time. It is no accident that the words “credit” and “collections” are often used together, and seen as similar functions. How well you put together a customer credit arrangement will drive how well it works. In a perfect world, every customer pays on time. In the real world, you will sometimes have to follow up and collect the money that is due for you.

Unfortunately, busy small business owners do not pay enough attention to credit and collections and do not manage the process until it is too late.

In my experience here are the top 5 real-life small business credit and collections missteps:
Number One: Insufficient information on credit customers.

Imagine borrowing money from a bank and having to only give your name and cell phone number. A bank gathers information on you, and makes an informed decision as to your creditworthiness. While you may not be able or willing to make the type of credit investigation and determination a bank would make, you can at least gather basic information on your customer using a credit application.

A customer once hired me to collect a $ 15,000 debt. They had been asked to do a very large commercial job in another state. The job was the biggest they had ever done, and they were very excited. So excited in fact, that they started work on the project with only the first name and cell phone of the man requesting the work. Needless to say, they did not get paid. We were able to research and find more contact information and obtain payment, but it took time and cost our customer money.

Number Two: Poor documentation.

If you are going to give customers credit, you must clearly outline your credit terms in writing, and have customer sign their agreement. A customer credit contract will be your best friend.

I have heard small “mom and pop” customers tell me that they not want a formal written agreement. They feel that asking a new customer to sign an agreement that outlines payment terms and also lists the consequences of non-payment is a negative way to begin a relationship. The prefer “handshake agreements” based on trust.

In truth, clearly communicating credit terms in writing in advance of a transaction is exactly the way to begin a business relationship. Start off on the right foot, and you can save problems down the road.

Need I tell you how many collections I have made based on handshake agreements? Often, contract terms are conveyed and agreed to verbally. While oral contracts are valid in most states, an oral contract subjects you to the memory of another. Trust me, in a dispute, an angry customer will remember it differently that you do.

Number Three: No system for accounts receivable management

Your accounts receivables will not manage themselves. If you do not have an aging report,  you must put one together immediately and live by it. An aging report lists customer invoices by their due date, and will tell you at a glance how long much is due you, and how long the customer has owed it to you.

Your next step is to design and program to follow up with customers at each landmark date, usually 30, 60, 90 and over 90 days past due. Assign responsibility for each contact, whether it be a phone call or collection letter.

Once you have your plan in place, stick to it! Again, manage your accounts receivable or they will manage you.

Number Four: Using Small Claims Court incorrectly

Small Claims Court exists to allow business owners the opportunity to take their cases directly to court. An attorney can be used, but is not required. Small claims court handle cases where the amount of the claim is under a certain dollar amount, which varies by state. In Maine, the limit is $ 6,000. In New Hampshire, it is $10,000.

In many instances, Small Claims Court is a great option for collection. The fees are generally low, and often people “wake up” and pay when served with a small claims suit. If you do proceed to trial, and if you do win, you are awarded a judgment. The Court does not collect the money for you. You have to collect it on your own and that can take more time and cost more money.

Not all debts make good court cases. Does the person or company have assets to attach? Are you certain you are suing the right entity? Does the dollar amount of the claim make the cost and effort worthwhile?

Last week, I received a phone call from a prospect who had been owed $ 2,300. Their attorney took the case to small claims court and charged them $ 1,500. The Court awarded a judgment for the $ 2,300 plus costs (around $150). The attorney advised that they were not able to collect the debt, and suggested hiring a collection agency. There is no underlying contract for attorney fees or costs of collection and the Court did not award attorney fees, so I had to tell this poor business owner that I could not collect the money he spent on his attorney, who obtained the judgment, but who has not interest in doing the hard work of collecting the debt.

Number Five: Waiting to long to bring in experts.

While you should attempt to collect accounts receivable on your own, there is a limit to what you can do. If you wait too long, you take the risk that your customer will incur more debt, move or that something else will happen to make the debt more difficult or even impossible to collect.

Set the limit of how long you are willing to wait for your money, and stand by it. Recently a customer submitted a $ 100.00 debt to me for collection. They advised that they had sent monthly notices to the customer for over a year.  If you do not receive any response within 90 days, get expert help. The longer you wait, the higher fee a collection agency will charge.

Delay also has some less obvious but very real impact on your business, perhaps including a higher cost of collection.

The good news is that these small business credit and collections blunders are all preventable. Planning, strategy and a persistence go a long way, and will benefit your business in the long run.

 

 

 

Debt Collection Costs: How to Manage Them

Posted by Marilyn Miller on June 06, 2019  /   Posted in Uncategorized

Debt collection costs – who doesn’t hate them? I get it. You don’t get paid and have to pay someone to get your money for you. It stinks.

On the other hand, bad debt sitting on your books doesn’t do anything for you and your business. You can’t use it to grow your business or pay your employees. You have to convert those receivables into cash and to do that, you have to recover bad debt. With bad debt, something really is better than nothing.

How do you control your costs of collection? The first step is your own consistent effort to stay on top of the aging of your receivables. You must have a plan and procedure in place and you must stick to it. The better you get at your own in-house collection, the more you can keep the costs of debt collection to a minimum.

Even with the best efforts, some bad debts need to be referred for outside collection. If you have not collected the money in 90 days, you have to consider hiring a collection agency. The number one factor that drives up collection agency fees is the aging of the debt. Collection agency fees are higher for older debts. You are not doing yourself any favors hanging on debts, hoping your customers will pay you. In addition to higher fees, there are some hidden “soft costs of delay” Get help!

Debt collection costs are about more than the rate a collection agency charges. Do you have a customer contract? If you do, you may be able to charge interest and/or recover some or all of your collection costs.

So, the top three things you can do to lower your debt collection costs are:

  1. Recover as much as you can in-house using smart and consistent procedure.
  2. Don’t hold on to the debt too long.
  3. Maximize your recovery by adding contractual language to include interest and costs of collection.

How do you manage your debt collection costs?

Collection Agency or Letter Service: Which Do You Want?

Posted by Marilyn Miller on May 27, 2019  /   Posted in Uncategorized

Debt collection involves a number of activities. Some debts are simple to collect, while others are more difficult.

More often than not, debt collection involves more than simply sending letters.

Yet, yesterday I received an email from a collection agency in another state promoting a very low fee to send four letters. To get the lowest rate, you have to submit a larger number of files. You pay the per file fee upfront. No phone calls are made for the fee, and all funds are sent directly to you. Sound great, no?

Let’s do the math

A small medical office sends 100 files to collection. The fee is $ 8 per file, so $ 800 is paid up front. Remember, you pay the fee whether or not the letters work, but if it does work, your only expense is the initial fee.

Twenty debtors pay from the letter, and you recover $1,000, slightly more than your original investment.  You ask the collection agency what will happen to the remaining  files, and they quote you the rate for real collection,  the standard contingent rate of  35-50%. The new contingent rate is in addition to the initial fee, which is, of course, non-refundable.

Let’s say the total value of the money owed to you in those 100 files is $ 10,000. You have recovered 10% of the money owed to you. Can your business afford to lose that $ 9,000?

Remember that four letters are likely sent over consecutive months, which means that your contingent rate will likely be higher, as debt collection rates increase as debts age. The debts get staler, people move and incur more debt. Trust me, the longer a debt is out there, the more likely money owed to you will be used to pay other bills.

Agencies that use this approach will only use it on current accounts, that is, files that are around 90 days old. It also assumes a volume placement Most small businesses will not have hundreds of collection files.

You should be sending collection letters yourself. Your collection agency should be contacting debtors by mail and phone, and researching for new information.

Effective debt collection is about so much more than letter writing. The choice is yours.

Customer Contracts: Worst Reasons for Not Having Them

Posted by Marilyn Miller on May 24, 2019  /   Posted in Uncategorized

Customer contracts are essential to debt collection. Contracts can make a difference between collection and walking away with nothing. In a dispute, a signed contract can prove your case. Contracts can reduce the cost of collection if your customer agreed to them (in writing) in advance. Taking time at the start of a relationship or transaction to set details in writing will avoid problems down the road.

I have been writing and speaking to my clients for years on the importance of customer contracts and debt collection. Yet, every month I receive more large debts that are not documented, and I have to give my client the bad news that I cannot add collection costs, or that a certain dispute may not fare up in court.

What reasons could there be for NOT having a customer contract? Here are some of the worst I have heard.
“We have an understanding and do not need anything formal”

The days of the handshake deal are gone. Movie mogul Sam Goldwyn once praised the trustworthiness of a colleague claiming that his, “verbal contract was worth more than the paper it is written on”. Well, oral contracts are admissible as evidence in most courts, oral contracts leave you open to interpretation. In a dispute, how many of your customers are going to remember the deal the same way you do? Get contracts in writing.

“It is too much work and not worth the effort to get a contract on each customer”

What if I told you that getting the basic terms of your payment arrangements would assist you in the event of a customer dispute? How about if a customer contract could reduce your cost of collection? Would those factors make it worth your while/

In addition, in most instances, you do not need a lengthy document. You simply need to put the basic payment expectations and the consequences for non-payment in writing. If a new customer calls and orders your service, obtain an email address and send customer an email with your terms. Ask customer to confirm back to you. Voila, a simple contract!

“We’re a mom and pop business, and we do not want to scare new customers away by discussing payment (or non-payment)”

Every business, especially a small business benefits from great communication. If you start off a relationship with all parties in agreement, you are much more likely to succeed.

Collection Agency: What Did You Really Do to Collect?

Posted by Marilyn Miller on May 17, 2019  /   Posted in Uncategorized

A collection agency is hired to collect a debt that is two years old. They make a phone call in an attempt to collect.  Upon receiving the call, the debtor (who had avoided contact for two years) immediately called his creditor and paid the bill (over $1,000) in full. The client called to report the payment, but also asked, “What did you actually do on this file?”

The answer is, “I did the exact right thing to get him to pay.”

Now my customer may believe that it was too quick and that I could not have possibly made it happen that quickly. I mean, it is possible that after two years, this person decided on their own to pick up the phone and pay their bill. What a coincidence that he did this the very same day we called!

It is impossible to say exactly what will turn a file.

Sometimes it is quick, and sometimes it goes on for years. Some people pay when they receive a collection letter, some wait for a phone call or second collection letter.  Some have to be taken through the legal process. Some are only collected through post-judgment collection by a lien or garnishment.

Many debts placed for collection will need to be researched. A collection agency has specialized tools to “skip trace” or research to find new information such as address or phone.

I like to look at my collection agency as a problem solver. Each file is different and needs a specific approach. If I receive a $10.00 file for collection, I can ill-afford to do more than send them one letter. If the debtor has no assets, the best option may be to get them on a payment plan they can afford. If the debtor has the means to pay and is just ignoring the debt, then litigation and post-judgment recovery make sense.

Yes, a collection sends letters. They make phone calls. Sometimes they report debts to the credit bureau. The main thing that leads to success is that a collection agency can focus on getting you paid. It is all they do – focus on getting you paid, which makes all the difference.

Debt Collection vs. Billing

Posted by Marilyn Miller on May 15, 2019  /   Posted in Uncategorized

 

Debt collection is a process. It is strategic and involves more than simply billing your customers.

Certainly, billing customers is important.

Too often, people tell us that they would have paid their debt but did not receive a bill. Prompt billing of your customers keeps your receivables cycle moving. Your bills should be easy to read, and provide clear instructions on how to pay. Make it easy for people to pay you.

The trouble comes in when you are billing customers and they are not paying you. At this point, you need to do more.

How many bills should you send to customers?

There is no set rule for how many bills you should send someone who is not paying you. It depends on the size of the bill, the value of the customer to you business, and a number of other factors. However, if you have sent two or more bills to a customer and received no response it is time to …

Pick up the phone and speak with your customers.

You will be surprised how many customers will appreciate a friendly reminder. Use the call as an opportunity to get feedback on customer satisfaction, or to sell new product or service. People are busy, and some people really do forget to pay a bill.

If your customer has multiple bills, your phone call could just move your bill to the top of the pile. If you do not ask, you may never know.

So what does a debt collector do that is different?

Imagine if you bill a customer and the bill is returned back to you marked, “Return to Sender – Unable to Forward”. You try to call the customer and the phone number is out of service.

While there is a good deal of information on the internet, a debt collector has specialized tools to find information about people. Research is known to debt collectors as “skip tracing” and it is what we do all day long.

Debt collectors also are experienced negotiators, and can handle tough customer issues. You can spend less time chasing delinquent payers and more time growing our business.

 

 

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