Author Archives Marilyn Miller

Collection Agency: Five Terrible Reasons NOT to Hire One

Posted by Marilyn Miller on May 17, 2018  /   Posted in Uncategorized

David Letterman fans take heart! We have our very own “Top 10 List” of sorts, although in this case, there are thankfully only five items on the list. Small business owners have cited these really bad excuses for not outsourcing their debt collection. Here they are, and our thoughts on why they are really are terrible, no good, awful, very bad excuses:

5. “I am too busy”

Too busy to recover money owed to you? Hiring a collection agency will not only save you time so that you focus on your business, but you can use the extra cash to hire some help.

4. “It’s too expensive”

An unpaid receivable has no value until it is converted to cash. There are lots of collection agencies out there, and it will not be difficult to negotiate an attractive rate. Be sure to use an agency that has not upfront or hidden fees, and is compensated with a percentage of funds recovered.

3. “I can do anything a debt collection can”

Collection agencies do a great deal more than make phone calls and send letters. A good deal of collection involves research, that is, finding debtors and their assets. Also, if you want, collection agencies can report bad debts to a credit bureau. They can also provide information regarding best practices for your in-house credit and collection practices. Remember that a collection agency focuses on collecting for you, whereas you have many job responsibilities. (See #5, above)

2. “If I am patient and wait it out, my customers will pay eventually”

How about the time value of that money, and it how you could be using it today to grow your business? Do you know that there is a statute of limitations on how long you can recover bad debt? Also, while you are waiting, your delinquent customer is likely incurring more debt, and may be selling assets, or having other more proactive creditors attach their assets. Wait too long, and there may be nothing to get.

And the absolute WORST reason not to use a debt collection agency is:

1. “I will lose customers”

How about the time value of that money, and it how you could be using it today to grow your business? Work with your collection agency to identify slow paying customers that you may want to take back once the debt is paid. Find a collection agency that is professional (get references) and one that will work well with your company’s philosophy. You may find that the collection process, seeing some people through hard times, might make customers come back to you and remain loyal for years!

Maine Small Claims Court: Getting it Right, Getting it Wrong

Posted by Marilyn Miller on May 14, 2018  /   Posted in Uncategorized

Maine Small Claims Court exists to give small business owners and individuals a way to recover money in a cost-effective and relatively simple way. Small Claims are limited to $6,000 and plaintiffs can take their cases directly to Court, saving money on attorney fees.

Maine outlines the process in a detailed guide and claims are considered in local courts. Easy, right? Well, sometimes.

People who use the small claims court effectively learn that not every case should be litigated. They carefully research to make sure their customer has some means to pay. They understand that simply getting a judgment is not enough. The Maine Small Claims Court does not collect the money for you. If you win your case, you are awarded a judgment, and become the judgment creditor. Your customer, the defendant, becomes the judgment debtor. The judgment you obtain is a court order that details how much the judgment debtor must pay you, and when. If they do not pay you within the specified time, you can begin post-judgment collection. In Maine, you can bring the debtor back to court for a disclosure hearing to determine which assets they have to pay the debt. After disclosure you may decide to place a lien on property owned by the debtor or recover your money using a bank or wage garnishment.

People who get the Maine Small Claims Court system right make certain they bring the right claims to court. They make a decision on the economics of the file – realizing that at least one, and possibly several trips to court may be required. Since costs average around $100.00, but could be significantly more, they choose carefully. They  make sure they have the correct address for serving the lawsuit. If the debtor is a company, they make certain they name the correct business entity.  When they go for the Court hearing, they are prepared. Most importantly, they have a realistic view of the process and realize that it may take some time to get paid.

People who get the Maine Small Claims Court system wrong do not prepare. Most of the time, they are suing people solely because it appears to be less expensive than hiring a collection agency. It can be, if a quick settlement can be reached. However, less than twenty five percent of cases settle easily. The balance need a considerable effort for recovery. I cannot tell you how many times we are contacted by small business owners to collect judgments that are incorrect, or are against companies or individuals who do not have any means to pay.

The best way to get the Maine Small Claims Court right is to realize that is only one tool in the debt collection toolbox. Have a strategy that includes a solid in-house collection effort, a relationship with a debt collection agency and a working knowledge of the Maine Small Claims Courts, and success is guaranteed.

Debt Collection: Got Leverage? Use it or Lose It!

Posted by Marilyn Miller on May 10, 2018  /   Posted in Uncategorized

Debt collection can be a relatively simple process if people want to pay you and have the means to do so. Customers who have simply gotten behind due to unforeseen expenses will, with a little push from you, may do the right thing. What happens if they don’t?  What happens when a customer refuses to pay?

There are many factors that can be incentive for customers to pay you. One of the most powerful tools you may have is leverage. Leverage is the ability to without future product or service until your bill is paid. Not all business owners have the opportunity to use leverage. If you do have leverage use it to help recover delinquent accounts receivables.

A classic example of using leverage to get paid comes from the movie Ghostbusters. A snooty hotel manager refuses to pay the exorbitant bill presented to him for the removal of ghosts from his hotel ballroom. Bill Murray’s character, Dr Peter Venkman, offers to return the ghosts, which, of course would be disastrous for the hotel. Leverage!

Sometimes people give away their leverage, making it more difficult to get paid. Yesterday I received a new business inquiry who had obtained a small claims judgment but had not gotten paid. As we spoke, I learned that the judgment was against his former wife, who lived in the house with him along with their children. He was not willing to change his living situation, and I told him I thought in his current situation he had very little opportunity for payment.

Similarly, too many small business owners continue to provide customers with large outstanding balances product of service. Although in some cases, particularly in the medical field, it is difficult, perhaps impossible to deny service, it is important to set limits.

I have a new file on my desk today from a contractor who had the perfect opportunity to file a mechanics’ lien against a customer’s property. Instead, he waited too long. He gave away leverage.

Another collection file I have is for an auto repair shop that let a customer take his car without paying anything. Now, six months later, the customer claims not to have money to pay his bill. I believe that he would have found the money had my customer required payment before they released the vehicle.

Here are some more examples of customer debt collection using leverage successfully:

  1. Pediatrician requires payment on account in order for parent to receive camp or  school physical form.
  2. Orthodontist requiring full payment for braces to be removed.
  3. On first cold day, home heating oil company requiring full payment on old balance before new fuel is delivered.
  4. Manufacturer combining new orders at a discount if old balance paid.

In some cases you can cut a customer off entirely. In other cases, you may only be able to limit them. Whatever you do, make certain to always require at least some payment. Remember, every time a customer makes a payment, they increase the statute of limitations, the time period you have to legally collect the debt.

Debt Collection: Why Customers Get Mad at Me and Why They Shouldn’t

Posted by Marilyn Miller on May 07, 2018  /   Posted in Uncategorized

Debt collection for a small business is a team sport. If one person tries to do it alone, the results will be limited. Worse still, if a team is not in sync and does not communicate, they work at cross purposes and chaos reigns.

When I perform debt collection for a small business, I want to be a member of their team and work closely with them to get the best results. Most of the time, it works well.

Most third-party collection agencies work on a contingency basis which means that they take a percentage of sums recovered. They make no money unless they get results. When a collection agency agrees to work to recover a delinquent debt, they take a leap of faith. The agency takes no money upfront because they believe they can recover the debt, and therefore earn a commission.

Imagine pricing your product before you know how much it is going to cost you.

When a collection agency begins to collect a debt, they do not know how much time and effort it will take. It could be one phone call or letter or many. There is simply no way to know. A collection agency generally charges more for older debts than newer ones, but even very recent debts can be difficult to collect. Agencies generally work to recover enough to some money for their customers and make a profit doing so.

Some agencies charge a small per file fee for collection. I have taken several accounts from agencies that use this approach, and have found that their percentage of debt recovered is pitiful. Why? Because if an agency only charges, say $20.00 to collect a debt, they can only afford to spend $20.00 (at most!) collecting it, which is to say, you get very little for your money. Plus you pay it up front, versus the contingent approach where you have no upfront expenditure. The contingency approach, in my opinion, is the only way to go.

So why do customers get mad at me?

Sometimes a customer believes that by charging a commission to recover money for them, I am taking some of “their money”. I get it – it stinks not to get paid. Your collection agency, however is not your enemy. They did not cause the debt to become delinquent.

Some customers get mad because they believe my rate is too high. Usually in this case, they have tried a per file fee, or a low rate, and gotten poor results. The debt has aged, making it more difficult to collect. My rate when I am not the first agency involved is higher, which is standard for the debt collection agency.

Another reason for a higher rate is that customers wait far too long before hiring me. I want my customers to do everything they can on their own, but after 90 days, it is time to bring in the experts.

Lastly, customers are upset when I have to tell them that I cannot add my fees to the debt. I can do it in some cases but not in others. Three factors drive my ability to pass costs along: contract, type of collection and state laws.

Without a contract, I cannot and will not add collection costs to the debt. A customer must agree in advance to pay any collection fees.  If you wait until after you have done the work, to tell them they are going to pay your costs, it is too late. The agreement must be in writing.

The laws vary for collection costs on the type of debt, whether or not they are consumer (business to consumer) versus commercial (business to business). State laws also may limit the costs that can be passed on.

For example, Maine allows costs to be passed along to consumers if there is a contract, and if the debt is not a “credit transaction”, such as an auto loan or credit card. Connecticut, on the other hand, allows only 15% of the total owed to be passed along to consumers. In all cases however, no contract means no fees can be recovered.

So what should customers do instead of being mad at me?

A contract is the single best debt collection tool. Even a simple email that states your price and terms for payment, and states that you will pass along any collection costs works as long as the customer emails back their agreement.

Perhaps it is not possible for small business owners to always get a signed customer contract. I do know that they can be doing it more often than they are currently doing. If you are too busy or do not feel like bothering to get a contract, you cannot blame your collection agency for not recovering the costs.

If you wait too long, you cannot complain about having a higher collection rate. If you focus solely on rate, you are making mistake, as rate is only one consideration in hiring a collection agency.

So, don’t get mad. Get those contracts. Come up with a system to attempt in-house collection for 90 days and then get it off to me. I am passionate about your right to be paid.

Don’t get mad. Get paid. I can help.



Small Business Credit: What I Learned from an Internet Scam

Posted by Marilyn Miller on May 04, 2018  /   Posted in Uncategorized

Small business credit in terms of the credit you extend to your customers, is an art. It involves gathering of information, an informed decision, a written commitment in a contract, and a program to manage customers and adjust as necessary.

I write and speak a good deal about small business credit and work with my customers to improve their credit practices so that the risk of bad debt is minimized. One of the first things I tell my customers if that not every customer deserves the same credit terms. I encourage them to take the time to underwrite a new credit customer and extend credit to them in a way that makes sense.

So, you would think that I always get to know my customers, right? Well, not always.

This past week, I was approached by a new customer who was located overseas to collect a business debt from someone in Maine. The debt in question was very large, so it had our interest. We asked the questions we would normally ask, and were provided information to document the debt. We “successfully” recovered a large sum, only to find that they check we were presented was counterfeit. My partner details the whole incident in his blog. Check it out, it is quite a story!

What did we do wrong? Although we took the time to verify the debt, we did not do the research on the customer. We were busy, and excited with the possibility of making a quick, large collection. Never has the phrase, “If it looks too good to be true, it usually is” meant more to me.

You will not always have all the time or information you need to make a decision.

Each business is different, and the time and effort you can commit, or are willing to commit, to determining which customers are creditworthy is up to you. Do the best you can with the information you have. Doing something is better than doing nothing. The internet has an amazing amount of information on companies. In my recent case, if I had done a simple search, I would have known the “client” was not on the level.

Learn from your mistakes.

Fool me once, shame on you. Fool me twice, shame on me.

Effective today, we will make certain each new customer is a valid company. Bigger is not always better. Both large and small companies neglect to pay their bills. On the other hand, there are both large and small businesses who are worthy of your best credit terms and will be become great long term customers.

If you are not sure about a company, trust your gut. Require full payment in advance or at time of service, or at least get a hefty deposit. If you get burned, do not wait to hire a collection agency.

Remember that extending small business credit is your choice, and it is your right to extend or deny credit as you see fit. The art is knowing who, when and how to do it in a way that both helps grow and protect your business.

I still have a lot to learn, so you are in good company.


Medical and Dental Debt Collection: How Letters of Protection Work

Posted by Marilyn Miller on May 01, 2018  /   Posted in Uncategorized

Medical and dental debt collection are hard enough these days due to changes in the law and higher insurance deductibles. Planning in advance can certainly minimize the number of patient files referred for outside collection. In the case of treatment for conditions resulting from an accident, when you are asked to delay payment pending an insurance or legal settlement, a Letter of Protection often makes sense.

Consider this case from our collection files. Patient came to a chiropractor after an auto accident. Doctor treated the patient for months and accrued a large bill. Patient claimed not to the have the money to pay but promised to pay his bill as soon as he received settlement from insurance company. Patients’s attorney requested and received bills from doctor. Years go by without payment, and all patient contact information is no longer valid. Is the doctor out of luck? No, because before treating the patient, he required a letter of protection from the patient’s attorney.

A letter of protection (LOP) is a letter provided by the patient’s attorney that promises to pay you as soon as the case settles, before the patient receives the final disbursement. An LOP is a solid promise to pay. A lawyer would face consequences for jumping a letter of protection.

A lawyer cannot provide you a letter or protection without client approval. If an attorney tells you a patient will not agree to a LOP, then you are under no obligation to treat without payment at the time of service.

Here are some additional things to remember:

  1. Ask the attorney to include in the letter that they will let you know immediately if the case is lost, or if their services are terminated.
  2. If the attorney changes, the new attorney must provide a new letter.
  3. Ask the patient to provide a separate lien to you which similarly states that they are responsible for costs and will pay you when settlement is received.
  4. Make certain to include a clause in both the attorney and patient letter that state that payment is NOT contingent on the case prevailing. The patient owes you whether they win their case or not.
  5. Have a system to follow up on LOP’s. Contact the attorney at least quarterly for updates.

Remember, you are not required to accept a letter of protection. You are doing it as a favor, because sometimes people are badly hurt through no fault of their own and you want to help them. That is great, but you must protect yourself. A legal case could take years to settle, so tread lightly and consider each case on its own merits.

If you can, ask the patient to provide you nominal payments at each visit. You can make this a condition of delaying payment. One provider I know charges $5.00 each visit. Payments will keep your statute of limitations from expiring. Payments also get the patient into a good habit of paying you something each time you see them.



Collection Agency: It’s Not Our Fault You Did Not Get Paid

Posted by Marilyn Miller on April 25, 2018  /   Posted in Uncategorized

A collection agency is not the party that neglected to pay you. They did not cause the debt to happen. I am not saying it is your fault you did not get paid, but it is certainly not our fault either. If you are angry at your collection agency because they charge a fee to collect money for you, you are missing the point. Your agency is your ally. Work with them to recover at least some of the money owed. In short, don’t get mad, get paid!

You can assist your collection agency and get the best results by doing a number of  things:

Provide full submission with all the information you have

Give your agency a detailed bill that shows and charges and also payments against those charges. If you have a contract, send it. Provide all information you have the debtor, even if it is old information and even if you are not sure it will be relevant.

Let the agency know what you have done to collect the debt. If the debtor has disputed the debt or may have reason to dispute it, share that with the agency. If a debt results from a special circumstance such as a bounced check, include a copy of the bad check with your submission.

Share any updates with the agency

If you learn that the debtor has a new address or has changed jobs, let the agency know. Any detail, no matter how insignificant it may appear on the surface. could prove to be the very detail that turns the file.

Stop providing new product or service to someone who owes you money

Unless you are contractually obligated, or, as in the case of a medical provider, you have a professional responsibility, stop providing service or product to customers in collections. If for some reason, you must continue, let the agency know.

We once received a large file from a local chiropractor who never told us that they already had two large open balances for a patient. The woman owed them around $7,000 and yet they took her on again as a patient. The debtor did not take our collection agency seriously, as she believed she would suffer no consequence and could get an unlimited amount of free service. Work with your agency, not against them.

Get out of the way

Once you have sent a file to your collection agency, let them do their job. Customers who have ignored for months will all of a sudden contact you and promise anything if you will only take their file out of collections. Do not believe it. Send them back to collection agency. While it may well be that the act of sending a file to collections does draw the customer out, pulling the file not only sends a mixed message but also disrespects your relationship with your collection agency.

Treat your collection agency like you would any other trusted business partner. The rewards will be well worth the effort.








Hiring a Collection Agency: Waiting Too Long Can Hurt Your Business

Posted by Marilyn Miller on April 23, 2018  /   Posted in Uncategorized

How long do you wait to hire a collection agency? Are you holding on to your past due accounts hoping that customers are going to come to their senses and pay you? How long do you normally wait to receive payment?We advocate waiting only 90 days before taking action, but we realize that there are many reasons to wait a bit longer. If customers are talking to (not ignoring!) you and if you believe that is a real possibility they will make good on payment AND if you are willing to wait because you wish to keep them as a customer, that is one thing. An active decision to extend credit a bit longer can be a good business practice in the long run. However, too often we see our customers simply being too busy to keep track of their receivables, and the pile of money owed to them grows by leaps and bounds. Some customers are uncomfortable asking for their money. Passive “decisions” to delay collecting money owed to you can cost you dearly. Here are some things to consider:

 Perception: If customers owe you, chances are they owe others as well.

Do you want to become the creditor that they don’t pay because you are not asking for your money? (The squeaky wheel and all!).

I recently received a large receivable from 2014 for collection. When I contacted the debtor to collect it, his initial reaction was, “Where have they been for 4 years?” Although the debt was still well within the statute of limitations and very collectible, the perception on the part of the debtor company was that it was not important enough to the creditor to warrant paying. Our intervention made it an urgent item, and they are now in a payment arrangement.

Here today, gone tomorrow

Companies go out of business every day. They also sell assets and relocate. The same is true, perhaps more so, for consumers. If you wait too long to pursue money owed to you, you run the risk that there will be nothing to get when you decide it is time to take action!

Can you prove it?

Imagine this: A customer owes you money but you decide to wait a few years, and then finally pursue it. They dispute receiving the product/service, or dispute the quality of the service, even thought they have never complained before. To collect your money, you have to respond to their dispute. How good are your records? You may still have the invoice, but not the background information. Some disputes requires an individual’s personal recollection of the circumstances, which if not detailed in writing at the time of service, may be lost forever. We see this type of thing happen all the time.

Increased Cost of Collection

– The longer you wait. the greater the chance that your collection agency will charge you a higher fee to collect it.

These soft costs of delay are very real. Can you afford to wait?

Credit Bureau Reporting and Debt Collection: The Upside and Downside

Posted by Marilyn Miller on April 20, 2018  /   Posted in Uncategorized


Credit bureau reporting is often cited as the key benefit of hiring a collection agency.  A common belief is that if you report a debt to one or all three of the credit reporting agencies (Transunion, Experian and Equifax) it will assure that a consumer will pay a bill. If that were the case, why do 30% of Americans have credit scores under 600, which is considered “fair” credit at best, and poor or subprime, at best? There are also people who have no credit score at all, because they do have the need for credit. Does anyone really believe that these people will be motivated to pay a delinquent bill if they are threatened that the debt will be reported against their credit file?

So what is are the upsides, or benefits  of credit reporting as respects debt collection?

Credit reporting is definitely a tool that collection agencies use. There are times when people decide to clean up their credit because they are buying a home, or just want to be more financially responsible. At those times, consumers will pay the debts that are on their credit reports.

So does credit reporting actually help collect a debt? It can motivate your some people to pay the bill so as to avoid the impact to their credit score. Also, there is a chance that even if your customer does not care about their credit score today, they will at some point in the future. Federal and state laws vary on how long debts can be reported, but the “future” could be years from now though. How long do you want to wait? What is your collection agency doing in the meantime?

When a collection agency reports a debt, it makes their customers, the original creditors feel as if the delinquent customer has not “gotten away” with not paying their debt. The only problem with that thinking is that the delinquent customer already has already gotten away with it!  Credit reporting used for revenge is just silly.  Focus not on getting even, but on recovery – on getting paid.

Which brings me to the downside of credit bureau reporting…

Without even taking into account the security risks of data breach, credit reporting does have its downsides, mostly because people overestimate its effect on debt collection. Credit bueau reporting is only one tool a collection agency can use to collect a debt. My opinion is that many collection agencies overuse it, Ask your collection agency what they will do to recover for you. If credit bureau reporting is the first thing they tell you, it likely means that is pretty much all they are doing. Perhaps they are sending a letter and making a few calls, but after a month or so, the debt is parked on your customer’s credit report and nothing new happens.

In my experience, most people sent to collections are not primarily concerned with their credit scores. It may be an issue, but it is not the most important issue. The most important issue, the one we hear again and again is just not having the ability to pay. Therefore it makes sense to work with people and get them into affordable payment plans, rather than punish them for something that may be totally out of their control. Even for those customers that intentionally stiff you, your focus should not be on getting even with them. Your goal, and the goal of your collection agency should be to recover as much money as possible. It can be done without credit reporting. I know – I have been doing it for 14 years.

As of July 1, 2017, credit reporting agencies were also required to remove many debts that did not have key identifying information on such as social security number and date of birth. Going forward, if do not have complete information on customers, the credit bureaus may be unable to accept reportings. The impact of medical debt on a credit score has also been minimized So an active plan for recovery becomes even more important.

Credit reporting and debt collection, therefore, are two distinct things. One is a tool that may or may not work, and the other is a process – an action word. What actions you and your collection agency take will make the difference in getting you paid.



Credit Policy: Are You Smart About Yours? Take Our Quiz!

Posted by Marilyn Miller on April 19, 2018  /   Posted in Uncategorized

Any small business that extends credit to customers must have a solid credit policy. Do you think that your company’s policy is a good one? Take this quiz to find out. Each question is worth 10 points.

Do you have a customer application to obtain information on a new customer?

Obtain full contact information including street address, phone numbers, email, place of employment and so forth. If your customer is a business, ask for references – bank and trade.

Do you verify that the information provided to you is correct?

For example, if you are a medical practice, verify that insurance policy is active at the time of service. We see many delinquent medical files resulting from terminated insurance policies. As time permits, review what insurance will and will not cover beforehand with the patient, and ask them to sign their agreement to proceed and take responsibility for anything insurance does not cover.

If you customer is a business, verify references.

Do you update customer information regularly, at least every year?

People move and change phone numbers often. Companies go out of business. Each time you communicate with a customer, take the opportunity to update and obtain new information. I recently received a commercial debt where the company changed their legal name, but kept taking service for a year. They now claim that they do not owe the debt because the contract is with the old company. Our client never updated their client information.

If you never update your customer information, deduct 10 points

Do you make informed decisions on each customer credit limits and terms?

Not every customer deserves the same credit terms and conditions. Your credit policy should give your best, long-term customers the best terms. A new business or a customer in a cash flow crunch (seasonal, etc), or a history of slow-pay gets a smaller limit outstanding at any one time. Also, your less creditworthy customers should put some “skin in the game” with a down payment/deposit. Require a valid credit card on file at all times. There are also some customers who should pay cash, up front at all times.

You may not have all the information you need, but use what you do know to make an informed decision. Not sure? Start slowly with a small limit and see how they pay.

If you are giving all customers the same terms you are letting your customers run your credit policy and you flunk this question. Deduct 10 points.

Do you have a customer contract signed by your customer that confirms credit terms and your expectations for payment?

A contract can be complex, or simply an email confirming the arrangement that is confirmed back to you by the customer. Put details in writing, and communicate them to your customer.

Detail not only your expectations for payment, but also the consequences if payments are not made on time. You can add finance charges only if you have a contractual agreement to do so. Customers should also agree contractually to be responsible for any costs associated with collection the debt in the event of nonpayment.

If you think you do not need to get this agreement in advance and can simply add interest and costs when you do not get paid, deduct 20 points

If your customer is a business, and you have a personal guarantee, meaning the owner will pay personally if the business cannot, give yourself 20 bonus points.

Do you have a system to monitor outstanding accounts receivable and a way to recover delinquent accounts?

Stay on top of your A/R. Know what is 30/60/90+ days at all times. Have a collection letter handy to use. Hire a collection letter to get the ones you cannot get on your own.

What’s your score? Does your credit policy need some work?



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