Author Archives Marilyn Miller

Give Your Business the Gift of Cash Flow For the Holidays

Posted by Marilyn Miller on December 22, 2017  /   Posted in Uncategorized

Would your business run more smoothly with better cash flow? Mine certainly would.

Small businesses owners focus a great deal of attention on new business sales and administrative/operating expenses, as they should. However, all the sales and operating efficiency in the world are not worth much if your accounts receivables are stagnant – if customers are not paying you or are paying you too slowly.

Here are some simple things you can do to increase your cash flow in 2018:

Revise or strengthen your credit terms and policies. Not all customers deserve the same credit terms or limits. Customers who have a strong payment history should be rewarded with your best terms. Use their excellent payment history to sell more product or service to them.

Bill promptly and accurately. The sooner your customers receive your bill, the sooner they can pay you. Revise your payment terms to “payable upon receipt” rather than in thirty days. Go “paperless” and email invoices to customers so that they receive your bill sooner. Invest some time into making sure invoices are accurate. A little quality control will cut down on disputes, and get payments to you sooner.

Require deposits and down payments. Every credit customer should give you a deposit or down payment. Customers with skin in the game are more likely to take a payment plan or credit line more seriously.

Make it easy for customers to pay you.  Can your customers pay you online? Do you accept many forms of payment including some of the newer methods such as PayPal?

Strengthen in-house collection procedures.  Stay on top of the aging of your receivables and have a plan to act on them at 30, 60 and 90 days. Use collection letters and personal calls to customers to bring the money in.

Hire a collection agency.  Once you have exhausted in-house efforts, do not delay in sending files to your agency. Delay could cost you.

Best wishes for a healthy and prosperous 2018!

 

 

 

 

Hidden Costs of Debt Collection: How Waiting Can Cost You

Posted by Marilyn Miller on December 20, 2017  /   Posted in Uncategorized

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 recommend 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:

1. 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 2013 for collection. When I contacted the owner of the company 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.

2. Liquidation – 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!

3. 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. You may know that their “dispute” is bogus, but that knowledge does not cancel out their right to dispute it. For consumers, the Fair Debt Collection Practices Act (FDCPA) requires verification of the debt within thirty days, if consumer asks for it. 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.

4. 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?

Customer Contracts: Get it in Writing!

Posted by Marilyn Miller on December 18, 2017  /   Posted in Uncategorized

Customer contracts are essential. Non-negotiable. If you are going to extend credit, even with a long-standing customer or a large company that looks good on paper, without customer contracts you could be setting yourself up for a big loss.

This week, I received a call from a business owner who is owed $7,000. I asked if he had a contract, and he said that he did. However, when he sent me the contract, I noticed it was not signed. In short, even though he uses customer contracts, in this particular instance, it was a “rush” job, and the customer never signed the contract. The bill has not been paid, which prompted the customer to contact us. Our initial research shows that the businessowner owes just about everyone in the state (exaggeration, but not by much). The business has stopped operating and has no assets.

Would a customer contract would help collect this particular debt? Perhaps, especially with a personal guarantee. We know for a fact that the owner of the indebted business has assets, while the business does not.

Often, customer contracts do not have to be complicated. Simple terms communicated to a customer and an acknowledgement from customer that the agree and accept those terms is better than nothing. If you cannot take a few minutes to send a quick email, perhaps you should take a time management class!

Customer must agree to terms in advance. For example, if you do not have a written agreement regarding finance charges on late payments, you cannot charge them. Simply listing finance charges after the fact on your invoice does not cut them.

Customer contracts should be in writing. Oral contracts are legal in most states, but an oral contract leaves terms and conditions open to interpretation, and hence, open to dispute.

Many small business owners hesitate to have their customers sign a contract, believing that it starts a business relationship off on a negative note. Nothing could be futher from the truth. Clearly communicating terms and conditions in writing, and making sure your customer agrees to them will communicate your commitment to the customer and to a long-term business relationship.

What’s that I hear? Too busy? Can’t afford the time? The reality is that you cannot afford not to.

Debt Collection: Got Leverage? Use It!

Posted by Marilyn Miller on December 15, 2017  /   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 incentivize 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 exhorbitant 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.

Here are some 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.

 

Collection Agencies: Are They Too Expensive?

Posted by Marilyn Miller on December 13, 2017  /   Posted in Uncategorized

 

 

 

 

 

 

 

 

 

Collection agencies usually do not charge a fee upfront and charge a contingency rate, which is a percentage of sums collected. Typically, no fee is due if no collection is made. Many small business owners find this approach preferable than spending money on an attorney retainer or spending their own time and money using the Small Claims System. A good collection agency can assist a small business by recovering money that can be put back into the business.

Still, we continue to hear small business owners wonder if hiring a collection agency is “worth it”, or argue that collection agencies are “too expensive”. Here are my thoughts on these issues:

  • Accounts receivables are a promise to pay. Delinquent accounts receivables are broken promises to pay. When you hire a collection agency, you have nothing – zero – except a broken promise to pay. Collection agencies turn nothing into something. The “something” can then be used to grow your business or pay your employees.
  • Collection agencies take a leap of faith when they work with you. Like you, they are in business to make a profit, and they take on your files without knowing for sure if they can be collected.
  • It goes without saying that collection agencies are incentivized to get results for you, because they want to get paid too. Let them do their job. Give them any information that will help them. Respect and partner with your agency.
  • Collection agencies get burned along with you if a customer declares bankruptcy. If it happens, there is likely nothing that can be done. If it happens, do not blame your agency.
  • There are a good number of excellent collection agencies out there so you should be able to negotiate a competitive rate. DO NOT, however focus only on the rate. Not all rates are the same. Some low rates have hidden fees or mean collection agencies will provide limited services to you. Know what is in your rate!

Money sitting on your books uncollected is worthless to you. If you think you cannot afford a collection agency, I would argue that you cannot afford not to!

 

 

 

 

Collection Agency Fees: How Much Will They Cost Your Business?

Posted by Marilyn Miller on December 11, 2017  /   Posted in Uncategorized

Small business owners everywhere are looking to reduce costs and improve efficiency in their companies, and recover money owed to them.  Some business owners just write off their bad debt hoping receive favorable tax treatment, but this is a big mistake since most small businesses are on a cash accounting basis, and there is no tax benefit for bad debt write off.  The goal is recover as much money as you can at the lowest cost to you. But how do you do that?

Companies should definitely try to collect all they can themselves but waiting too long to pursue bad debt can also cause problems. After two or three collection letters, the file should be turned over to your collection agency.

The cost of a collection agency can vary. Collection agencies get paid in one of two ways: flat fee per file orcontingency. Flat fee charges can work for some businesses, but usually only cover a certain time period, or cover limited services. For example, you pay 29.00 per file and the collection agency sends one letter and makes a few phone calls. Per file fees debt collection fees are based on the collection agency’s estimation that some files will pay quickly.

There are two main issues with the flat fee approach to debt collection costs. First, is often only available to companies that send large numbers of files to collections monthly, such as a large medical group. Secondly, services that are part and parcel of the collection process are probably going to cost extra. Over half of accounts sent to collection need some type of research to find new phone numbers or addresses, and research will not be provided on a low fee file. So, while these rates are attractive at first glance, they may not be the best option for you, especially if you have already done some in-house collection.

The flat fee approach is fine for “low hanging fruit”, but you can usually collect those on your own. What happens to the tougher files? They are either parked on a credit report, where they will languish, or you will be asked for an additional fee for further collection activity.

The most common way collection agencies are paid is by contingency, which means that the collection agency gets paid no money upfront, and is compensated with a percentage of sums collected. The debt collect fees normally vary based on its “age” (how long outstanding). Contingency rates vary from 25% (or less) on debts that are under 90 days old to 50% (or more) on debts that are over a year old. Contingency rates should include the full range of collection services you need: research, credit reporting, legal fees.

One of the most effective ways to minimize your cost of collection agency is to use a solid customer contract that passes on some of the cost of collection. Many states allow some or all of the costs of collection to be passed on to the customer if (and only if) the customer agrees to it beforehand. Check with your attorney to find out how your contract can help you with collection costs.

Collection Agency Results: How to Improve Them

Posted by Marilyn Miller on December 06, 2017  /   Posted in Uncategorized

It’s a good thing to hire a collection agency. How do you maximize collection agency results? If you really want to get the best bang for your buck, you must assist the agency by giving the tools and information they need.Customer_credit

First, you must provide the agency with a complete submission with all relevant information. Your collection agency should give you some guidance here, but for starters:

  1. Detailed invoice showing all services provided, cost of services, payments, etc. Your invoice must include the date(s) service was provided.
  2. ALL information you have on the delinquent customer. Provide name, address, all phone numbers, email, place of employment, date of birth and any other relevant data. If you do not have a current address/phone/email, send the old information. Your agency should be able to “skip trace” or research using the old information.
  3. A copy of your contract. If you don’t have a contract, send any relevant information that proves the customer ordered the work.
  4. Any relevant correspondence from the customer. For example, submit any change orders, disputes and/or an unfulfilled promise to pay. If you do not know if it is relevant, send it.
  5. A brief description of the nature of the debt. If the customer paid you with a bad check, make sure to mention it. If you are a subcontractor and you know the general contractor was paid, but did not pay you, that is an important detail you must share. You get the picture, give any  detail you think might be important.

Secondly, once you submit a file, let the collection agency do their job. Do not send out monthly invoices. If the customer calls you begging you to take them out of collections, do not relent. I cannot tell you how many times a client has asked us to pull a file, only to get that file back a month or so later when another promise to pay has been broken. Certainly, if you receive a payment, accept it, and make sure to notify your agency immediately.

Finally, share any new information you may learn on the delinquent customer. You may hear that the company is going out of business, laying off employees, or purchasing new equipment. If your customer is a consumer, you may learn of a new job, divorce, or relocation. As with any information, err on the side of giving too much information. You would not believe how one small piece of information will turn a “dead” file into a successful collection.

Remember, your collection agency is a trusted partner. Work with them, and you will be delighted with your results.

Medical Debt Collection is All About Communication

Posted by Marilyn Miller on December 04, 2017  /   Posted in Uncategorized

Medical debt collection has been in the news lately because more and more Americans are unable to pay what they owe because of higher out of pocket medical costs. There are differing arguments, based mainly on political ideology for a better healthcare/insurance system. However, the system we have today provides both challenges opportunities for health care provider.

Each part of your service delivery provides an opportunity to communicate, and better communication can prevent problems down the road.

New Patient Intake – Before a patient is seen, collect as much information as you can. Many practices have their patient forms online and require them to be completed and provided at the first visit. This is great, except that insurance information should be collected and verified well before the first visit. Many of the bills we see come for collection involve inactive insurance policies that were not presented until the date of service. As much as practical, verify insurance before the first visit and make sure to communicate information on any out-of-pocket costs to the patient.

Patient Financial Responsibility – Each new patient should sign a statement promising to pay any out of pocket costs. The statement should inform patients when you expect to be paid and the types of payment plans you are willing to accept. Update each year.

Patient Billing – Once insurance has processed the claim, patient statements should be sent that clearly indicate charges, payments and adjustments. Bill promptly and regularly.

Collection Letters – If, infortunately, patients fail to pay you on time, have a collection letter ready to send out. Your letter should be polite but firm. Again, give a specfic time period for payment. You can also send a second letter with increasing urgency, and advise patient that you will take further collection action if payment is not received by the due date.

Medical debt collection starts when the patient walks in the door. Better communication means fewer files referred to your collection agency.

Collection Agencies: You Hate Them Until You Need Them

Posted by Marilyn Miller on November 24, 2017  /   Posted in Uncategorized

Google “collection agency”. You will see a ton of articles about what to do if you are contacted (“harassed”) by a collection agencies, as well as advertisements from attorneys willing to prosecute your Fair Debt Collection Practices Act (FDCPA) claim against an agency.

Believe it or not, reputable collection agencies (and most are reputable) believe in the FDCPA and work hard to comply with the law. The advice I always give to small business owners looking to hire a collection agency is to ask about an FDCPA training program for their collectors – a must to make certain your customers will be treated with respect.

collection_agency_evilDon’t get me wrong, there are abuses. However, the debt collection industry is like any other, with good and bad players. The debt collection industry represents the largest source of complaints to the Consumer Financial Protection Bureau. However, there is some feeling that the methods of data collection used by CFPB might not accurately reflect consumer issues with debt collectors.

Of course, my industry may be unique in we are often resented by both our collection clients and the people who owe them money. Our clients see us as a necessary evil, and the resentment they feel about not being paid often transfers to the collection agency when they see a portion of their hard-earned money going to collection agency fees, truly adding insult in injury.

What are the other options?  Do it yourself? Sure, you should have a program in place to collect as much as you can in-house. A good consistent program will certainly cut down on the files you need to refer for outside collection. Hire an attorney? Yes, some cases can be settled by an attorney, but not all files are right for litigation, and there is are still costs associated?. Just ignore the delinquent accounts and take a tax write-off? Well, that rarely gives you much relief, if it helps at all.

Consider a recent study done by Fundbox that reported some $825 billion in unpaid invoices to small businesses in the US alone. The study conjectured that if all unpaid invoices were paid on time, small businesses across the country could hire 2.1 million new employees, thereby reducing unemployment by 27 percent – how is that for a jobs program?

Not getting paid by customers can also mean that you are unable to grow your business by physical expansion, purchase of equipment, sales and marketing. You may even have to raise your prices.

The collection industry’s trade Association, ACA International reported that in 2013, third party collection agencies returned nearly $50 billion to their customers.

Still hate us?

Collection Agency Results: How To Improve Them

Posted by Marilyn Miller on November 22, 2017  /   Posted in Uncategorized

It’s a good thing to hire a collection agency. How do you maximize collection agency results? If you really want to get the best bang for your buck, you must assist the agency by giving the tools and information they need.Customer_credit

First, you must provide the agency with a complete submission with all relevant information. Your collection agency should give you some guidance here, but for starters:

  1. Detailed invoice showing all services provided, cost of services, payments, etc. Your invoice must include the date(s) service was provided.
  2. ALL information you have on the delinquent customer. Provide name, address, all phone numbers, email, place of employment, date of birth and any other relevant data. If you do not have a current address/phone/email, send the old information. Your agency should be able to “skip trace” or research using the old information.
  3. A copy of your contract. If you don’t have a contract, send any relevant information that proves the customer ordered the work.
  4. Any relevant correspondence from the customer. For example, submit any change orders, disputes and/or an unfulfilled promise to pay. If you do not know if it is relevant, send it.
  5. A brief description of the nature of the debt. If the customer paid you with a bad check, make sure to mention it. If you are a subcontractor and you know the general contractor was paid, but did not pay you, that is an important detail you must share. You get the picture, give any  detail you think might be important.

Secondly, once you submit a file, let the collection agency do their job. Do not send out monthly invoices. If the customer calls you begging you to take them out of collections, do not relent. I cannot tell you how many times a client has asked us to pull a file, only to get that file back a month or so later when another promise to pay has been broken. Certainly, if you receive a payment, accept it, and make sure to notify your agency immediately.

Finally, share any new information you may learn on the delinquent customer. You may hear that the company is going out of business, laying off employees, or purchasing new equipment. If your customer is a consumer, you may learn of a new job, divorce, or relocation. As with any information, err on the side of giving too much information. You would not believe how one small piece of information will turn a “dead” file into a successful collection.

Remember, your collection agency is a trusted partner. Work with them, and you will be delighted with your results.

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