Collection Agency: Love to Hate?

Posted by Marilyn Miller on April 28, 2020  /   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 agency, 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.

Don’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?

Making Adjustments to Your “Vision Board” in Response to Current Times

Posted by Marilyn Miller on April 25, 2020  /   Posted in Uncategorized
Before COVID-19 what did you have on your vision board for your business?  What adjustments have you made or need to make for post-COVID-19?

Anyone who has delved into any type of self-improvement whether it be for personal or business, may have been tasked with creating a “Vision Board” for what they want to see happen in their future.  As a business owner, maybe you didn’t physically create a vision board, but perhaps had a virtual Vision Board or at least an idea of one.

Fast forward to today and a you are now faced with creating a “Post COVID-19” vision board.  How to reopen your business, how to pick up where you left off, how to maintain your current clients and solicit new ones. How to deal with the economic challenges that face not only us, but our clients as well. 

Your vision board may now include a more flexible approach to the way your clients pay you.
  • Offer payments plans with a down payment or offer incentives for payment in full at the time of the service.  
  • You might consider extending credit to existing customers as long as you both agree and sign off on the terms. 
  •  Create clear, concise contracts outlining all costs including penalties for cancellations, late payment fees, cost of collection, etc.  Your vision board might also include cleaning up your accounts receivable, contacting your customers who are behind on payments, offer flexible re-payment plans, taking a look at some of your older accounts receivable and try to collect on those accounts.

Just envision “cleaning up” and “cleaning out” your accounts receivable.Take the time you have now to update your vision board to be reflective of the unforeseen circumstances that have been thrust upon us. 

 Now is the time to revamp your “vision” make the changes to your business operations that you may have thought about, include them in your vision for the day (and it is almost here) that we are “back to business as usual” well maybe not as usual, but the new usual!

A New Look at Small Business Payment Plans

Posted by Marilyn Miller on April 24, 2020  /   Posted in Uncategorized

In a time of economic uncertainty like the current Covid-19 crisis, small business owners need to be flexible and creative. The ability to provide payment terms to customers is a great way to be stay competitive, but it comes with a good deal of risk.

Payment plans are more important than ever and need to carefully constructed, monitored and documented.

The first rule of any payment plan is that it must be in writing and must be signed by the customer. The plan should detail exactly how and when payments are to be made, and elaborate any consequences if payments are not made as agreed.

Personally, I believe every payment plan should begin with a down payment, even a small one. Getting some “skin in the game” is a good thing. Presently, a customer may not have the ability to pay today, but you will not know that unless you ask.

A review of payment plans is part of your overall accounts receivable management process, and must be done monthly, at least. Even in the best of times, you may have to consider altering plans to accommodate seasonal changes or downturns in business. You should be the one making the calls on this though, not the customer. When you see payment plans getting off course, reach out to your customer immediately. Keep communicating. 

How are payment plans affected in a tough time? What can you do about it?

As you are monitoring your plans and reach out to delinquent customers, here are some adjustments to consider:

  • Method of payment – If your customers are used to paying you in person, they cannot do that if your office is closed. Even when we reopen, it is likely you will want to limit person-to-person contact. Ask your credit card processor for a mobile solution. Set up an payment portal on your website. Direct customers to call your office with credit card information. 
  • Amount of payment – If a customer is having trouble making payments, you can temporarily lower payment amounts. Make sure the change is agreed to in writing. 
  • Deferred payment – You may be in a position to allow customers to skip a month or two, and add the skipped payment to end of the payment term. Again, as always, get it in writing.
  • Offer payment of full balance – Not everyone is out of work or out of business. You may have customers who are doing well, and now is a great time to offer a payoff. Your can offer to waive interest or offer a small discount to pay the balance in a lump sum. It is very important to communicate these offers as “limited time only” opportunities. 

Each time you make contact with a customer who is experiencing trouble making payments, you have an opportunity to solidify your relationship. Customers who know you care about them and are willing to work with them will stick around. 



Stimulus, Schimulus

Posted by Marilyn Miller on April 22, 2020  /   Posted in Uncategorized

If you have already received your stimulus check, congratulations. Many people have not, and who knows how long it will take to arrive, and many people do not qualify to receive the funds. Similarly, if you waiting for the Small Business Administration to send you some relief, get in line.

What can you do if you do not qualify or cannot wait for relief?

If your business is still open, keep selling. Keep extending credit, but in a smart way.  

Stay on top of your accounts receivable. Make sure people know how to pay you. You may have to change the way you receive payments.

Revisit payment plans and see if they need to be amended. It’s better to get a little less than to get nothing. Give customers a little breathing room today as an investment in tomorrow’s sales.

As part of your accounts receivable management program, contact delinquent customers and speak with them. If they cannot pay you now, they will promise to pay at a later date. You will only know which customers are able to pay you if you ask. 



Customer Contracts: Planning for Recovery

Posted by Marilyn Miller on April 17, 2020  /   Posted in Uncategorized

I just listened to the New York Governor daily update on the Covid-19 situation in his state. I have listened to him often of late. I have a vested interest in New York, as my (healthy, thankfully) 96-year old father lives there.

Today, the governor spoke about how New York has come back stronger from tough times before, and that he hopes and believes that the same will happen after Covid-19. It got me thinking about how my business, and other small businesses can use this “down time” to ensure we come out stronger on the side of this ordeal.

One way to strengthen and protect a small business is with strong customer contracts.

The time to write or review your customer contracts is now. Relying on oral contracts or a “handshake deal” is not good practice. While oral contracts are valid, unless a deal is in writing, you leave yourself open in the event of a dispute.

Use this time to strengthen your business by making sure you have a good customer contract that is executed before a transaction. If you wait until after the transaction, as my mom used to say, you are “closing the barn after the cows have gotten out”. Good solution, but too late to be of any use.

How do customer contracts benefit your business?
They document all details of the customer relationship.

Imagine beginning a relationship with both parties clearly understanding how things are going to work. A customer contract is a road map to success.

They can often be very simple.

Not every customer contract has to be complicated. Often, a simple statement will do. For example, if you take new customer orders over the phone, confirm details of cost, expectations for payments and the consequences of non-payment in an email before providing your service. Ask customer to email back their agreement to your terms. You have a simple contract.

They help resolve customer disputes.

If you have a solid customer contract, you can use it to resolve customer disputes. For example, I have a customer who outlines, in detail, how a customer must cancel the contract. If a customer does not cancel correctly, additional charges apply.

Also, if you decide to litigate a customer dispute or non-payment, a customer contract will greatly increase your chances of success. You contract should also address the subject of arbitration, and how it may or may not be used to resolve disputes.

personal guarantee means that an owner of the business guarantees the debt if the company is unable to pay.

They can lower your costs of debt collection

If you wish to recover collection agency or attorney fees, you must include them in your customer contract and make sure customer agrees to them beforehand. The same holds true if you want to add finance charges or late fees. You cannot just add them onto your invoice after the fact.

They can be used to personally guarantee a business debt.

If your customer is a business, especially a new business or a business in distress, we recommend obtaining a personal guarantee.

Commit to the drafting, revision and regular use of customer contracts. Update them annually. Ask your attorney to draft a customer contract for your business for you today. It will not cost much, and it will be the best money you spend this year.

In other words, close the barn door before the cows get out, not after!





Accounts Receivable Management and Resiliency of Your Business

Posted by Marilyn Miller on April 16, 2020  /   Posted in Uncategorized

Every Thursday morning, I spend 90 minutes networking with a group of local professionals in my BNI Group. We spend time learning about each other, our businesses, and what types of referrals are best. During the COVID-19 crisis, we are meeting virtually. The theme of this week’s meeting was “resilience”, which is certainly a topic on the minds of us all.

Merriam Webster defines resiliency as an ability to recover from or adjust easily to misfortune or change. As small business owners we are constantly dealing with change, and how well we adjust to it has always determined our success. However, during the present crisis, it appears all we have is uncertainty and change. Since it is spring, and spring means baseball, consider that this crisis has thrown us all a massive curve ball, and it is up to us to foul it off.

A solid accounts receivable management process will make your business more resilient.  

Your first step is to make smart credit decisions. Get to know your customers. Not every customer deserves credit from you, and not every customer to whom you extend credit should get the same terms. Do as much as you can to gather as much information as you can on a new customer, including credit references, and verify them.

Once you have decided to extend credit to a customer, document your arrangement with a customer contract. It is nice to think that you can do business on a handshake, and sometimes you can, but why take the chance? Many of the files that land on my desk as delinquent desks are undocumented “handshake” deals. An oral contract is often accepted in a Court of Law, but an oral contract leaves open the opportunity for a customer to remember your oral arrangement differently, and remember it differently they will as soon as there is a payment dispute or delinquency.

No time to prepare a formal contract? Send a simple email confirming basic details including when and how you expect to be paid, and what will happen if you are not paid on time. Remember though that a contract must be bilateral, so make sure that your customer confirms that they agree. Once they agree, you have a simple contract, which is certainly better than nothing at all.

Lastly, develop and commit to a process to monitor and track your your receivables. You (or a staff member you trust) should be intimate with what you have outstanding at 30, 60, 90 and over 90 days and have a plan of what to do at each stage of aging. Get on the phone and speak with your customers. Send a well worded collection letter. Hire a collection agency. Use the court system. In short, take action!

Accounts receivables management, if properly executed, will impact every aspect of your business. You will have more time, more sales, better cash flow. On the other hand, if you do not manage your receivables, they will end up managing you.

Small Business Owners: Now is the Time to Review Customer Accounts

Posted by Marilyn Miller on April 15, 2020  /   Posted in Uncategorized

I just heard on the news that a landlord in New Jersey waived rent for his tenants for three months. What a generous and compassionate gesture! This particular landlord has the means to take the hit, and he is also getting some assistance during the Covic-19 crisis. Small businesses, even with government assistance, may not have the means to waive payments, and may have only a limited ability to delay them.

How long can you afford to delay customer payments?

While you are working through this crisis, I hope you are monitoring your accounts receivable and reaching out to customers who are behind. Not all customers have no ability to pay you. Some may ask for an extension on their terms, or will ask to lower their monthly payment to you. You will not know unless you ask.  If you delay any contact, you may be asking for trouble. 

Too much delay is like gambling with your accounts receivable. Here are some issues that can develop:

1.  The delinquent customer could move out of state. This would not make it impossible to collect but it will likely make it more difficult.

2. The delinquent customer could sell an asset that you might have been able to attach for payment later on.

3. A business customer could go out of business.

4. Your customer could incur more debt, be less able to pay you, or even declare bankruptcy.

5. Other more proactive creditor could take legal action and place liens on their property, wages, etc. You would then be behind those.

6. If you end up referring the customer at some point for outside collections, you could incur a higher contingency collection fee. Higher fees for older accounts (over a year, or in some cases, over 180 days) are common, because older debts are more difficult to collect.

There is nothing wrong with asking people who owe you money to pay you. Listen carefully and be compassionate with people who are not working.  If they cannot pay you now, work with them on payment terms for the future. You will find, however, that many people are happy to hear from you and willing to pay you. The only way you “lose” if you delay too long, or do nothing. 


Preparing to Reopen: Know Your Customers and How they Pay

Posted by Marilyn Miller on April 14, 2020  /   Posted in Uncategorized

As we begin preparations to reopen the business of the country, it becomes more important than ever to take a look at your credit practices. You can make up for lost sales by offering credit terms to customers. However you must extend credit in a smart way.

So how do you decide how to grant credit: to whom, how much, and for how long?

It is  important to understand your customers, and how they pay.

There are 5 kinds of “payers”.

  • Prompt and Regular – You never worry about payments. They pay on time. They deserve the most credit at the best terms.
  • Slow but Steady – Usually long term customers who you count on for regular orders who have always paid, just slowly. They are usually 30-60 days behind, but are a good source of business. Grant them credit, but watch your outstanding balance. Set a maximum outstanding balance. Offer discounts for prompt payments. If they go beyond 90 days, get on the phone and speak to them.
  • First Round Collection – These customers, when sent to a collection agency or attorney, pay voluntarily. They want to get back into your good graces. They need your product or service. Customers with seasonal needs often fall into this category. A fuel oil dealer client of ours saw a big rush of payments after the first frost. Require these clients clear up any old balance before you extend any more credit.  After payment, require a deposit or convert them to a cash basis.
  • Legal Collections – These collection clients will not pay without a legal action. Some will pay when they are sued. For other customers, you will have to obtain a court judgment against them, and then perhaps they will get religion and pay. For still others, you may have to resort to property liens, wage garnishments or other extreme measures. It should go without saying, but these customers should not only not have any credit with you, but should not be customers at all.
  • Never Going to Pay – Customers who go out of business, have no assets to attach, or who file bankruptcy are almost always a lost cause. Look to see if there is any possibility to recover, but be prepared to walk away.

Customers may move from one group to another, and hopefully you are watching the aging of your receivables and will take the appropriate actions.

Customer credit is a privilege, not a right. Watch your customers, how they pay (or don’t pay), and cash flow will take care of itself.

How to Extend Credit to Customers Post Covid-19: Think Like a Bank

Posted by Marilyn Miller on April 13, 2020  /   Posted in Uncategorized

It’s no secret that small businesses are having a tough time right now. The Covid-19 crisis means that  businesses are either entirely shut down or operating with limited staff. Stimulus money is slow in coming, but will it be enough? Local, state and federal officials are struggling to determine how and when to “reopen” the economy. 

It is frustrating that to feel that we do not have control over when and how we will reopen. We do, however have control of what we will do when the time comes. 

One way to get sales flowing again will be to extend new credit lines to customers. However, your patients and customers might be in a financial pinch from unemployment or reduced income. They may be behind on mortgage, rent, utilities or bank loans and will have to begin paying those obligations at some point. You want to supercharge new business sales by offering credit terms, but how do you extend credit in ways that will also protect your business.

The answer is simple. Think like a bank.

Every small business has a relationship with a bank. Many successful businesses owe their start to an initial cash infusion in the form of a small business loan. Others borrow to expand or buy new equipment. In each case, the bank has studied the business and its owners and taken certain actions to protect their investment. Similarly, small businesses owners should make informed credit decisions with their customers, just like their bank does.

Small business owners should look to their bank’s practices and like their bank, make informed credit decisions about their customers. They should also take the appropriate steps to protect themselves.

1. Underwrite the customer – Small business owners are often so anxious to win a new customer that they fail to collect basic contact information. You want to be responsive and make it easy for people to use your services, and that is great, but slow down! A simple application is a good place to start. Collect all the information you can without making the process too cumbersome. 

2. Commit terms to writing in the form of a contract – You want great communication with your customers, right? It all starts with a clear definition of the scope of your work and its cost. Your contract must also include terms of payment, and consequences for non-payment.

3. Set credit limits and stick to them. Some companies perform credit checks on new customers. This may not work for your business for any number of reasons, but it is important that you know how much credit you are willing to give to any one customer. 

4. Make it personal – If your client is a business, particularly a new small business, require a personal guarantee, which will help you get paid if the business fails or is unable to pay.

Think about it – can you name a bank that will loan you money, indefinitely, and not charge you interest? Unless you are a well established company with money in the bank, they will likely require your personal guarantee. 

So, be like a bank, and protect your credit decisions and will you protect your business. 


10 Tips to Minimize Bad Debt in Your Small Business

Posted by Marilyn Miller on April 10, 2020  /   Posted in Uncategorized

Do you want to send fewer customers to collections? Do you want to maximize chances of recovery of the accounts you do send to your collection agency?  Here are some ways to do it.

1. Establish a clear and consistent credit policy and stick to it.

• How much credit are you willing to extend to customers?
• How long are you willing to wait for your money?
• What sort of terms will you offer?
• What are your competitors doing?
• What image do you want to portray in the community?
• When are you willing to “fire” a non-paying customer?
• How far are you willing to go to collect money owed to you?

2. Develop a system to monitor your receivables.

Review the aging of your receivables every 30 days. Many small
businesses use Quickbooks, which provides excellent reports that you can use
to track your non-paying customers. The best report in the world is not of any use
though unless you are closely monitoring it and have a plan to take action at each
step along the way.

3. Designate one person as primary contact responsible for
accounts receivables and collection.

The key is focus. You need one person driving the process – someone always
looking, and communicating any issues to key individuals within the organization.

4. Set up in-house pre-collection process and use it consistently.

• When are you going to send a follow up collection letter?
• When do you make follow up phone calls, and who makes them?
• Involve sales, customer service and management in the process
• Personal contact get results

5. Use a contract with every customer. Your contract MUST have:
• Scope of work to be performed
• Length of project
• Cost of work
• Terms for payment
• Consequences for non-payment (interest/collection costs)

6. Use a personal guarantee in your contract with a business.

You sign a personal guarantee when you borrow for your business. Expect the
same guarantee from your customers, especially businesses under three years old.
A personal guarantee will enable you to recover from someone even if they go out
of business.

7. Collect complete customer contact information and update

Collect all customer data you can, include all phones, place of business etc. For a
business, make certain you have the correct legal name. For an individual, make
certain you have full name including professional title, middle initials, Jr/Sr. Update
every time you have contact with the customer. Do not simply ask, “is everything
the same?” Ask, “Is you phone number 203-555-xxxx?”

8. Invoice regularly and present invoices that are clear and detailed.

Many collection problems result from poor billing practices. Make sure your invoices
clearly detail each charge as outlined in your contract. State due date for payment.
Send bills monthly.

9. Offer incentives for prompt payment and set up payment plans
that work

Offer a discount for a cash payment, or a payment made before the due date. Or,
set reasonable payment arrangements, preferably with a significant down payment
(e.g. 25% down/9 equals). Be sure to document all arrangements!

10. Make it easy for people to pay you

Obtain credit card from customers for automatic payments. The more you can get
people paying you automatically the better. An e-commerce payment portal might
work for your business – the cost of putting it together will pay off in cash flow to

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