Is Your Collection Agency the Monster in the Closet?

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

Last week, my friend asked my advice on a customer who was not paying. I told her that I would happily work on the case for her, but suggested that she first send one last letter to her customer giving a final opportunity to pay. I told her to set a firm due date for the payment, and to communicate that if the bill was not paid on time that it would be referred for outside collection.

My friend followed my advice, and received payment in full. She was grateful, saying that the mere “threat” of a collection agency or the “monster in the closet” as she called it, caused the bill to get paid. I would never recommend a threat of any sort, but I do recommend constant communication with customers, even when the communication is difficult.

From your very first contact with your customer, you must communicate how and when you want to be paid. Do not be afraid to do this. You are in business to make money. You provide your product or service with the expectation of getting paid.

When customers do not pay you, they are sending you a message. So, the message you send back is important.  Chances are that people who owe you money owe other people as well. Do you think those creditors are sitting and doing nothing? How to get your bill to the top of the pile?

You must create a sense of urgency.

Your customer contract must clearly indicate your payment terms, and the consequences for payment. For example, it might say:

If your account is referred for outside collection, you agree that you will be responsible for and all costs of collection including but not limited to collection agency fees, attorney fees, cost of suit, court fees. 

Continue conversations with your customers, making sure your invoices have the terms clearly printed on them, and advise your customers how and when you expect to get paid.  Remember, a customer still wants something from you.  They want to use the credit you extend because it is good for their finances.  You as the creditor then assume the responsibility of its management.  Credit will not manage itself.

You will see that some customers pay from your final notice, to avoid being sent to collections. Others will pay only when their file is referred from collection. Do what it takes to get paid.

Do not be afraid to let the monster out of the closet. Of course, make sure your agency collects debt professionally and ethically, but let them do their job and get results for you.



Cash Flow for Seasonal Businesses: Recover Money Owed to You

Posted by Marilyn Miller on November 10, 2017  /   Posted in Uncategorized

Cash flow for seasonal businesses are tough. One storm can make or break your entire season. For example, a cold snowy winter could be great for a ski resort, while retail stores might suffer if consumers cannot get out to shop.
The effects of the season can also be seen on your cash flow. A warm winter could mean more work for a contractor, but wreak havoc on the sales of a snow plow or home heating oil company.
If your business is seasonal in nature, do you have a plan to keep your cash flow steady in the slow months? Many companies trim operations, lay off staff or temporarily shut down. Some smart companies diversify their operations such as the heating snow plow company that takes on landscaping work, or the home heating oil company that starts an air conditioning division.
What about using the down time to chase down some delinquent customers? You have done the work, and you deserve to be paid for it. You may just have the answer your cash flow problems right in front of you – in your aging accounts receivables!
Here are some steps to take to recover money owed to you:
• Take a look at the aging of your receivables. Start with the 30-day late customers first. Offer a small discount for prompt payment in full. Make sure to mention that the discount is a limited time offer, and that it is for full payment only.
• Draft a collection letter and send it along with a copy of the invoice.
• Call delinquent customers and talk to them. Very often, people are embarrassed to talk about money they owe. Some people just need to know that you will work with them. Make it easy for them to pay you by offering payment plans. Be certain to document all payment plans.
• If you still have no response after writing and calling, consider hiring a collection agency. Find a collection agency that fits your needs. Most agencies work on a “no fee until collected” basis, so you have nothing to lose.
Put the money you have already earned to work for you. It will warm up for cash flow, and heat up your business!

Small Business Debt Collection: What Makes People Pay?

Posted by Marilyn Miller on November 08, 2017  /   Posted in Uncategorized


Small business debt collection is a group activity. The business owner should establish that that the recovery of delinquent customer debt is a priority, and give staff resources needed to tget the job done. Key staff members must commit to a regular review of aging accounts receivables.

Process is important, and so is understand the factors that will encourage delinquent customers and pay your bill.

  1. Leverage – If you have a product or service that customers want again, use your leverage. Old Fuel oil bills often get paid right after the first cold night. Pediatricians receive payment when parents need a physical form for camp or the start of a school year. If you have a some leverage, do not give it away. Whenever possible, do not continue to provide service to a customer who owes you money.
  2. Discounts – Before you hire a collection agency, consider offering a discount to your customer. Offer a discount that is less than what you would pay your collection agency. You can also “roll in” new sales with the old bill, giving a small overall discount. Remember though to be very clear that your offer is only available for a limited time. Be specific about the date that offer will end. Explain consequences if payment is not made. You will be amazed at how many people will pay a bill when offered a 5 or 10% discount, and you will lower your overall cost of collection.
  3. Ease of payment – Know your customers and make it easy for them to pay you. Some customers want to send you a check. Include an envelope with your bill. Other customers want to pay their bills online. Consider not only traditional credit cards, but newer methods like PayPal.
  4. Communication – A phone call or collection letter can get you terrific results. Do not be afraid to call a customer to ask them for money.
  5. Elevation – Each collection attempt should increase the urgency. Within your own organization, use senior management to reach out to delinquent customers. Let customers know that unpaid bills will be referred to your collection agency.

Small business debt collection is  not difficult. Use the tools you have available to you, and your business will benefit.

Small Business Debt Collection: Myth of the Write Off

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

Small business debt collection if often overlooked for many reasons. However, if a small business owner forgives bad customer debt hoping for a tax write off, they are due for a rude awakending Have you ever know a small business owner to do this? I sure have.

Sometimes a business will “write off” an amount owed to them as an accounting function, to begin the collection process. The business has tried to recoup the money and cannot, and is isolating those sums it wishes to refer for outside collection. However this sort of “write-off” is not intended to be used for tax purposes.


Small business owners who believe that they will receive favorable tax consequences for writing off bad debt may be making several mistakes. First, many small business owners report their business sales on a cash basis, which means that they report income as they receive it. If your business is on a cash basis, you cannot receive any tax benefit for bad debt write off. Even if you are a bit larger company (say, over $3 million in sales) and use and accrual basis (income counted when earned, whether or not paid), you need to show a reasonable effort to recover the funds, and it is questionable that any tax benefit received will match the benefit of having the funds reruns to you, even in part.

The best way for a small business to recover bad debt is to focus on procedures that reduce bad debt, promptly attempt to collect past due accounts and get outside from a collection agency or attorney when they need it.

So, a business that is “writing off” bad debt is like throwing money away. Money that was earned, and money that is needed to grow your business and pay your employees.

Small business debt collection must be a part of your ongoing activities, for the health of your business. What are you doing to reduce bad debt in your business?

Your Maine Collection Agency: What they Can and Cannot Do

Posted by Marilyn Miller on November 01, 2017  /   Posted in Uncategorized

This post is not about the Fair Debt Collection Practices Act and the rights of consumers to be protected from abusive debt collection practices. Certainly, a debt collection agency must be in compliance with the law, but there have been many articles written on that subject. So, if you are reading this article looking for information on how to stop collection calls, stop reading now.

However, if you are a small Maine business owner or entrepreneur and you are not getting paid by customers, and want to hire a collection agency, this post will help you get a realistic idea of what you should and should not expect.



Here are some things your Maine collection agency  can (and should) do for you:

Help locate customers who have moved – A big part of debt collection is finding debtors and their assets. You should never pay an additional fee for research as it is an integral part of the collection process.

Give you ideas on how to improve your credit practices – The best collection is the one you can make in house without having to send to a third party.

Save your time and let you focus on your business while they focus on getting you paid – Certainly you should make an effort to recover money, but after a while it simply does not make sense to use productive time chasing bad debt. Also, debt collection agencies have special tools and training.

Advise you on information needed to assist with the collection and maximize results – Ask your collection agency to advise you on the process, and ask them to tell you what information they will need to get the job done.

Here are some things your collection agency cannot (and should not do):

Change the financial situation of your customers – If someone is in a cash crunch, you may not be able to get all your money at once, and you should be realistic and flexible with your agency if they ask you to accept small payments or a settlement. A good debt collector is a skilled negotiator, and they will work hard to get you paid, but you may have to be patient and be paid over time. Remember that most agencies are paid on a contingencybasis, which means they only get paid when they get results for you. So, if they ask you to take a settlement or payment plan, it is because their experience tells them it is best option.

Ruin someone’s credit – We get it. It makes you angry when you do not get paid. However, credit reporting is only one tool and recent changes in the law lessen the impact of single item anyway. So,  one item reported to the credit bureau will not ruin anything. Focus not on being angry but on the goal of getting paid.

Charge fees that are not in your contract or prohibited by law – If you want to recover collection costs or charge interest on past due accounts, you must have a customer contract that allows it. In addition, you must be in compliance with state laws. Some states allow recovery of all or part of your collection fees, others do not.  Certain rates of interest are considered by law usurious, or excessive. A good customer contract will be your best friend. Contact your attorney today to get one.

Collect debts that are legally uncollectible – Each state has a time limit, or statute of limitations that governs how long a debt someone can be held liable for the debt. Also it is illegal to collect a debt that is under the protection of the bankruptcy court. So, do not wait to long to send accounts off for collection!

Collect debts from parties that are not liable for them – Once again, the need for a customer contract is important.  When you are providing product or service to a business, especially a new business, you should ask for a personal guarantee. A personal guarantee means that a business owner takes personal responsibility for debt of their company if they go out of business.

Similarly you cannot hold heirs responsible for a debt of a deceased relative. However, if there is an estate with assets you can make a claim against the estate in an attempt to recover.

In the end, it comes down to communication with your Maine collection agency. Use your agency not simply as a commodity but as a trusted partner. It is perfectly fine to have high expectations, but your expectations must also be realistic.

Debt Collection and Documentation: Love and Marriage

Posted by Marilyn Miller on October 30, 2017  /   Posted in Uncategorized










To borrow from an old song, Debt collection and documentation, do go together like love and marriage. You can’t have one without the other.

Similarly, debt collection without proper documentation is set up for failure. Unless you put it in writing, you leave everything open to dispute. Here are 5 ways documentation can help with debt collection:

  1. Customer application – If you are thinking of extending credit, gather as much information as you can including bank and trade references.
  2. Contract – Once you have confirmed the terms and conditions of your arrangements with your customer, confirm in a written contract. If you are too busy for a formal contract, send customer an email confirming details. Remember though, that contracts must be bilateral, which means you have to ask (and receive) approval in writing from your customer.  Again, an email back from a customer stating that they agree to your terms works.
  3. Personal Guarantee – If you are working with a business, a personal guarantee will protect your receivables if the company goes out of business. A personal guarantee means that the business owners pledge their personal assets if the business will not or cannot pay you.
  4. Payment Plan Confirmation – Commit any approved payment plan to writing, and ask your customer to sign it. Make certain your plan lists the amount to be paid, timing of payments and what will happen if payments are not made as promised.
  5. Collection Letter – Draft a template letter demanding payment from a customer. Give a specific due date for payment. List consequences of non-payment. Never threaten, but be firm and specific. Also, keep notes of all collection efforts, including emails and phone calls.

Think of debt collection and documentation as inseparable. It will not take too long, and the investment of time you do make will be well worth it.

Business Debt Collection: Easy as ABC?

Posted by Marilyn Miller on October 27, 2017  /   Posted in Uncategorized

Business debt collection is not rocket science. It does involve a consistent commitment to a regular process. Many small business owners spend a good deal of time trying to get the lowest rate from their collection agency. Others will do nothing to collect on their own, yet will be reluctant to send it for outside collection. Both approaches are short sighted, and could sabotage bad debt recovery efforts and be disastrous for cash flow.

In the excellent play and film, Glengarry Glen Ross, the sales manager for a brokerage firm tells his that sales is as easy as ABC, that is, “Always Be Closing”. I contend that the way to get the best collection results is to ALWAYS BE COLLECTING.

Collecting is not just calling delinquent debtors on the phone. It begins with your first contact with a customer.  How do you communicate your prices and how do  you expect to be paid? How much information do you gather on a new customer. Do you make informed credit decisions and do you have a customer contract?

Business debt collection involves being on top of your accounts receivables at all times. You or someone you designate should be assigned with this task, and it must be a priority. This first step will drive the whole process.

Next, establish a procedure for following up on delinquent accounts. We suggest the following:

1.       Compose 2 or 3 collection letters of increasing urgency. Note the word urgency – no anger or threatening. Be firm and specific.  Generally, you would send letters at 30, 60 and 90 days past due, but you can set the schedule that works for you.

2.       Calls to follow up with selected customers.  Use someone with either a relation to the customer, or a position of authority to make the calls. Let delinquent customer know that the issue is being escalated in your organization.

3.       Decide how long you are willing to wait before getting outside help. You can use the same “drop dead” date for all delinquent customers or allow a little more time for long time customers. However, it is very important to stick to the timeline once you set it.

4.      Communicate the process to all in your organization. It is very important that you discontinue new sales to these customers at this time, or at very least make certain the files are marked so that any new sales requests become an opportunity to collect past due sums.

5.       Hire a collection agency. While you will cut down on the files you need to send them, you must be ready to move on and refer for outside collections when the time is right. Develop a checklist to make sure you give your agency all the information they need to do their job.

6.       Continuously monitor your results and adjust as necessary.

Business debt collection should be easy. However, to make it easy as “ABC”, you have to commit to it, and keep the process on track.


Collection Agencies: Good for the Economy and Your Small Business

Posted by Marilyn Miller on October 25, 2017  /   Posted in Uncategorized

Collection agencies in the United States recovered over $55 billion in 2013, according to a recent study. That number has only grown. Medical, credit card, mortgage and student loans dominate the types of delinquent debts placed for collection. Small business owners certainly benefit from the credit and collection industry as well.

When small business owners do not get paid, the impact can be immediate. Small business owners  are often the first ones to forego their salary to plug a hole in their cash flow stream. If delinquencies continue, or increase, one or more of the following could happen:

  • No new hires leading to existing staff being overburdened. The result is a hit to morale and decrease in productivity.
  • New marketing programs or development of new lines of business are curtailed.
  • New equipment orders are delayed or cancelled. Maintenance on existing equipment could suffer as well.
  • Credit lines are contracted, possibly making your product less competitive
  • Less money to pay creditors, leading to a hit to business credit availability and reputation.

A recent  found that if  paid on time, U.S. small business owners could hire an additional 2.1 million employees.  This alone would reduce unemployment to around 3% – a 23% decrease. How is that for a jobs program?

It does not take long for uncollected receivables to choke the cash flow of a small business. All too often, collection agencies are brought only when a business is in trouble, or after the debt has grown very stale. Several times, I have had to tell a small business owner that they money they were carrying on their books for years has now gone past the legal statute of limitations, making it basically noncollectable. By the way, the statute of limitations in many states is at least 5 to 6 years. What purpose could a small business have for holding onto bad debt that long?

Hiring a collection agency can not only improve cash flow but give a small business the opportunity to expand and grow. Collection agencies focus on getting you paid, and let you go back for managing your business.



Customer Bankruptcy: Does It Mean You Will Never Get Paid?

Posted by Marilyn Miller on October 23, 2017  /   Posted in Uncategorized

Bankruptcy protections were created to give people who have incurred debts greater than their assets or ability to pay. It is intended to make way for a “fresh” debt-free start. However, there is nothing more frustrating to a small business owner than having to walk away from money owed to them when a customer declares bankruptcy.bankruptcy

There are several different kinds of bankruptcy. Generally they fall into two categories – those that discharge, or eliminate debts and those that restructure, or set up payment plans. There are also different types for individuals vs. business.

Once you are made aware that a customer (whether a company or an individual consumer) has filed for bankruptcy, you must notcontact them directly as long as the case is active. If you have placed their file for collection agency, you must let them know immediately and they too, must cease contact directly with the debtor. No contact means no contact – no bills, no phone calls, no letters.  If the debtor is represented by an attorney, you may make contact with the attorney. You can also file a proof of claim with the court, and you will get notifications as the case progresses.

Your chances  of bad debt recovery depends on many factors, and there are some important things to keep in mind.

  1. If your customer is a business, do you have a personal guarantee, which means that the customer will personally guarantee debts of the company? If you do,  and the company declares bankruptcy, you may still have the right to pursue the personal guarantor.
  2. If you believe that there are assets that have not been disclosed, or believe for some reason that your debt should be exempted from discharge, you should attend the hearing, and you will have an opportunity to question the debtor.
  3. The debtor has responsibilities while in bankruptcy. If they do not perform their duties, their case may be dismissed. If so, you are free to pursue the debt again.
  4. If the debtor files a repayment plan for debts that is approved by the court, notify the court if the payments are not made according to the plan.
  5. If the debt is discharged, it means that the debt is wiped out, and you cannot recover it. Move on.

Things happen to people and businesses and you cannot foresee every situation, but if you are watching the aging of your receivables, look for signs of trouble and suspend credit, reach out to the debtor to see if you can work out a solution.

Accounts Receivables Management 101

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

If you are a small business owner, accounts receivables management should one of the things you do you really well. Alas, it often takes a back seat to sales and everyday operations. Imagine though, what would happen to your cash flow if those new customers did not pay you? You might be forced to restrict credit lines, which would make you less competitive. You would have to divert your attention from managing your business to come up with a plan to bring the money in. Accounts receivables management therefore, is essential for sales and operations of your business. One simply cannot exist without the other.  So how do you manage your accounts receivables?

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.

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