Being a Debt Collector: A Day in the Life

Posted by Marilyn Miller on August 17, 2018  /   Posted in Uncategorized
What does a debt collector do all day?

A debt collector does spend countless hours dialing for dollars. While telephone contact is a big part of what we do every day, it is only a small part of our plan to get our customers paid.

Morning Coffee and Promises

The first thing I do every morning is review the daily list of people who have promised to pay. A debt collector who sets debtor promises and diligently follows up on them. Some people do exactly what they say they will do. Others do it eventually, after several delays. Still others never intend to pay, and when they promise you, they are saying what they know will get you off them phone.

An experienced debt collector can differentiate between real promises and not-so-real ones. If someone does not pay on a given date, they can inquire as to the reason for non-payment, and perhaps work out a better plan for repayment.  For example, I recently spoke with a woman who owed my dentist client over $1,000. The first time we spoke, she told me she could pay in two weeks. I set the promise and followed up on the given day. I could not reach her for a week, despite multiple attempts. She did finally return the call, and told me that she could not make the payment. By carefully and compassionately questioning her, I learned that she did not understand that she did not have to pay the entire payment all at once. I was able to set her up on a payment plan of $ 100.00 a month, with payments scheduled to correspond with her biweekly paychecks. She stayed on schedule and paid the debt off as promised.

Customer Communication and Coaching

This week, I worked with an accountant to collect a past due balance. The debtor had paid half his bill, but had failed to make the second payment and had stopped responding. When we approached the debtor, who owed $2,500, he told me that he had been promised that he could pay only $700 to settle the balance. He had, in fact been told that, but when he failed to pay promptly the accountant believed his settlement offer could be withdrawn.

My accountant customer had an oral contract (for settlement at $ 700) with his customer. While oral contracts are valid, they are subject to the memory of each party in the event of a dispute. After fifteen years as a debt collector, I can assure you that in a dispute, each party will remember only the part of the deal that benefits them.

I advised my client to accept payment of $ 700.00. I advised the debtor (in writing) that we would accept the settled amount if and only if payment was made within a week. The debtor wired the money to the accountant the following day.

Afterwards, the accountant and I discussed how to document settlement offers in the future, that is, always put it in writing, lay out exactly how and when the debt is to be paid, and describe what will happen if payment is not made as promised.

My client took a little less money, but he got his money quickly and avoided a long, protracted dispute. He also learned how to protect himself in the future. I call that a good deal!

Skip, Skip, Skip to My Lou!

A big part of being a debt collector is research to find people and their assets. In our business it is called “skip tracing” and it is one of the favorite parts of my job. I consider skip tracing a critical part of my job, and I am really good at it.

Skip tracing combines using different sources (some public, others purchased) to find people or to make an assesment of their ability to pay. It is a critical part of our strategy and process.

If you are considering hiring a debt collector, you must ask about their skip tracing capabilities.

Legal Beagle

I am not an attorney but I work with attorneys nearly every day. Unfortunately there are times when the only way to collect a debt is to commence litigation and obtain a judgment. I have seen far too many judgments that are uncollectible for various reasons. Therefore, I spend a good deal of time choosing and preparing only the best files to send to our attorney partners. We assist by managing the legal process, especially post judgment collection.

So yes, there is a bit of a grind in making what can seem like endless phone calls, or stuffing and mailing hundreds of collection letters. However, the variety of tasks and my commitment to the right of my clients to be paid for their work keeps me going.

 

 

 

 

Debt Collection Costs: How to Control Them

Posted by Marilyn Miller on August 15, 2018  /   Posted in Uncategorized

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

cost_of_debt_collection

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

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

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

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

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

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

How do you manage your debt collection costs? Let us know in the comments.

Customer Contracts and Debt Collection: Worst Reasons for Not Having Them

Posted by Marilyn Miller on August 08, 2018  /   Posted in Uncategorized

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

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

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

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

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

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

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

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

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

 

 

 

Collection Agency: Don’t Fault Them If….

Posted by Marilyn Miller on August 06, 2018  /   Posted in Uncategorized

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

There are things, however that a collection cannot do.

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

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

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

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

For creditors, a little planning goes a long way.

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

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

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

 

 

Debt Collection: Sexy or Not?

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

Debt collection. A great topic for cocktail party conversations…if you want to clear the room really quickly. Many small business owners are actually embarrassed to be owed money, as if it is their fault. While there are things to do to minimize bad debt, there is no shame in being owed money. What IS a shame is for a business owner to do nothing about recovering money owed to them.

Several times I attempted to put together small business seminars like, “What To Do When You Don’t Get Paid”, only to speak to a nearly empty room. It seems that people are more interested in topics such as social media marketing or human resources. Once, a friend asked me to speak at a seminar for her clients. I agreed, and we had 7 attendees. We got great feedback, with one participant stating it was the best, most useful seminar she had ever attended. The owner told me she was baffled as to why we did not have a full room. Apparently, the previous month they held a seminar about dealing with the millennial in the workplace and sold out. I wondered too, since I have made a very good living helping people with their accounts receivable, and I know that it is something small businesses struggle with every day.

When small business owners do not get paid, the effect is almost immediate. Vendors do not get paid. Investments in equipment, marketing and new hires slow down or cease altogether. To my mind, the topic of debt collection – how to minimize the cost of bad debt to a business or how to put together a system to recover from delinquent customers would be the first thing I would want to hear about it.

A colleague told me that being a debt collector was just not a “sexy” job, like working in marketing, or starting a brewery, or being a life coach.

Now, I will be the first to admit that I am a bit of a nerd about debt collection for small business owners. I am like being paid for what I do, and I passionately advocate for the right of my clients to be paid for what they do. It sure turns me on!

 

 

 

Debt Collection and Customer Retention: You CAN Have Both

Posted by Marilyn Miller on July 30, 2018  /   Posted in Uncategorized

Debt collection and customer retention are not mutually exclusive. It is possible to manage delinquent customers if you have a consistent plan. Small business owners work really hard to gain new business. Every new relationship begins with the expectation of payment, so when payment is not received, it feels like betrayal. How do you juggle your need to be paid with the need to grow your business and retain customers? Is there a way to collect money owed to you and protect, even salvage your client relationship?

Sure there is. You must commit to a consistent plan:

  • Start every relationship off the right way with a good contract that outlines all payment terms and the consequences of non-payment. Customer contract do not come from lack of trust. Putting the details of your business relationship in writing, and having both parties agree is NOT a negative way to begin a business relationship. In fact, it is a great way to make sure all parties are on the same page from the start. Great relationships begin with great communication.
  • Know your customers and how they pay. Do not give the same terms to all credit customers. You may give your largest or most promising clients more credit than others. With other customers who may be slow payers, ask for a down payment before extending credit.
  • Every month, review your accounts receivables and follow up with them diligently. Polite reminder phone calls and well crafted collection letters can work wonders.
  • Perform “triage” on all customers over 90 days past due. Make two piles: customers you are willing to ride it out with a little longer and those that need to be sent immediately for outside collection. There is a big difference between a client who responds to your calls and asks for a little more time and a customer who totally ignores you or flat out refuses to pay. Decide which customers you wish to keep and wish you no longer wish to have as customers.
  • Make them an offer they cannot refuse! Find creative ways to offer new product if the old balance is paid in full. For example, if your customer owes you for three months, offer 3 additional months at a discounted cost if the original 3 months are paid in full. Consider a small discount of say, 10% for payment in full. A small discount will be less you will pay a collection agency, and might just do the job. However, make sure you communicate in writing that your offer is only available for a limited time, and will be withdrawn on a certain date.
  • For customers you wish to send for outside debt collection, decide which customers (if any) you would take back once their bill is satisfied. Let your collection agency know as they may be able to use the information to get the bill paid. We strongly recommend not providing new services to accounts that have been sent for outside collection until balances are paid in full.

In the end, it all comes down to communication with your customers and a consistent plan for tracking the money owed to you. Good customers will appreciate your discipline and fairness, and those who do not work with you may not be worth your time for the long term.

Collection Agency: More than Phone Calls and Credit Reporting

Posted by Marilyn Miller on July 27, 2018  /   Posted in Uncategorized

Most people believe that a collection agency simply makes phone calls and reports debts to a credit rating agency. Certainly telephonic contact is an important part of the process. Although I contend it is overrated, credit reporting can perhaps assist with recovery.

So what else does your collection agency do?

Collection agencies have specialized tools to locate your customers and their assets.  I spend a good part of my day looking for people and their assets. “Skip tracing” is the research process in the credit and collections industry. The term comes from private investigation firms who would look for information on people who had “skipped town”. To me,  skip tracing involves finding new information (address, phone, email, assets) of customers who have moved.

Why is skiptracing important?

How important is skip tracing to the collection process? Lexis Nexis, a leading provider of research tools for law, government and collections estimates that 35% of delinquent debtors move annually. Also, 50% of files placed for collection will need some sort of skip tracing.

Collection agency research might reveal a name change due to marriage or divorce, new  phone number, or a new job. They will research a file under consideration for possible legal action  to make certain there are assets (job, bank account) to justify legal action.

Does skiptracing cost more?

Your collection agency should provide skip tracing as part of their services. Although some agencies charge a higher contingency rate for collections involving skip tracing, you should not have to pay an additional fee for it.

What sources are used to skiptrace?

Services like Lexis Nexis and Transunion offer automated services collection agencies use. However, these databases use public information.  If a person must have something in their name – a utility bill, driver’s license – anything. If not, chances of finding them with this method is next to nothing. Still, it is a good first step.

Collection agencies may also can review credit reports not only to obtain contact and asset information, but to get an idea of the debtor’s ability to repay the debt.

Often a collection agency will review court and land records. Solid research drives the strategy. As an example, we once selected a file for litigation. The debtor had a good job and owned a home. However, she had multiple judgments liens against her, more than the value of her home.

Skip tracing becomes an art when you take it to the next level and review the debtor’s social media profile. You would be amazed at how much information can be obtained from Facebook, LinkedIn or a simple Google search.

I love working puzzles, and quality skiptracing is just that. If your collection agency is not doing this for you, you are missing a huge piece of the puzzle.

Debt Collection and Payment Plans

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

Collection agencies make a number of mistakes, but refusing to accept a payment plan should not be one of them. We recently collected a file that was very close to being noncollectable because of the statute of limitations. Why were we successful? We offered her a payment plan. The consumer was elderly and told us that the previous collection agency refused to allow her to make monthly payments. We set up an auto monthly payment with her credit card, and sent her a written confirmation. She was so overjoyed that she offered to send our client a letter praising our efforts.

collection agencies payment plansMany consumers become overwhelmed by the total amount of a debt, but if you break it down for them, it often becomes manageable. It is important to remember some simple rules about payment plans.

Document. Document! DOCUMENT! Memories fail us. It is important to detail of the plan in writing and make sure both parties sign to indicate their agreement:

1. Amount of money to be paid, number of installments, number of installments (Example: “…will pay the sum of one thousand dollars ($ 1,000 USD), payable in 10 equal installments of 100.00 each)

2. When, where, and how each payment is to be made – exact details. (Example: Payments should be made payable to {Company Name} must be mailed to {Company Name, Full Address} so that payments are received by the 15th of every month.) Also, don’t forget that this agreement should list whether interest will accrue on unpaid balance.

3. Consequences for default on agreement – Will default void the agreement? Will you charge a late payment fee? Will the file be sent to a debt collector? Make sure to specifically detail what happens if the terms are not met exactly as agreed. 

There are also several ways you can use payment plans to enhance your cash flow and make it easier for people to pay you. 

1. Obtain a larger down payment up front with small back end payments.

2. Consider an online payment portal. Ours has increased payments by 30%.

3. Accept all forms of payment, including PayPal, Apple Pay and others.

4. Set up automatic credit/debit payments, keeping a card on file (VERY important to get a signed consent to use the card in the case of any dispute)

5. Payment coupons – Very old school, but some people like them. Some people like a monthly statement and envelope.

6. Offer an incentive for early payment of balance.

Be smart about your payment plans and make sure your collection agencies are too. Remember that people are busy. Make it easy for them to pay. Convenience is key!

Customer Credit: Reasons People Do Not Pay Their Bills (And What You Can Do)

Posted by Marilyn Miller on July 18, 2018  /   Posted in Uncategorized

Small business customer credit allows you to increase sales and grow your business. However, business owners must be smart about extending credit. Not all customers deserve to receive the same credit terms. Credit agreements must be in writing. Your customer credit contracts are invaluable.

To put it simply, there are three  this condition that create delinquency.

People do not pay their bills due to poor credit practices on their part, poor credit practices on the creditors part, and catastrophic life events.

Customers who do not pay due to their own poor credit practices are the kinds of customer who do not care about the credit rating. They may be irresponsible, overwhelmed or simply believe they do not have to pay. These customers are typically the ones who are referred for collection. Depending on the specific reasons, they may agree to pay the debt in installments while others may have to referred for legal action.

Other customers do not pay due to creditor actions. Yes, I said that. People may not be paying based on something you did or do not do. If you do not send bills promptly or if your bills are difficult to understand, you may be giving a customer an excuse not to pay you. I recently received a medical bill from a pediatric practice. Since my kids are grown, I knew it was a mistake. I called the office and learned that the bill was valid, but that the practice billed everything under an affiliated pediatric group. How confusing!

Other times, small business customer credit goes awry when the creditor does tell the customer upfront what services will cost, and what will and will not be included. For example, a contractor should communicate the applicable hourly rate and minimum charge before going to do the job. A simple email confirming the details of price and service can serve as a simple contract.

Take time to put together a customer contract. Bill promptly. Make sure customers know how and when you want to be paid. Do not be afraid to pick up the phone to speak to customers as soon as they become delinquent.

Customers who do not pay based on catastrophic life events are often the most difficult for recovery. Today, the most common catastrophic life event is either the loss of a job, or an accident or illness that produces a large medical bill. Your best bet in this situation is to do your best to be patient and work to with customers to pay in installments. We set up payment plans all the time with who are out of work. Usually, we begin with small payments and reassess every few months, with the understanding that payments will increase if employment is secured. Some people may become too overwhelmed and declare bankruptcy which could mean you have to walk away. With patience and compassion, however, you will find that even when times are the toughest, many customers want to do the right thing.

 

 

 

 

Small Business Debt Collection: How to Get it Right

Posted by Marilyn Miller on July 16, 2018  /   Posted in Uncategorized

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

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

 

 

 

 

 

 

 

 

 

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

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

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

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

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

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

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

 

 

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