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

Consistency and Compassion Go Hand in Hand

Posted by Marilyn Miller on April 10, 2020  /   Posted in Uncategorized
Treat others the way you would want to be treated under the same circumstances.

This is so relevant especially in today’s climate.  When we are on the other side of this pandemic, after being isolated and having time to miss our co-workers, neighbors, family, friends, the pool guy, our hairdresser, our nail salon personnel, our doctors and dentists, our local pubs, restaurants and so many more, I hope we are all reborn with a new sense of compassion and general respect for each other.  After all, COVID-19 treated each of us equally.

Take this approach with your established clients and patients and add a new dose of “Corona kindness/compassion”.  Be flexible with current and new clients, offer payment plans, extend credit, just be sure to always document these offers.

Call now and call often the clients that owe you money.  

The one thing that I found that has worked for me in collecting debt is consistency.  Making consistent contact with debtor’s through calls/email will more often than not, result in success.  I try to not let more than a few days transpire from my initial call and a follow-up call/email.  This is a great rule of thumb to apply to your accounts receivable. Try and not let more than 30-60 days pass before you send out reminder notices, make phone calls, send email reminders.  I believe in the old saying “out of sight, out of mind” which couldn’t be truer about past due bills!

Today I left the security of my office and ventured out to the store and guess what I saw? People working, landscapers, utility workers, delivery drivers, gas station attendants, convenience store employees, bank workers, essential retail workers (food, liquor stores, business supply stores, etc.) which can only mean one thing – lots of people are still employed!

Accounts Receivable Management and Credit Practices for Your “New Normal”

Posted by Marilyn Miller on April 08, 2020  /   Posted in Uncategorized
The Chinese use two brush strokes to write the word ‘crisis. ‘ One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger–but recognize the opportunity.” – John F. Kennedy

Uncertainty is never good for small business. However, we live with some degree of uncertainty all the time. Will the new product sell? Is expanding the office a good idea? Will the new manager succeed?

We manage uncertainty in our businesses by gathering as much information as we can and making an informed decision. We monitor results and make any necessary.

So what happens when the world throws your small business a curve ball like the Covid-19 crisis? It is hard to get accurate information, and the changing nature of the virus makes planning difficult. Your business may be closed, or operating at a reduced capacity. This time, you may or may not be able to make informed decision. 

We can be crushed by the uncertainty or we can control some things that are in our control.

This is a perfect time to set up or revise your accounts receivable management program. 

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.

Do you have a plan to extend credit to customers in a smart way?

Whether the economy tanks or recovers quickly, you may still have to decide how to extend credit to customers. Extending credit gives you a competitive edge, and deepens your relationship with customers. Take a look at what you are doing now and consider how you might improve your credit practices. 

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.

Develop or strengthen customer contracts.

Now more than ever it is important to document your customer credit arrangement with a 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.

Make it easy for people to pay you.

The ability to set up payment plans and to take online payments has really helped our business in this crisis. If you do not have an online payment portal, now is the time to invest in one. 

Consider these times an opportunity to share your “new normal” by shaping policies that will protect your business in the long run. 

Being a Debt Collection in 2020 (The age of the COVID-19 Pandemic)

Posted by Marilyn Miller on April 07, 2020  /   Posted in Uncategorized

I remember January like it was last week. I had planned a vacation to Florida to include a 5-day cruise with my girlfriend.  Someone mentioned something about a virus in Asia and to be completely honest, I knew nothing about it.  I got on an airplane thought nothing of it, boarded my cruise, had a great time, still the virus was just a conversation some people were having.  

When we got back from the cruise it seemed as though talk about the Corona virus had picked up momentum but it was still so far away from my reality.  I boarded the plane home, noticed some people were wearing masks (which I thought was a little over-reactive) and I sat myself arm to arm and cheek (not the face one) to cheek with my fellow passengers.  In less than a month, wow, was I and everyone else dealt a reality check.  

As the virus found itself to American soil and then infiltrated itself into our everyday life, we were faced with mandatory stay at home orders, social distancing, non-essential businesses ordered closed, and thousands of people out of work.  

At first, my partners and I were at a loss as to what we should do.  I mean how could we possibly make collection calls when it seemed as though the world was coming apart at the seams.  The first few weeks we decided we would give it a go and see what type of reception we would get.  We made a pledge that we would be very respectful and understanding of the situations that the people we were contacting were possibly facing.  Our thought was just to open a dialogue with them, offer understanding if they were faced with financial difficulty due to loss of income, assure them that we could give them an extension until April 1, 2020 (which we were all optimistic at the time that this virus would be under control and things would be back to normal).   We offered payment plans, keeping in mind no amount was too small and that when things picked up then the payment amount could increase.  Sounded like a great plan and guess what – it was!

Not only have we been able to collect payments (yes payments) on outstanding debts, secured payment plans and offered simply more time (no longer April 1st but optimistically mid-May) but we also a shared dialogue with the debtors about what we are all facing as this virus has become so much more than a “pandemic” that was happening somewhere else far away.  

I have also found out that there are still a lot of people who are employed (albeit their office may now be located right outside their bedroom door) and they are still earning a paycheck.

So, when people ask, and believe me I get asked often (even from my adult children) how can you possibly call people and ask for money during a time like this?  My answer is simple – people are still people, corona virus or not, they still want to pay their bills, (a lot of the time they are bills that were overlooked) and when treated with respect and kindness they respond positively.   In the past month, we have had phenomenal success with our collections and each week surpasses the prior week’s total.  

In closing, although we are living through uncharted and uncertain times, we all know that this too shall pass and life will pick-up right where we left off.  We will all be back to “business as usual”, working, socializing and yes even traveling, and in my case, cruising!

Pay Bills with Money You Have Already Earned

Posted by Marilyn Miller on April 06, 2020  /   Posted in Uncategorized

As we navigate the Covid 19 crisis, we all try to do our best to keep ourselves and those we love healthy. If you are a small business owner, it is also important to take care of the health of your business.

None of us know how long the crisis will last, and how long we will not be able to resume normal business operations. We’ve reached out to our lenders and landlords and delayed some payments. Small businesses can apply for relief with the Paycheck Protection Program of the CARES Act.  However, we do not know when relief will come or if it will be enough. 

Businesses need cash. Banks are flooded with calls. Businesses will look to borrow, or sell equipment, even barter for services, but often overlook an important source of cash – their own books.

You have a very good source of cash available to you today – your accounts receivable.

Why not take a look and see if you can recover some of the money owed to you from delinquent customers? Sure, many people are in the same boat as you are, scrambling for cash, but not everyone is out or work or out of business. 

It is more important than ever to speak with your customers, even customers who owe you money.

Reach out and speak with your customers. They will be reassured that you are still working.  Surely you cannot get blood from a stone, but some customers may be able and willing to pay you something. 

At very least, you will have a conversation with your customer and be able to assess their ability to pay in the short and long term. The information you obtain will help you manage your accounts receivable. You will be better able to plan which customers will be viable in the long term. Remember, this crisis is not going to last forever, and at some point, customers are going to want your product or service again, and will ask you to extend credit to them.

Some customers may need your product or service now, and you can use the opportunity to strike a deal with them to pay their outstanding balance first, and then a payment plan for new orders. 

Be flexible with your payment terms and payment options.

Use this opportunity to set up or revise payment plans with your customers. Offer to delay the first payment, or take an interest only payment the first month. 

If you have traditionally received your payments in person or in the mail, your payment stream will suffer, and you need to change it up. If you are not taking credit cards, start doing so immediately. Look at PayPal, ApplePay, Venmo, or any way to make it easy for people to pay you. 

Do not forget, even now, to document payment plans. 

The actions you take today will either hurt or help you in the long term. Invest your time in reaching out to your customers. Do not be afraid to contact customers who owe you money. You will be pleasantly surprised that many want to pay you, and will pay you something. Those that cannot pay you today might make a promise to pay you tomorrow. 






Do Collections Agencies Prosper in a Recession?

Posted by Marilyn Miller on March 31, 2020  /   Posted in Uncategorized

Conventional wisdom, even from Fed Chairman Jerome Powell is that we are likely in a recession. How deep and how long a recession we may experience is unknown, and anyone who claims they do know is simply guessing. 

People keep asking me, “A recession is good for your collection agency, right?” The answer is a resounding no. Contrary to what you may believe, collection agencies, especially small business agencies like ours, do not prey on people – in any economy. We do not delight in the misfortunes of others. We are a working in the middle of our clients and those who owe them money. We are working to keep our small business customers able to provide their products and services by recovering money owed to them.

If people are not working, they use whatever income they have to pay current bills. Not everyone will be unemployed or struggling. We have no way to determine which people pay until we contact them.

However, making contact with people, and listening will help us determine what we are up against. The truth is that most people sent to collections want to pay. They just cannot pay at the time, or do not understand they owe. 

Even now, in these uncertain times, we are talking with people. If they have lost their jobs, we put their account on hold. We are offering payment plans and waiving interest and fees where we can.  We do not report debts to credit bureaus. We do not execute legal judgments (garnishments, etc). 

We find that people are very open to discussing the money they owe, and willing to work out a plan to pay in the future. My partner says that we are “making friends” by treating people with respect, while all the while still delivering results to our customers.

We encourage our small business clients to use this time to review their accounts receivable and institute or revise their plan to manage them. We advise them to use this time to strengthen their credit practices and to review their customer contracts

We are taking a long term view and taking it day by day, doing our part to keep the economy going. 


Using Collection Letters in a Tough Economy

Posted by Marilyn Miller on March 30, 2020  /   Posted in Uncategorized

How well you communicate with customers that owe you money is important. In tough economic times, what you say is even more important than ever.

In the past week, I have received emails from my bank, my doctors and just about every retail establishment I have visited in the past year. Everyone says we are “all in it together” and offer to help.

There is no reason that you have to stop communicating with customers who owe you money. Management of your accounts receivables must not stop during a down economy. Even if you know customers cannot pay you, keep communicating with them.

Not every business is closed. Not every person who owes you money is unemployed. You will not know unless you ask.

A debt collection letter is a key tool to recover money owed to you. Take a look at the collection letter you normally use. What changes can you make that will communicate to customers that you do care while still asking for the money owed to you?

Here are some ideas:

Offer a payment plan or extend terms on current payment plans 

Let customers know that you are willing to work with them. It is better to have smaller payments than no payments at all. Similarly, you can delay payments entirely for a month and then use the opportunity 30 days later to have another conversation with your All payment plans should be in writing. 

Offer a small discount for payment in full.

Offer a small discount for balances paid in full. However, if you do this you must make certain to specify that it is a limited time offer and that full amount will be due and owing if not made in the specified offer period.

Waive interest and late fees.

You can be very creative with finance charges. You can waive them altogether or suspend them for a period of time. 

Give customers information on how to make payment while still practicing social distancing.

If your customers are used to paying you in person, make sure you give different options: pay online, pay by mail, and so forth. If you are working only reduced hours, let customers know when you will be in the office to answer questions regarding their account or to take their payments over the phone.

Customers want to think you are still in business, even if your door is closed.

Keep communicating!




Eight Signs it is Time to Hire a Collection Agency

Posted by Marilyn Miller on March 26, 2020  /   Posted in Uncategorized

You have a growing small business, are “doing everything right”. You use customer contracts and have a good plan to recover bad debt in-house. When do you need to hire a collection agency?

Here are 8 signs it is time to get some outside help:
  1. You have a growing number of receivables over 90 days past due.
  2. You are spending too much time chasing non-paying customers and you do not have enough time for sales and customer service.
  3. You are having trouble paying your creditors because you are owed so much money.
  4. You do not have the cash flow to hire new employees or buy new equipment.
  5. Customers you have been billing move and you have no way to find a new address or contact information for them.
  6. You and your staff do not wish to be involved with customer disputes over payment.
  7. You have been going to small claims court and getting judgments, but are still not getting paid.
  8. Your accountant tells you that you cannot get a tax benefit from writing off your bad debt.

When small business owners to not get paid, it hits the community and people in the community immediately. Small business owners usually pay themselves last, and if they do not have the cash flow, they work for nothing. Heck – even President Trump has been accused of non-payment to small businesses.

Hiring a collection agency can save you time and put cash back into your business.

Debt collection agencies have resources to research and find people and their assets. They are expert negotiators who know how to handle disputes. They can set up effective payment plans and make sure people pay when they say they will. If you have obtained court judgments that you cannot collect, a collection agency knows how to attach assets, and execute court judgments using liens.

Hiring a debt collection agency may be the best business decision you make this year!

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