Maine Collection Agency: How to Pick the Right Agency for Your Business

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

A Maine collection agency can help a small Maine business improve their cash flow by recovering their bad debt. Agencies typically work on a percentage of sums recovered, with rates can vary based on many factors including the age and size of debt, type of business, number of files submitted annually.

A Maine collection agency seeking to recover debt owed by Maine consumers must be licensed and bonded. The Maine Department of Consumer Credit Protection in Gardiner is the licensing authority. A Maine collection agency seeking to recover debt owed by Maine businesses (commonly referred to as commercial or B2B collection) is not required to have a debt collection specific license. However, as with any relationship, you should verify that the agency is indeed a business authorized to conduct business in Maine.

Your first step is to clearly define, and then articulate your collection goals.

Many medical providers prefer a softer, more compassionate approach to debt collection. They want their agency to reflect the personality of their practice. Other companies, particularly in commercial collections want a more dynamic approach, up to and including actions in Maine Small Claims Court.

Once your goals are defined, you must clearly communicate them to potential agencies and see how their approach matches yours.
Other factors to consider are:

1.       Local – How important to you is it that your collection agency be in Maine? We recently successfully completed several large commercial collections for out of state companies who were owned money by businesses in Maine.  Being local created a sense of urgency, and it also provided us the opportunity to see firsthand if the business was still operating. For Maine consumers, a Maine collection agency would have more knowledge of local economic conditions such as mill closings that might impact the consumer’s ability to pay the bill.

2.       Experience – Does the collection agency have experience in your industry? Always ask for you check references.

3.       Credit reporting – While I personally believe that credit reporting is an overused tool in debt collection, if it is important to make sure the agency has the capability to do it.

4.       Research tools – Half of the people sent for collection will need some sort of research (referred to as “skip tracing” in collection-speak. How does the agency go about finding people and their assets?

5.       Technology – Does the agency have the tools to give you the information you need? Also, does their use of technology in contacting debtors work for you? Many agencies use automated calls to contact debtors – will that work for your customers?

6.       Compliance – Consumer agencies are governed by the Fair Debt Collection Practices Act. Medical debt collection must comply with HIPPA.

7.       Legal Capabilities – While Maine collection agencies who are not attorneys cannot represent you in Small Claims Court, if you believe you may want legal services, make certain your agency has a relationship with attorneys who can take your case to court. In the same vein, make certain the agency is experienced in post-judgment collection.

8.       Rate – Notice I listed this factor last – not because it is not important. A competitive rate is great, but make sure you know what is and what is not included. Most Maine collection agencies work on a “no collection, no fee” or contingency basis. What services are included in the rate? A low rate may mean your customer only receives one letter and a few phone calls.

In the end, hiring the right Maine collection agency may be the smartest move you make for your business this year. Best of luck with it.

Credit and Collections Pitfalls and How to Avoid Them

Posted by Marilyn Miller on October 05, 2020  /   Posted in Uncategorized

Credit and collections for small business can be tricky, but a good plan for the way you extend credit to customers, how you monitor your receivables and how you recover money not paid to you is crucial. Here are some pitfalls to avoid in the coming year.

One size fits all credit – Allowing customers to pay on credit is a privilege you should extend in a thoughtful way. Not every customer should be granted credit arrangements. Know your customers and how they pay. Save your best credit terms for your best paying customers. Others should earn the privilege.

Lack of Documentation – Every phase of your credit process should be documented, from a customer credit application to customer contract. Even a simple email confirming basic details is better than nothing. Remember though, that a customer contract must be bilateral, meaning that both parties must agree to it. Be sure to get a signature or an email confirming their agreement to contractual details.

Late or inaccurate billing – So many collection issues arise from bills that are either incorrect or are sent far too late. Invest some time for quality control before your invoices are sent to customers. Bill promptly.

No in-house collections procedure. You should always be on top of your 30/60/90 aging. Have a plan to contact delinquent customers by phone and by letter.

Waiting too long to outsource collections – After 90 days, if your customer is ignoring you, you need to bring in the experts. You cannot do it all, and when you hire a collection agency, you free up some time to focus on other aspects of your business. Waiting too long will cost you, and not only with a higher collection fee.

It does not take a good deal of time to improve your credit and collections efforts. It only takes commitment to a process.

How to Avoid Hiring a Collection Agency

Posted by Marilyn Miller on October 02, 2020  /   Posted in Uncategorized

Some small business owners avoid hiring a collection agency, ignoring that they have a problem with their accounts receivable. They simply put on blinders and focus on other things. They forego hiring a collection agency by claiming that is it too expensive, takes too much time, or not worth effort. While this is certainly an effective way to avoid hiring a collection agency, it is self-defeating. Delinquent accounts receivable can be ignored, but they do not collect themselves.

So how can small business owners address their delinquent customers, collect money owed to them and still avoid having to hire a collection agency?

Discontinue extending credit to customers.

If you do not extend any sort of credit by having all customers pay up front, then you will never have an issue with customers not paying. How feasible is this for your business? In many cases, it will make you less competitive. You would be avoiding one issue by creating another.

Require a customer contract for all credit customers

Lay out the terms of your credit agreement with customers before providing your product or service. Communicate your expectations for payment in advance. Explain how much, when and how the customer will pay, and explain what will happen if they do not pay as promised.

Your contract does not have to complex. Send a customer a quick email with details of payment and asked them to email back their consent, and you have a simple contract.

A customer contract can help settle disputes before they happen. A contract should be in writing. Oral contracts are legal but open the possibility of different recollections of the terms and conditions of the oral contract.

Make it easy for people to pay you.

People will pay you more regularly if you give them different payment options. You want your bill to be considered as important as any monthly bill. More and more people pay their bills online. If you give customers the option of paying your bill online, it can put your bill on equal footing with other obligations.

Design and implement a process for contacting delinquent customers and work it consistently.

Treat accounts receivable management with the same importance you give to sales, operations or customer service. Review accounts receivable regularly and contact customers as soon as they are late. Use a collection letter and personal phone calls. Be a friendly pest.

Can you avoid ever having to hire a collection agency? Maybe, maybe not. You can however greatly reduce the number of customers you refer for outside collection, if you give your accounts receivables the attention they deserve.

Consumer Rights and Creditor Rights: A Debt Collector’s View

Posted by Marilyn Miller on October 01, 2020  /   Posted in Uncategorized

Consumer rights and creditor rights are not mutually exclusive.  As respects collection of a delinquent debt, a consumer has the right to be treated respectfully. A consumer has the right to obtain complete and accurate information on the debt. Consumer rights are protected by the Fair Debt Collections Practices Act, or FDCPA a law put in place to shield consumers from abusive and deceptive practices by third party debt collection agencies.

The FDCPA is a very good law.

Consumers need to be protected from unprofessional collection agencies. You need only google “collection agency scam” to find a host of horror stories. Some of the news reported is not actually done by collection agencies, but by people pretending to be collection agencies to scam people by pretending to be the IRS, and so forth. Nevertheless, there are bad players among debt collectors – just as there are bad players in every industry. There are also many reputable collection agencies working hard to return money back to business owners and keep the economy moving.

Creditors also have rights, including the right to be paid for the work they do.

None of my clients want to work for free. Would you want to work and not be paid? Creditors have a responsibility to protect their right to be paid by communicating to their credit customers upfront the terms and conditions of their payment policy.

An effective debt collector stands at the intersection of consumer rights and creditor rights.

They are an advocate for their client – the creditor. The goal is and always should be to get the creditor paid. However, if consumer rights are protected, and the debt collector can clearly and professionally communicate with the consumer, chances of success are high.

Consumer debt collectors must be professional yet persistent. There really are instances where people have suffered a life even that leave them unable to pay. There are also instances when people do not take their responsibility to pay for services seriously. A good debt collector knows how to tell the difference.

So when does the process break down?

It breaks down when one or more of the parties neglect the rights of the other party. If a debt collector is abusive, chances are a consumer will take legal action. When a consumer does not respond to numerous requests for payment, then chances are the debt collection will progress and could impact the consumer’s credit rating or put the assets of the consumer in jeopardy. If a creditor is careless with their credit practices, and if they do not work in tandem with their collection agency, it will become difficult to get the best results.

Respect, professionalism and most importantly, communication are essential for all parties. Collection agencies must adhere to the law, and work with consumers to set up payment arrangements. Consumers should realize that when a debt is referred for outside collection, it is time to do something – even if that something is letting the agency know they cannot or will not pay. Creditors should trust and support their collection agencies, and give them all the tools they need to succeed.

Accounts Receivable Management 101

Posted by Marilyn Miller on September 30, 2020  /   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.

What Does a Debt Collector Do All Day?

Posted by Marilyn Miller on September 24, 2020  /   Posted in Uncategorized
Morning Coffee and Promises

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.

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.

Collection Agency: Too Expensive?

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

No small business owner wants to send a customer to collections and we encourage to set up a program in-house to monitor and follow up on aging receivables. However at some point it is time to escalate the issues, and hiring a debt collection agency.

 

Many small business owners have never worked with a collection agency before and when I speak with them, they are curious about a number of issues such as how the process will work or repercussions to their business. One of the top questions, however, is how much debt collection will cost their business.

 

 

 

 

 

 

 

 

 

 

The cost of debt collection depends on a number of factors.

Most collection agencies use a contingent commission compensation model, which means their fee is a percentage of any sums recovered. No collection means no fee. Rates vary, primarily based on aging of the debt. The older the debt, the higher the fee.

If a debt is over a year old our collection fee is likely 50%. Is that too expensive? Well consider the following:

  • The value of your delinquent receivables is zero. Until you are paid, that receivable cannot be used to feed your family or grow your business.
  • You can use a customer contract to offset part or all of the cost of collection. Your contract must be signed in advance and must include customer’s agreement to bear all costs of collection. If you take the time to include this wording in your contract, your agency can add at least part of their fee onto the debt and collect it from your customer, depending on state laws.
  • Your collection agency agrees to attempt to collect the debt for you before knowing the financial status of the customer or any other factors that might limit successful collection. Try to think of any other business that gets paid solely on results. If you hire an attorney to sue someone, you pay rather or not you get a favorable result. If a contractor comes to your home to look at a project, you may often pay an hourly rate, even if you decide not to proceed. A public relations firm can write great press releases and place them in key publications, but they cannot guarantee you business will result. A collection agency cannot guarantee they will collect all the money for all the files you send them. However, if they are not successful you do not pay the agency. 

So with a guarantee of no collection=no fee, it is not a question of whether or not a collection is too expensive. It is a question of how can you afford not to give them the opportunity to collect for you?

 

 

Customer Credit: If You Build it, They Will Pay

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

Getting paid on time is every small business owner’s dream. However, many business owners  take for granted that their customers know how and when they want to be paid. Sometimes, they don’t. If you make communicate to your customers and make it easy for them to pay you on time, they will.

Remember the film Field of Dreams? The main character (an Iowa farmer portrayed by Kevin Costner)hears a voice in a cornfield one day. It says, “If you build it, they will come” Costner listens to the voice, mows down his crops and build a baseball diamond in the middle of nowhere. He builds it…and “they” come.

If you build system for getting paid on time, then “they” (paying customers) will come. I have been in the financial world for over 25 years, and I believe that most people want to pay what they owe. I also believe that the more effectively you communicate how and when you expect to be paid and make it easy for people to pay you, the more likely you are to be paid on time, most of the time.

I get my electric bill every month on the same day, by email. I can pay it with two mouse clicks. It is amazingly simple, and I pay it instantly every month.

Your payment terms must be clearly communicated to customers before you do the work, and then reinforced when you bill them. Use a contract, even a simple one, to outline your payment terms. It is not enough simply to payment terms on your invoice afterwards. Customer must agree in writing beforehand.

Once you have a customer, how do you make it easy for people to pay you?

  • Follow up with your customer immediately after the job is finished. Make sure you have the right billing contact. Use the opportunity to thank them and ask that they are pleased with your service.
  • Your bills must be sent promptly and must be easy to understand. Sending them consistently on the same day every month should be your goal. Remember, you are trying to build good paying habits with your customer, so show them your good billing practices.
  • Require a deposit before you start a project. Customers with skin in the game are more likely to want to continue paying.
  • As your customers how they wish to receive their bills. These days many customers want to receive their bills by email.
  • Offer a discount for prompt payment. You will be surprised how many people will take advantage of your offer.
  • Accept credit and debits cards, ACH, PayPalApplePay and any other method of payment.
  • Consider a payment portal on your website. I have one, and its use increases every month.
  • Offer payment plans. Make sure to document them, with terms for repayment as well as the consequences if the payment plan is not followed.

Getting paid on time is not really hard. You can control it, and you should.

Debt Collection and Leverage

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

I just received word from a client that a patient we have been trying to reach since last year paid her bill in full. The reason she paid is that she called the doctor to make an appointment and was advised that her account was in collections, and that she would need to pay it in full before scheduling an appointment. So she called us and paid.

Now, this patient knew she had the money because we sent her notification of the debt, and she had been promising to pay it for some time.  What made her pay it now? Leverage!

There are many factors that can be an incentive for customers to pay you. One of the most powerful tools you may have is leverage. Leverage is the ability to without future product or service until your bill is paid. Not all business owners have the opportunity to use leverage. If you do have leverage use it to help recover delinquent accounts receivables.

Do not believe that using leverage you have is a negative thing. You are not “holding it over their heads”. You are asking them to fulfill their end of the bargain. You would not have provided the product of service or product if you knew that you would not be paid for it. 

A classic example of using leverage to get paid comes from the movie Ghostbusters. A snooty hotel manager refuses to pay the exorbitant bill presented to him for the removal of ghosts from his hotel ballroom. 

Bill Murray’s character, Dr Peter Venkman, offers to return the ghosts, which, of course would be disastrous for the hotel. Leverage!

Sometimes people give away their leverage, making it more difficult to get paid. Yesterday I received a new business inquiry who had obtained a small claims judgment but had not gotten paid. As we spoke, I learned that the judgment was against his former wife, who lived in the house with him along with their children. He was not willing to change his living situation, and I told him I thought in his current situation he had very little opportunity for payment.

Similarly, too many small business owners continue to provide customers with large outstanding balances product of service. Although in some cases, particularly in the medical field, it is difficult, perhaps impossible to deny service, it is important to set limits. It is important to have a process to know when and how you can and will 

I have a new file on my desk today from a contractor who had the perfect opportunity to file a mechanics’ lien against a customer’s property. Instead, he waited too long. No leverage!

Another collection file I have is for an auto repair shop that let a customer take his car without paying anything. Now, six months later, the customer claims not to have money to pay his bill. I believe that he would have found the money had my customer required payment before they released the vehicle. No leverage!

Here are some more examples of customer debt collection using leverage successfully:

  1. Pediatrician requires payment on account in order for parent to receive camp or  school physical form.
  2. Orthodontist requiring full payment for braces to be removed.
  3. On first cold day, home heating oil company requiring full payment on old balance before new fuel is delivered.
  4. Manufacturer combining new orders at a discount if old balance paid.

In some cases you can cut a customer off entirely. In other cases, you may only be able to limit them. Whatever you do, make certain to always require at least some payment. Remember, every time a customer makes a payment, they add to the statute of limitations, the time period you have to legally collect the debt.

Eight Signs it is Time to Hire a Collection Agency

Posted by Marilyn Miller on August 27, 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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