Small Business Debt Collection: What Convinces People to Pay Their Bill?

Posted by Marilyn Miller on November 17, 2017  /   Posted in Uncategorized

Small business debt collection is both rewarding and frustrating. It is rewarding when your efforts to recover bad debt are succcessful. It is frustrating when it consumes too much of your time. It is also disheartening to small business owners when they do not get paid. In every case, small business debt collection can be more effective if you know the thins to do that will convince people to pay you.

Smart payment plans – Sometimes people to not pay because they simply do not have the money. Giving them the opportunity to pay you what they can afford each month. You must however, document the plan and get them to sign their agreement. If you can, get a deposit or downpayment, even a small one. Customers with “skin in the game” may be more likely to pay the balance owed.

Leverage – If you have a product or service that your customer wants, and if they owe you money, use that leverage to get the old balance paid. Be creative. Roll the old balance into a new one. If you can, stop providing new service or product until the balance is paid in full.

Communication – Your bills should detailed and easy to understand. When a customer defaults on payment, a collection letter should be sent to the patient that lets them know you are serious about getting paid. Get on the phone and speak with key customers in an attempt to work something out.

Easy of payment – Give customers a variety of ways to pay you. Know your customers and how they pay, and respond to their needs and preferences. If your customers want to mail you a check payment, provide an envelope with your bill. If your customers want to pay their bills online, give them the opportunity to do so.

Escalation – Some people are only going to pay you if you escalate the matter by sending it to your collection agency or filing a suit in Small Claims Suit.

Not every approach works for every customer. You will see fhat if you can figure what “turns” a file, then your small business debt collection efforts will be more successful and rewarding.


Maine Collection Agency: How to Choose the Right One

Posted by Marilyn Miller on November 15, 2017  /   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.

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.



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