One of the issues we see day to day is the fact that many B2B clients don't have a solid relationship with the Accounts Payable clerks at their client companies. This is a problem!! Your invoice's likelihood and ability to be payed quickly may be in direct correlation to your AR clerks relationship with the AP clerk at the client company.
How do you build proper relationship? It begins when the client is brought on to your rolls. Have the AR clerk call the AP clerk and introduce themselves, maybe even send a small gift (cupcakes, specialty food item, something native to your area) , and begin a dialog. Have your AR clerk ask how the client company prefers invoices, snail-mail or electronic. Ask them what your company could do to make the process easier, is there a better day to send invoices to get paid quicker etc.
You see, COMMUNICATION is everything, and the sooner it begins, the better!!
If you have other concepts along this line send them to me bblackburn@therecoverynetworks.com......
31 March, 2009
06 March, 2009
Business Week Article...19% of employers plan to drop health benefits
By..Joanne Wojcik
Nineteen percent of employers responding to a new Hewitt Associates Inc. survey are planning to stop offering health benefits over the next three to five years, nearly five times as many as the 4% that said they were planning an exit strategy last year.
For those employers planning to continue to provide health benefits, keeping employees healthy has become the primary workforce issue in 2009, up from the No. 2 position in 2008, according to Lincolnshire, Ill.-based Hewitt's survey, "The Road Ahead: Emerging Health Trends 2009."
"Promoting employee accountability" was ranked the chief health and prevention component of employers' health care strategies in 2009, followed by "offering competitive benefits" and "managing health risk." In 2008, employers selected "offering competitive benefits" as their chief objective, followed by "promoting accountability" and "tightly managing health care cost trends."
"In today's environment, employers are under pressure to cut health care expenses, but they realize that short-term cost-management tactics do not address the underlying drivers of health care cost," Jim Winkler, head of Hewitt's North America Health Management Consulting practice, said in a statement. "This leaves them with two options: making a long-term commitment to improving the health of employees and their families, or exiting health care altogether." Among other survey findings:
· More employers are targeting specific health conditions within their employee populations than in previous years. Specifically, employers are targeting asthma, cardiovascular disease, depression and diabetes.
· When employers were asked to what extent health care reform proposals outlined by the Obama administration would affect their current health care strategies, 51% said they would have some impact, while 44% said it would have no impact.
· While one-third of executives think the Obama administration and Congress should address health reform in his first year in office, 63% believe it will take place in President Barack Obama’s first term. Moreover, 60% said the federal government should take the lead vs. 33% who said the federal government and the states should share responsibility.
A total of 343 benefits executives from a broad spectrum of industries responded to the survey, which was conducted between December 2008 and January 2009.
For more information about the survey, contact Maureen Mersch at maureen.mersch@hewitt.com or Mary Ann Armatys at maarmatys@hewitt.com.
Nineteen percent of employers responding to a new Hewitt Associates Inc. survey are planning to stop offering health benefits over the next three to five years, nearly five times as many as the 4% that said they were planning an exit strategy last year.
For those employers planning to continue to provide health benefits, keeping employees healthy has become the primary workforce issue in 2009, up from the No. 2 position in 2008, according to Lincolnshire, Ill.-based Hewitt's survey, "The Road Ahead: Emerging Health Trends 2009."
"Promoting employee accountability" was ranked the chief health and prevention component of employers' health care strategies in 2009, followed by "offering competitive benefits" and "managing health risk." In 2008, employers selected "offering competitive benefits" as their chief objective, followed by "promoting accountability" and "tightly managing health care cost trends."
"In today's environment, employers are under pressure to cut health care expenses, but they realize that short-term cost-management tactics do not address the underlying drivers of health care cost," Jim Winkler, head of Hewitt's North America Health Management Consulting practice, said in a statement. "This leaves them with two options: making a long-term commitment to improving the health of employees and their families, or exiting health care altogether." Among other survey findings:
· More employers are targeting specific health conditions within their employee populations than in previous years. Specifically, employers are targeting asthma, cardiovascular disease, depression and diabetes.
· When employers were asked to what extent health care reform proposals outlined by the Obama administration would affect their current health care strategies, 51% said they would have some impact, while 44% said it would have no impact.
· While one-third of executives think the Obama administration and Congress should address health reform in his first year in office, 63% believe it will take place in President Barack Obama’s first term. Moreover, 60% said the federal government should take the lead vs. 33% who said the federal government and the states should share responsibility.
A total of 343 benefits executives from a broad spectrum of industries responded to the survey, which was conducted between December 2008 and January 2009.
For more information about the survey, contact Maureen Mersch at maureen.mersch@hewitt.com or Mary Ann Armatys at maarmatys@hewitt.com.
16 February, 2009
Incentive
Incentive
Everyone acts according to incentive.
This is why many businesses choose to pay sales staff primarily by commission, so that the sales staff will have an incentive to close sales for their employers, and bring in more profit for the firm.
By building incentive into the system for their sales reps, they align their interests and ensure mutual benefit.
The trouble is, businesses (and their vendors) are actually disincentivized to do what is best for that business in the Accounts Receivable (A/R) Department.
But it isn’t obvious how.
It will take a little bit of work, but this report will walk you through, step-by-step, how your A/R department is losing you money every day, because of how incentive is mis-applied, and what you can do to fix it.
Part One:
The Business
Imagine you are a business owner.
You have a healthy business, with a pretty good Accounts Receivable department chugging away, issuing invoices and collecting payments.
But some of your clients don’t pay right away. In fact they can go pretty long without paying, and eat up a lot of your resources while you try to collect the debt.
You are referred to a third-party collections company that has agreed to collect all your bad debt for you without you paying anything at all unless they do collect. But, if they do collect, you have agreed to split that amount 50-50 with them. (A “contingency-fee”)
Sounds good so far, but consider this:
Studies have shown that, on average, accounts typically lose around 10% in value for every month that goes by without it being collected.
So, in round numbers, your $1,000 account is worth maybe $900 after 30 days, $810 at 60 days, etc…
At 12 months late, your accounts are only about 22% recoverable.
At some point though, you have to hand the account over to your collections company so they can initiate their collections efforts, before the value goes to zero, right?
But when?
You’re not going to do it at 30 days late, when it is still highly likely that your client will pay you, right?
That would be like giving away $450! (Since they would keep half of what they collect and its worth about $900 at this point)
What about at 60 days late? - It’s worth $810, so it will cost you $405 - no way!
Why would you? They are bringing very little value at this point but they still get a huge paycheck for doing what you probably could have done without them.
90 days late?.. 120 days?.. 360?..
You can’t submit it to them when it is fresh and still highly recoverable because that would be far too expensive, and essentially giving away your profit margin (or more).
Instead, you are forced to hold on to these accounts because you can’t afford to pay this company to collect on accounts that are only a little bit late.
You have to wait until you are sure that you aren’t going to be able to collect it yourself, before you turn it over to this company, or else you will end up handing over so much “good” money to chase the “bad” it isn’t even worth it.
Part Two:
The contingency collections firm
Now imagine that you are instead an owner of a contingency fee based collections firm. In fact, you own the very firm in our previous example.
You keep 50% on anything you are able to collect.
You have developed a pretty sizable client base and get a steady steam of past-due accounts.
Let’s say that one month you get a $100,000 account from a large IT firm. You also get ten $10,000 accounts, and a hundred $1,000 accounts.
Which accounts do you think you would focus on? Definitely the $100k account first, right?
Then the ten worth $10k? Of course.
Two-thirds of your potential profit is in this top eleven percent of these accounts.
Because you are paid based on what you collect, and because these accounts have much more money in them, you are incentivized to focus on these larger accounts.
Also, because you don’t have any accountability to your clients for how you choose to pursue the past-due amounts, you can basically file the smaller ones away to follow up on once you are done going after the big balances, if ever.
This is called Account Skimming, and it is very common in contingency fee firms.
But, what about those businesses that submitted those smaller balances?
What if all those $1,000 accounts that are 6 months late are yours, and you really need to get as much as you can out of them?
But it’s not going to happen because all of their time is spent on the bigger balances.
Because they, like you, want to make as much profit as they can, and that’s where the most potential is, in those mega-balances.
In addition, they are incentivized to use any harsh means to collect they see fit, since they don’t care about your relationship with this debtor, they just want to get a check out of them.
They also offer no peformance guarantees, because they want to have the freedom to focus on the bigger balance accounts, without being bothered by any guarantees to perform.
And, they offer no real information on what’s being done to pursue your debts, beyond a vague monthly statement with aggregate numbers. You can’t see what’s being done on each account as it happens, because they don’t want you to know.
So, here is the situation:
1. Businesses and A/R managers hold onto their aging accounts until the last possible moment.
And,
2. Contingency-Fee firms are able to ignore smaller balance accounts with no consequences.
This is why the contingency fee collections industry achieves only a 17% average collections rate!
Then they take their fee out of that 17%, netting you, the client, around 8.5%! (on average, meaning that half of the time you don’t even get this much.)
So that $1,000 account wastes away until you only get $85 for it.
They are so expensive because their recovery rate is so low…
But, their recovery rate is so low because they are so expensive… A classic catch-22.
It’s the system.
All the benefit is stacked on the side of the contingency-fee company, and all the cost is on the side of the business owner.
A better way
25 years ago, we recognized that the system was broken, and built a new one from the ground-up.
We charge a low flat fee, and guarantee our performance, why?
Because we charge an extremely low flat-fee, you, the business owner, are now actually incentivized to submit it while it is still fresh!
Because it doesn’t cost you an arm and a leg, you want us to go after them for you as soon as possible! (all the benefit of early submission, without the usual high cost)
It costs the same to submit them at 30 days late as it does at 300 days late!
Let’s use the same numbers from the above example.
If it is a $1,000 account, it will cost you $35 to submit it. Period.
And, we are incentivized to go after each and every account you submit to us, because of our guarantee to recover every account or you get to replace it free of charge!
It’s the system. It harnesses the power of incentive to benefit you.
In fact, if you implement our comprehensive Cash Management System, you will see a recovery rate of well over 80% on all past-due accounts!
You will also see your on-time payments skyrocket, because you can focus like a laser beam on getting those fresh accounts paid before they become past-due.
The system works.
Our recovery rate is so high because we’re inexpensive, and charge a flat-fee.
It’s the only way a recovery system can work to its maximum potential.
And we’ve built many features in to the system to safeguard its success including:
• 100% access to real-time account activity via dedicated web portal
(you can see everything at all times, complete accountability)
• Every penny is sent directly to you,
(we do not delay, intercept, or take a percentage of anything)
• You dictate the tone of the campaign, in order to preserve your client relationship
(no more rude collectors alienating your customers)
These contingency fee companies grow their profits at the cost of yours.
Their system is broken.
Put your business ahead of theirs, and implement a recovery system that actually works, because it was designed to benefit you.
Call today for a free Recovery Analysis to find out just how much money we can free up for your firm within the next 30 days.
Everyone acts according to incentive.
This is why many businesses choose to pay sales staff primarily by commission, so that the sales staff will have an incentive to close sales for their employers, and bring in more profit for the firm.
By building incentive into the system for their sales reps, they align their interests and ensure mutual benefit.
The trouble is, businesses (and their vendors) are actually disincentivized to do what is best for that business in the Accounts Receivable (A/R) Department.
But it isn’t obvious how.
It will take a little bit of work, but this report will walk you through, step-by-step, how your A/R department is losing you money every day, because of how incentive is mis-applied, and what you can do to fix it.
Part One:
The Business
Imagine you are a business owner.
You have a healthy business, with a pretty good Accounts Receivable department chugging away, issuing invoices and collecting payments.
But some of your clients don’t pay right away. In fact they can go pretty long without paying, and eat up a lot of your resources while you try to collect the debt.
You are referred to a third-party collections company that has agreed to collect all your bad debt for you without you paying anything at all unless they do collect. But, if they do collect, you have agreed to split that amount 50-50 with them. (A “contingency-fee”)
Sounds good so far, but consider this:
Studies have shown that, on average, accounts typically lose around 10% in value for every month that goes by without it being collected.
So, in round numbers, your $1,000 account is worth maybe $900 after 30 days, $810 at 60 days, etc…
At 12 months late, your accounts are only about 22% recoverable.
At some point though, you have to hand the account over to your collections company so they can initiate their collections efforts, before the value goes to zero, right?
But when?
You’re not going to do it at 30 days late, when it is still highly likely that your client will pay you, right?
That would be like giving away $450! (Since they would keep half of what they collect and its worth about $900 at this point)
What about at 60 days late? - It’s worth $810, so it will cost you $405 - no way!
Why would you? They are bringing very little value at this point but they still get a huge paycheck for doing what you probably could have done without them.
90 days late?.. 120 days?.. 360?..
You can’t submit it to them when it is fresh and still highly recoverable because that would be far too expensive, and essentially giving away your profit margin (or more).
Instead, you are forced to hold on to these accounts because you can’t afford to pay this company to collect on accounts that are only a little bit late.
You have to wait until you are sure that you aren’t going to be able to collect it yourself, before you turn it over to this company, or else you will end up handing over so much “good” money to chase the “bad” it isn’t even worth it.
Part Two:
The contingency collections firm
Now imagine that you are instead an owner of a contingency fee based collections firm. In fact, you own the very firm in our previous example.
You keep 50% on anything you are able to collect.
You have developed a pretty sizable client base and get a steady steam of past-due accounts.
Let’s say that one month you get a $100,000 account from a large IT firm. You also get ten $10,000 accounts, and a hundred $1,000 accounts.
Which accounts do you think you would focus on? Definitely the $100k account first, right?
Then the ten worth $10k? Of course.
Two-thirds of your potential profit is in this top eleven percent of these accounts.
Because you are paid based on what you collect, and because these accounts have much more money in them, you are incentivized to focus on these larger accounts.
Also, because you don’t have any accountability to your clients for how you choose to pursue the past-due amounts, you can basically file the smaller ones away to follow up on once you are done going after the big balances, if ever.
This is called Account Skimming, and it is very common in contingency fee firms.
But, what about those businesses that submitted those smaller balances?
What if all those $1,000 accounts that are 6 months late are yours, and you really need to get as much as you can out of them?
But it’s not going to happen because all of their time is spent on the bigger balances.
Because they, like you, want to make as much profit as they can, and that’s where the most potential is, in those mega-balances.
In addition, they are incentivized to use any harsh means to collect they see fit, since they don’t care about your relationship with this debtor, they just want to get a check out of them.
They also offer no peformance guarantees, because they want to have the freedom to focus on the bigger balance accounts, without being bothered by any guarantees to perform.
And, they offer no real information on what’s being done to pursue your debts, beyond a vague monthly statement with aggregate numbers. You can’t see what’s being done on each account as it happens, because they don’t want you to know.
So, here is the situation:
1. Businesses and A/R managers hold onto their aging accounts until the last possible moment.
And,
2. Contingency-Fee firms are able to ignore smaller balance accounts with no consequences.
This is why the contingency fee collections industry achieves only a 17% average collections rate!
Then they take their fee out of that 17%, netting you, the client, around 8.5%! (on average, meaning that half of the time you don’t even get this much.)
So that $1,000 account wastes away until you only get $85 for it.
They are so expensive because their recovery rate is so low…
But, their recovery rate is so low because they are so expensive… A classic catch-22.
It’s the system.
All the benefit is stacked on the side of the contingency-fee company, and all the cost is on the side of the business owner.
A better way
25 years ago, we recognized that the system was broken, and built a new one from the ground-up.
We charge a low flat fee, and guarantee our performance, why?
Because we charge an extremely low flat-fee, you, the business owner, are now actually incentivized to submit it while it is still fresh!
Because it doesn’t cost you an arm and a leg, you want us to go after them for you as soon as possible! (all the benefit of early submission, without the usual high cost)
It costs the same to submit them at 30 days late as it does at 300 days late!
Let’s use the same numbers from the above example.
If it is a $1,000 account, it will cost you $35 to submit it. Period.
And, we are incentivized to go after each and every account you submit to us, because of our guarantee to recover every account or you get to replace it free of charge!
It’s the system. It harnesses the power of incentive to benefit you.
In fact, if you implement our comprehensive Cash Management System, you will see a recovery rate of well over 80% on all past-due accounts!
You will also see your on-time payments skyrocket, because you can focus like a laser beam on getting those fresh accounts paid before they become past-due.
The system works.
Our recovery rate is so high because we’re inexpensive, and charge a flat-fee.
It’s the only way a recovery system can work to its maximum potential.
And we’ve built many features in to the system to safeguard its success including:
• 100% access to real-time account activity via dedicated web portal
(you can see everything at all times, complete accountability)
• Every penny is sent directly to you,
(we do not delay, intercept, or take a percentage of anything)
• You dictate the tone of the campaign, in order to preserve your client relationship
(no more rude collectors alienating your customers)
These contingency fee companies grow their profits at the cost of yours.
Their system is broken.
Put your business ahead of theirs, and implement a recovery system that actually works, because it was designed to benefit you.
Call today for a free Recovery Analysis to find out just how much money we can free up for your firm within the next 30 days.
09 January, 2009
How to get the money flowing again, in spite of the economic slowdown.
Have you heard of the 80/20 rule of business?
I'm sure you have. I was freshly reminded of it, in a conversation
with a colleague the other day. And, it got me thinking...
A few years ago, researchers discovered a principal that seemed to
hold true across every industry - from sole proprietors to Fortune
500 companies - consumer behavior, administrative functions,
employee resources - they all are subject to this rule:
That 80% of results come from 20% of actions.
20% of your product line will be 80% of your sales.
20% of your time will bring in 80% of your revenue.
20% of your resources fund 80% of your profits.
This begs the question: what are those "80%" activities that are
responsible for the 80% of your profits?
Also, this means that all the rest of your efforts are only
affecting 20% of your profit.
Successful businesses have found that by focusing on the "80%"
functions, they can improve their bottom line very dramatically,
very quickly.
And, since it only takes 20% of the effort, improvements can be
made quickly and easily.
What are your businesses "80%" activities?
There is a big one that may surprise you.
It is your Accounts Receivable Department.
Many businesses are bleeding money out of their A/R department
because of outdated methods and out of control costs.
I wonder how much profit you could save just by making a few
simple adjustments.
Below you will find a couple of blog posts I've written that will
help you focus on the 80% that can reap huge rewards by boosting
bottom line profitability.
I think they will be helpful.
Drop me a line if they are, or if you would like to talk through
your specific company's processes to see how we can get that 80%
rule working for you.
Bob Blackburn
Managing Director
Cash Recovery Network
I'm sure you have. I was freshly reminded of it, in a conversation
with a colleague the other day. And, it got me thinking...
A few years ago, researchers discovered a principal that seemed to
hold true across every industry - from sole proprietors to Fortune
500 companies - consumer behavior, administrative functions,
employee resources - they all are subject to this rule:
That 80% of results come from 20% of actions.
20% of your product line will be 80% of your sales.
20% of your time will bring in 80% of your revenue.
20% of your resources fund 80% of your profits.
This begs the question: what are those "80%" activities that are
responsible for the 80% of your profits?
Also, this means that all the rest of your efforts are only
affecting 20% of your profit.
Successful businesses have found that by focusing on the "80%"
functions, they can improve their bottom line very dramatically,
very quickly.
And, since it only takes 20% of the effort, improvements can be
made quickly and easily.
What are your businesses "80%" activities?
There is a big one that may surprise you.
It is your Accounts Receivable Department.
Many businesses are bleeding money out of their A/R department
because of outdated methods and out of control costs.
I wonder how much profit you could save just by making a few
simple adjustments.
Below you will find a couple of blog posts I've written that will
help you focus on the 80% that can reap huge rewards by boosting
bottom line profitability.
I think they will be helpful.
Drop me a line if they are, or if you would like to talk through
your specific company's processes to see how we can get that 80%
rule working for you.
Bob Blackburn
Managing Director
Cash Recovery Network
24 November, 2008
From The Wall Street Journal
The economy has tanked, and even if sales are still chugging along, you're likely facing another vexing problem: Customers who pay late -- or never.
Small businesses are notoriously lax about their collections processes. Many worry about imposing strict payment policies or chasing deadbeat customers for fear they'll lose potential business. What's more, collecting money generally isn't too problematic when times are good.
But when the economy is bad, businesses that aren't savvy and aggressive about collecting payments get toppled by the domino effect of delinquent customers. Here are some strategies that collections experts say will bolster payment success in a bad economy:
Set Ground Rules
The most effective collections strategies are preventive -- steps you take before serving a customer. Businesses should have a formal, written payment-and-collections policy so customers know what's expected of them and the repercussions of not paying, says Len Sklar, a collections consultant in Redwood City, Calif.
This policy may include when payments are due -- preferably, no more than 30 days after a service or good is provided -- and how overdue bills will be handled. Sometimes larger businesses take advantage of small businesses with informal collections procedures. So laying out that you expect all your customers to pay within, say, 30 days, and explaining the consequences, offers more protection and makes it easier to communicate the problem with customers if they become delinquent. Your written policy might say, for instance, that invoices will be forwarded to a collections agency once they reach 60 days past due.
Businesses with customers that rack up large bills should consider requiring credit checks and credit references from prospective customers. They might also consider charging down payments, such as 25% or 50% of the total expected bill. Many small companies don't do this out of fear of losing customers. But that approach is counterproductive: Customers reluctant to undergo a credit check are often those least likely to pay.
"What happens is [businesses] are able to screen out customers they shouldn't be doing business with in the first place," Mr. Sklar says.
He also recommends that businesses consider offering more payment options, such as postdated checks, to make it easier for customers to pay. Of course, there are risks to allowing postdated checks -- but this can stave off the chance that customers might not pay at all.
Businesses should also keep a record of who pays the bills for each customer account and the bank and account information so they have that information if they eventually need it.
Offer Carrots, Sticks
Incentives help. If customers know they can shave 5% off their bill by paying early, they are more likely to do so. Similarly, a business is less likely to pay late if it faces a 10% penalty.
Ande DeGeer, owner of a Web-design business in Dawsonville, Ga., with roughly $40,000 in annual revenue, began charging customers a 50% down payment when she noticed payments trickling in later and later.
But there are still more than a dozen clients behind on payments, so she is now considering charging a 3% fee if they are more than 60 days late and 10% if they get beyond 90 days.
She thinks a late fee will give those late payers a little more incentive to prioritize paying her bill over another vendor's bill. "It used to be if I had one that lagged a little bit, it never concerned me," says Ms. DeGeer, 61. "Obviously, now it becomes a big worry."
Pursue Early and Often
One big mistake that businesses make is waiting too long to pursue late payers.
Research suggests that the longer you wait to collect, the less likely you ever will. Businesses should start contacting overdue customers within a few days after the original due date.
Phone calls are more effective than letters, says Michelle Dunn, a debt-collections expert in Groton, N.H. "When they're hearing from you -- even if they're not responding to you -- they're still putting your bill at the top of the pile," she says.
The first call should be a friendly reminder noting that the bill is overdue and asking for a deadline by which the payment will arrive. If a customer expresses an inability to pay in full, it can make sense to work out a payment plan. But if those payments continue to come in late, follow up with a few more phone calls -- or even stop by the customer's office if it's local.
Tell the customer you will unfortunately have to send the bill to a collection agency if you don't receive payment soon. Follow up your calls with notices by mail.
Ms. Dunn recommends using the big red-white-and-blue Priority Mail envelopes from the Postal Service for sending overdue-bill notices, since they relay urgency and garner more attention than a regular plain white envelope. "They always open that letter first," she says.
Keep to Your Word
If all your reminders don't work and a customer is 60 or 90 days overdue, it's time to offer some tough love and ship those invoices to a collection agency. You might try having the agency send "precollection" notices that threaten collections, which are cheaper than full-fledged collection procedures. But ultimately, if the debtor doesn't pay, you need to take action.
Collections agencies generally take a 30% cut of all collected sums. But at least you're getting something.
Kelly Spors covers small business for The Wall Street Journal.
05 November, 2008
101 Credit & Collection Tips
CREDIT AND COLLECTION TIPS & TECHNIQUES
Action strategies that you can put to work today in your business or practice. Collect More Money, Faster, for Less!
Credit and Collection Tips and Techniques
Collections today are said to be 95% psychology and 5% muscle. This booklet is a time tested collection of tips, techniques and thoughts that can aid you and your organization in collecting more money, faster, for less.
Much of what is contained in this booklet may be common knowledge and the types of things you and your organization are already doing on a daily basis. But, there are bound to be several ideas and action-oriented tips that, if you implement them, will help you do an even better job on your receivables.
101 CREDIT & COLLECTION TIPS & TECHNIQUES
Warning Signs of Potential Credit and Collection Problems:
1. Numerous inquiries about one of your accounts.
2. Customer switches banks frequently.
3. Client asking for clarification or proof of service more frequently.
4. Changes in client payment patterns.
5. Partial payments rather than payment in full.
6. Problems in the client’s geographical area.
7. Problems in the client’s industry.
Warning Signs Your Sales Force May See First:
8. Order levels shrinking.
9. Empty shelves in warehouse or retail floor.
10. Plant operating at less than capacity.
11. Your customer’s major customer is trouble.
12. Loss of key staff members.
13. Large layoffs or reductions in hours.
14. Restricted tours in areas of facility.
Warning Signs of Potential Bad Check Problems:
15. Checks with printed numbers under 300.
16. No preprinted name or address on the checks.
17. Starter checks with no printed information.
18. Address on check and ID don’t match.
19. No picture ID or expired picture ID.
Why Collection Problems Occur:
20. Fear of loss of future business (don’t pursue delinquencies
actively for fear of losing future business).
21. Absence of credit and collection policy or unclear policy.
22. Lack of training of the collection staff.
23. Reluctance to use outside collection sources early in
delinquency cycle.
Seven Reasons to have a Formal Written Credit & Collection Policy:
24. Clarifies who does what.
25. Facilitates training.
26. Supports actions.
27. Prevents unauthorized changes.
28. Promotes consistency.
29. Reduces wasted time.
30. Answers 95% of the routine questions.
Develop Your Credit and Collection “Skills:”
31. Two basic concepts: (1) Time is the greatest deteriorating factor on the collectability of an account, and (2) You will never have enough resources to collect all your delinquencies.
32. Implement an early referral or cure program to maximize your internal and external recoveries.
33. Early referral programs, in addition to collecting, help you identify and single out no-pays from slow-pays and treat each accordingly.
34. Accounts 60 days or less of age are over 80% collectible.
35. Accounts over 90 days of age are typically less than 50% collectible (internally).
36. Working accounts under 60 days delinquent will typically maximize your internal yield and recovery. Use a third party for those over 60-90 days delinquent while focusing internal efforts on the easier slow-pay accounts.
37. Develop and use a “60-day Pursuit Program.”
• Concentrate all internal efforts into the time frame where they are most profitable.
• Start on your delinquents early - contact them often in the 60-day period.
• Get progressively stronger as the 60 days go by.
38. Elements to use in the 60-day Pursuit Program - copies of statements/invoices, letters, sales visits, phone calls, suspend credit.
39. After 60-90 days your options are: continue to pursue internally with reduced results, write-off the account, use small claims court, attorney or outside full-service collection agency.
Collection letters:
40. The most easily automated way to collect money.
41. Can’t solve problems or determine if a payment problem exists.
42. One-way communication.
43. Subject to misunderstanding.
44. Collection letters maintain the dialogue with the debtor.
45. They are inexpensive.
46. Sets the stage for your next action.
47. Lets the debtor know you haven’t forgotten about them.
Other Considerations in Using Collection Letters:
48. Your bill is not the debtor’s only mail.
49. Your letter is competing against professional mailers.
50. Change the look of each mailing.
51. You must discourage the debtor from discarding your envelope.
52. You must encourage the debtor to open your envelope.
53. Increase the odds of positive results from your letter.
54. Hand address a blank envelope – they’ll open it up!
55. Add “Address Correction Requested” and “Forwarding
Postage Guaranteed” to the envelope.
56. Mark envelope to encourage opening: “Urgent,” “Personal,”
“Confidential,” “Do Not Fold,” “Personal & Confidential.”
57. Motivate the debtor to want to pay with appeals in your letters:
• “Save finance charges.”
• “Keep your good credit record.”
• “Remain a valued client.”
• “Avoid a bad debt record.”
• “Avoid outside collection agency placement.”
58. Make collection letters progressively stronger.
Telephone Collection Calls.
59. Telephone contact is more costly, but much more effective.
60. Calls should supplement letters and follow up on what was
said in the letters.
61. Being two-way communication, calls can identify and solve
problems.
62. Sell and keep control on the collection call.
Making the Collection Call:
63. The collection call format:
• Identify the debtor.
• Identify yourself.
• Demand payment in full.
• Psychological pause.
• Determine problem or objection.
• Find solution.
• Close the call and get commitment.
64. Collection calls have three phases:
1. Opening Phase.
2. Negotiation Phase.
3. Closing Phase.
Opening Phase Tactics:
65. Verify the debtor’s identity. (I’m calling for [name]…is this
he/she?)
66. Verify debtor’s address.
67. Identify yourself.
68. State the debt owed (You owe us $567.35…).
69. State the type of action you desire. (“I need payment in full
today.”)
70. Pause and let the debtor respond.
Negotiation Phase Tactic—4 Steps (in this order):
71. Step one: “I must have payment in full today.”
72. Step two: “When can you send payment in full?”
73. Step three: “How much can you send today?”
74. Step four: “When can I expect a payment?”
Closing Phase Tactics:
75. Collector recaps what is going to happen and when.
76. Payments are always expressed as dollar amounts.
77. Points in time are always expressed as dates.
78. Debtors must confirm that they understand the next action on
their part.
Selecting an Outside Agency:
79. Always use a full-service agency as opposed to letter-
writing services etc.
80. Look for agencies that report accounts to all three major
credit reporting bureaus.
81. Select an agency that works on a national basis rather than a
“local” or “regional” basis so that debtors will be pursued even
if they move out of your local area.
82. Utilize an agency that has optional litigation services available
if a lawsuit becomes necessary.
Twenty More Tips - Especially for Medical Practices:
83. Conduct new patient pre-registration (and credit analysis) by phone or mail in advance of the first office visit. This reduces bottlenecks in the office and gives time for a credit investigation.
84. Secure credit bureau reports on new patients with poor credit history - identify and solve payment problems before services are rendered.
85. Potential “danger signals” on new patient registration forms:
• Address - transient or a P.O. Box only.
• Telephone - none or unlisted.
• Business address/telephone - none or same as home.
• Occupation - none.
• Referral - none, “a friend,” “medical society,” or “yellow pages.”
• Marital Status - divorced or separated, young, single persons.
• Age - very young or very old.
• No insurance coverage.
86. Doctor hopping (if known).
87. “What bills do you have that are more important than your health?”
88. Collection ratio - 92% to 95% recovery is average to good for
most types of group practices.
Special Medical Collection Call Debtor Appeals:
89. “I’d guess you made several thousand dollars during the last
few months, yet we have received only one small payment.”
90. “We helped you in a time of need, and in good faith, we expected to be paid in a reasonable time.”
91. “I know that you want to protect your credit so you can feel comfortable should you or your family need to return.”
92. “Add to a current loan (to pay us off)…or let some other bills go as you have ours for the past few months.”
That’s 101 Credit and Collection Tips and Techniques that, when implemented effectively, can dramatically improve your cash flow and translate into improved profitability for your business.
Call Today
If you would like and Accounts Receivable Analysis, at no cost or obligation, of your current credit and collection procedures, or if you would like assistance with any of the tips and techniques in this booklet, please contact:
Bob Blackburn
Cash Recovery Network, powered by NCSPlus Inc.
Toll-Free (800) 363-7215 Ext 3751
Email: bblackburn@ncsplus.com
Web: http://www.cashrecoverynetwork.com
Know the Law
Debt Collection, Collection Agencies and Credit Reporting Bureaus are highly regulated. Complete copies of the Fair Debt Collection Practices Act (FDCPA), the Fair Credit Reporting Act (FCRA) and a specimen HIPAA approved agreement for healthcare providers are available at: Web: http://www.ncsplus.com/regulations
101 CREDIT & COLLECTION TIPS & TECHNIQUES
_________________________________________________
© Copyright 2008, National Credit Systems, Inc.and Cash Recovery Network All Rights Reserved.
Action strategies that you can put to work today in your business or practice. Collect More Money, Faster, for Less!
Credit and Collection Tips and Techniques
Collections today are said to be 95% psychology and 5% muscle. This booklet is a time tested collection of tips, techniques and thoughts that can aid you and your organization in collecting more money, faster, for less.
Much of what is contained in this booklet may be common knowledge and the types of things you and your organization are already doing on a daily basis. But, there are bound to be several ideas and action-oriented tips that, if you implement them, will help you do an even better job on your receivables.
101 CREDIT & COLLECTION TIPS & TECHNIQUES
Warning Signs of Potential Credit and Collection Problems:
1. Numerous inquiries about one of your accounts.
2. Customer switches banks frequently.
3. Client asking for clarification or proof of service more frequently.
4. Changes in client payment patterns.
5. Partial payments rather than payment in full.
6. Problems in the client’s geographical area.
7. Problems in the client’s industry.
Warning Signs Your Sales Force May See First:
8. Order levels shrinking.
9. Empty shelves in warehouse or retail floor.
10. Plant operating at less than capacity.
11. Your customer’s major customer is trouble.
12. Loss of key staff members.
13. Large layoffs or reductions in hours.
14. Restricted tours in areas of facility.
Warning Signs of Potential Bad Check Problems:
15. Checks with printed numbers under 300.
16. No preprinted name or address on the checks.
17. Starter checks with no printed information.
18. Address on check and ID don’t match.
19. No picture ID or expired picture ID.
Why Collection Problems Occur:
20. Fear of loss of future business (don’t pursue delinquencies
actively for fear of losing future business).
21. Absence of credit and collection policy or unclear policy.
22. Lack of training of the collection staff.
23. Reluctance to use outside collection sources early in
delinquency cycle.
Seven Reasons to have a Formal Written Credit & Collection Policy:
24. Clarifies who does what.
25. Facilitates training.
26. Supports actions.
27. Prevents unauthorized changes.
28. Promotes consistency.
29. Reduces wasted time.
30. Answers 95% of the routine questions.
Develop Your Credit and Collection “Skills:”
31. Two basic concepts: (1) Time is the greatest deteriorating factor on the collectability of an account, and (2) You will never have enough resources to collect all your delinquencies.
32. Implement an early referral or cure program to maximize your internal and external recoveries.
33. Early referral programs, in addition to collecting, help you identify and single out no-pays from slow-pays and treat each accordingly.
34. Accounts 60 days or less of age are over 80% collectible.
35. Accounts over 90 days of age are typically less than 50% collectible (internally).
36. Working accounts under 60 days delinquent will typically maximize your internal yield and recovery. Use a third party for those over 60-90 days delinquent while focusing internal efforts on the easier slow-pay accounts.
37. Develop and use a “60-day Pursuit Program.”
• Concentrate all internal efforts into the time frame where they are most profitable.
• Start on your delinquents early - contact them often in the 60-day period.
• Get progressively stronger as the 60 days go by.
38. Elements to use in the 60-day Pursuit Program - copies of statements/invoices, letters, sales visits, phone calls, suspend credit.
39. After 60-90 days your options are: continue to pursue internally with reduced results, write-off the account, use small claims court, attorney or outside full-service collection agency.
Collection letters:
40. The most easily automated way to collect money.
41. Can’t solve problems or determine if a payment problem exists.
42. One-way communication.
43. Subject to misunderstanding.
44. Collection letters maintain the dialogue with the debtor.
45. They are inexpensive.
46. Sets the stage for your next action.
47. Lets the debtor know you haven’t forgotten about them.
Other Considerations in Using Collection Letters:
48. Your bill is not the debtor’s only mail.
49. Your letter is competing against professional mailers.
50. Change the look of each mailing.
51. You must discourage the debtor from discarding your envelope.
52. You must encourage the debtor to open your envelope.
53. Increase the odds of positive results from your letter.
54. Hand address a blank envelope – they’ll open it up!
55. Add “Address Correction Requested” and “Forwarding
Postage Guaranteed” to the envelope.
56. Mark envelope to encourage opening: “Urgent,” “Personal,”
“Confidential,” “Do Not Fold,” “Personal & Confidential.”
57. Motivate the debtor to want to pay with appeals in your letters:
• “Save finance charges.”
• “Keep your good credit record.”
• “Remain a valued client.”
• “Avoid a bad debt record.”
• “Avoid outside collection agency placement.”
58. Make collection letters progressively stronger.
Telephone Collection Calls.
59. Telephone contact is more costly, but much more effective.
60. Calls should supplement letters and follow up on what was
said in the letters.
61. Being two-way communication, calls can identify and solve
problems.
62. Sell and keep control on the collection call.
Making the Collection Call:
63. The collection call format:
• Identify the debtor.
• Identify yourself.
• Demand payment in full.
• Psychological pause.
• Determine problem or objection.
• Find solution.
• Close the call and get commitment.
64. Collection calls have three phases:
1. Opening Phase.
2. Negotiation Phase.
3. Closing Phase.
Opening Phase Tactics:
65. Verify the debtor’s identity. (I’m calling for [name]…is this
he/she?)
66. Verify debtor’s address.
67. Identify yourself.
68. State the debt owed (You owe us $567.35…).
69. State the type of action you desire. (“I need payment in full
today.”)
70. Pause and let the debtor respond.
Negotiation Phase Tactic—4 Steps (in this order):
71. Step one: “I must have payment in full today.”
72. Step two: “When can you send payment in full?”
73. Step three: “How much can you send today?”
74. Step four: “When can I expect a payment?”
Closing Phase Tactics:
75. Collector recaps what is going to happen and when.
76. Payments are always expressed as dollar amounts.
77. Points in time are always expressed as dates.
78. Debtors must confirm that they understand the next action on
their part.
Selecting an Outside Agency:
79. Always use a full-service agency as opposed to letter-
writing services etc.
80. Look for agencies that report accounts to all three major
credit reporting bureaus.
81. Select an agency that works on a national basis rather than a
“local” or “regional” basis so that debtors will be pursued even
if they move out of your local area.
82. Utilize an agency that has optional litigation services available
if a lawsuit becomes necessary.
Twenty More Tips - Especially for Medical Practices:
83. Conduct new patient pre-registration (and credit analysis) by phone or mail in advance of the first office visit. This reduces bottlenecks in the office and gives time for a credit investigation.
84. Secure credit bureau reports on new patients with poor credit history - identify and solve payment problems before services are rendered.
85. Potential “danger signals” on new patient registration forms:
• Address - transient or a P.O. Box only.
• Telephone - none or unlisted.
• Business address/telephone - none or same as home.
• Occupation - none.
• Referral - none, “a friend,” “medical society,” or “yellow pages.”
• Marital Status - divorced or separated, young, single persons.
• Age - very young or very old.
• No insurance coverage.
86. Doctor hopping (if known).
87. “What bills do you have that are more important than your health?”
88. Collection ratio - 92% to 95% recovery is average to good for
most types of group practices.
Special Medical Collection Call Debtor Appeals:
89. “I’d guess you made several thousand dollars during the last
few months, yet we have received only one small payment.”
90. “We helped you in a time of need, and in good faith, we expected to be paid in a reasonable time.”
91. “I know that you want to protect your credit so you can feel comfortable should you or your family need to return.”
92. “Add to a current loan (to pay us off)…or let some other bills go as you have ours for the past few months.”
That’s 101 Credit and Collection Tips and Techniques that, when implemented effectively, can dramatically improve your cash flow and translate into improved profitability for your business.
Call Today
If you would like and Accounts Receivable Analysis, at no cost or obligation, of your current credit and collection procedures, or if you would like assistance with any of the tips and techniques in this booklet, please contact:
Bob Blackburn
Cash Recovery Network, powered by NCSPlus Inc.
Toll-Free (800) 363-7215 Ext 3751
Email: bblackburn@ncsplus.com
Web: http://www.cashrecoverynetwork.com
Know the Law
Debt Collection, Collection Agencies and Credit Reporting Bureaus are highly regulated. Complete copies of the Fair Debt Collection Practices Act (FDCPA), the Fair Credit Reporting Act (FCRA) and a specimen HIPAA approved agreement for healthcare providers are available at: Web: http://www.ncsplus.com/regulations
101 CREDIT & COLLECTION TIPS & TECHNIQUES
_________________________________________________
© Copyright 2008, National Credit Systems, Inc.and Cash Recovery Network All Rights Reserved.
30 October, 2008
What the Traditional Collection Industry Doesn’t Want You to Know
The Myths, The Realities, and a Better Way:
The amount of money owed by consumers to creditors is climbing, currently estimated by the Federal Reserve at an alarming $7.4 trillion dollars. Business debt is equally high, at over $8 trillion.
What does that mean for you, the business owner and creditor?
Every business, if it is to meet its current cash flow needs, must have ongoing and effective cash flow management. National Credit Systems is a professional cash-flow management system that enables American businesses to survive this cash-flow crunch.
So what are your options to recover this outstanding debt?
Conventional collection agencies charge their clients from 33-to-50% of the amount collected, which is often more than the client’s profit margin. Other traditional collection methods are equally expensive, or simply too flawed in their design to function effectively on the creditor’s behalf.
Let’s take a closer look at the myths – and realities – behind common conventional collection strategies.
Conventional Collection Strategies
Historically, business people have been able to turn to six kinds of services to help them collect delinquent accounts and bad checks:
1. Traditional collection services
2. Credit bureaus
3. Lawyers
4. Percentage Collection Agencies
5. Letter Writing Agencies
6. Check Guarantee Services
Let’s look at each in more detail, and debunk the myths that surround them.
Myths about Traditional Collection Agencies and Credit Bureaus
Myth: Traditional Collection Agencies charge a fair percentage to collect outstanding debt.
Reality: No. In fact, you should be prepared to pay between 33% and 50% of the amount collected by any credit bureau or traditional Collection Service you hire.
Myth: Hiring a traditional collection service or credit bureau to collect your outstanding debt will result in a much higher collection rate than any other method.
Reality: Their recovery ratio is shockingly low, only about 17%, leaving the creditor with net cash of less than 10 cents on the dollar.
Myths about Percentage Collection Agencies
Myth: Traditional percentage agencies will work each account diligently.
Reality: The percentage fee structure used by agencies, credit bureaus and attorneys leads to “skimming” of accounts. In other words, since the agency is paid out of what it collects on an account, they typically concentrate their efforts on those easier, larger, newer, local accounts, and limits efforts on the smaller, older and out-of-town accounts. This results in even lower recovery ratios.
Myth: As the business owner and creditor, I am in control of all my outstanding accounts.
Reality: Not so. Once a creditor turns over an account to a conventional agency, all further contact is between the debtor and the agency. The creditor is out of the picture entirely. If the agency ever manages to collect, the creditor still must endure a “clearing period” before getting paid.
Myth: Traditional agencies will treat my debtors with respect, so we can maintain a business relationship in the future.
Reality: When a business assigns an account to a conventional agency, it will most likely never do business with that debtor again. The reason: creditors often delay turning accounts over to a third party hoping to avoid paying collection fees. By then, accounts have seriously deteriorated and the agency employs harsh collection tactics, which often alienate the debtor, and usually precludes any chance of sustaining the customer relationship.
Myth: If your bad debt is not more than a year old, it should be easy to collect.
Reality: The longer you wait , the less you are likely to collect.
Myths about Lawyers
Myth: Lawyers are effective because they can threaten litigation.
Reality: Most lawyers are not collection attorneys, and are not equipped to handle collections. Some lawyers do specialize in debt collection however, they:
• can’t affect credit records.
• don’t have people in the field.
• won’t work small accounts.
• skim accounts profusely.
The outcome: The customer receives less than half an effort. Attorneys doing collection work are either doing a client a favor, or charging such a high percentage that they consume the creditor’s profit margin. Cash flow and the ultimate recovery ratio are reduced.
Myths about Letter Writing Services
Myth: Letter writing services are a good option because of their low cost.
Reality: Letter writing services (sometimes known as “flat raters”) sell their clients a series of reminder letters sent to debtors. Although low in cost (averaging $7 to $10 per account), the Fair Debt Collection Practices Act requires them to disclose to the debtor in the letter that the reminder service:
• can’t affect credit records.
• aren’t a collection agency.
• have no authority to collect the debt
• Won’t take any action, legal or otherwise, regarding the claim.
Consequently, they are ineffective. Even worse, hard core debts (the ones the creditor is most interested in collecting) simply deteriorate further as they age during the 2-to-3 month letter writing cycle.
Myths about Check Guarantee Services
Myth: Using a Check Guarantee Services is a good option.
Reality: Some retailers use check guarantee or check insurance services to protect themselves from bad check losses. These services generally charge from 3-4% of the gross amounts of the checks, but only about 2% of the checks are bad and are replaced by the Check Guarantee Service (called the “loss recovery”).
The problem with these check insurance services is that they are quick to reject checks that are not properly submitted (e.g., the check writer does not have two forms of identification). Only two of every 100 checks ever bounce after being re-deposited. The creditor pays the premium anyway.
Now, let’s take a look at a better way to collect outstanding debt:
The ideal way to collect debt is to utilize a Cash Recovery methodology. The system would have you the merchant spending time collecting the 15-60 day late (this is the time they are most collectable, and then shifting the accounts to a professional service that charges a small fee per account ($9-$60 per based on average balances would be fair.) This service would have all the money remitted directly to the merchant and provide complete accountability on each step of the process. Anything short of this would not be beneficial in the long run. Once this system has a 120 days to mature you will see less and less accounts getting to the 60+ day late mark!
This is not a “simple” solution. It will take a focus of effort and a paradigm change to make it effective. I look forward to hearing from you on your progress. Please email me with any questions bblackburn@cashrecoverynetwork.com.
© Cash Recovery Network 2008
The amount of money owed by consumers to creditors is climbing, currently estimated by the Federal Reserve at an alarming $7.4 trillion dollars. Business debt is equally high, at over $8 trillion.
What does that mean for you, the business owner and creditor?
Every business, if it is to meet its current cash flow needs, must have ongoing and effective cash flow management. National Credit Systems is a professional cash-flow management system that enables American businesses to survive this cash-flow crunch.
So what are your options to recover this outstanding debt?
Conventional collection agencies charge their clients from 33-to-50% of the amount collected, which is often more than the client’s profit margin. Other traditional collection methods are equally expensive, or simply too flawed in their design to function effectively on the creditor’s behalf.
Let’s take a closer look at the myths – and realities – behind common conventional collection strategies.
Conventional Collection Strategies
Historically, business people have been able to turn to six kinds of services to help them collect delinquent accounts and bad checks:
1. Traditional collection services
2. Credit bureaus
3. Lawyers
4. Percentage Collection Agencies
5. Letter Writing Agencies
6. Check Guarantee Services
Let’s look at each in more detail, and debunk the myths that surround them.
Myths about Traditional Collection Agencies and Credit Bureaus
Myth: Traditional Collection Agencies charge a fair percentage to collect outstanding debt.
Reality: No. In fact, you should be prepared to pay between 33% and 50% of the amount collected by any credit bureau or traditional Collection Service you hire.
Myth: Hiring a traditional collection service or credit bureau to collect your outstanding debt will result in a much higher collection rate than any other method.
Reality: Their recovery ratio is shockingly low, only about 17%, leaving the creditor with net cash of less than 10 cents on the dollar.
Myths about Percentage Collection Agencies
Myth: Traditional percentage agencies will work each account diligently.
Reality: The percentage fee structure used by agencies, credit bureaus and attorneys leads to “skimming” of accounts. In other words, since the agency is paid out of what it collects on an account, they typically concentrate their efforts on those easier, larger, newer, local accounts, and limits efforts on the smaller, older and out-of-town accounts. This results in even lower recovery ratios.
Myth: As the business owner and creditor, I am in control of all my outstanding accounts.
Reality: Not so. Once a creditor turns over an account to a conventional agency, all further contact is between the debtor and the agency. The creditor is out of the picture entirely. If the agency ever manages to collect, the creditor still must endure a “clearing period” before getting paid.
Myth: Traditional agencies will treat my debtors with respect, so we can maintain a business relationship in the future.
Reality: When a business assigns an account to a conventional agency, it will most likely never do business with that debtor again. The reason: creditors often delay turning accounts over to a third party hoping to avoid paying collection fees. By then, accounts have seriously deteriorated and the agency employs harsh collection tactics, which often alienate the debtor, and usually precludes any chance of sustaining the customer relationship.
Myth: If your bad debt is not more than a year old, it should be easy to collect.
Reality: The longer you wait , the less you are likely to collect.
Myths about Lawyers
Myth: Lawyers are effective because they can threaten litigation.
Reality: Most lawyers are not collection attorneys, and are not equipped to handle collections. Some lawyers do specialize in debt collection however, they:
• can’t affect credit records.
• don’t have people in the field.
• won’t work small accounts.
• skim accounts profusely.
The outcome: The customer receives less than half an effort. Attorneys doing collection work are either doing a client a favor, or charging such a high percentage that they consume the creditor’s profit margin. Cash flow and the ultimate recovery ratio are reduced.
Myths about Letter Writing Services
Myth: Letter writing services are a good option because of their low cost.
Reality: Letter writing services (sometimes known as “flat raters”) sell their clients a series of reminder letters sent to debtors. Although low in cost (averaging $7 to $10 per account), the Fair Debt Collection Practices Act requires them to disclose to the debtor in the letter that the reminder service:
• can’t affect credit records.
• aren’t a collection agency.
• have no authority to collect the debt
• Won’t take any action, legal or otherwise, regarding the claim.
Consequently, they are ineffective. Even worse, hard core debts (the ones the creditor is most interested in collecting) simply deteriorate further as they age during the 2-to-3 month letter writing cycle.
Myths about Check Guarantee Services
Myth: Using a Check Guarantee Services is a good option.
Reality: Some retailers use check guarantee or check insurance services to protect themselves from bad check losses. These services generally charge from 3-4% of the gross amounts of the checks, but only about 2% of the checks are bad and are replaced by the Check Guarantee Service (called the “loss recovery”).
The problem with these check insurance services is that they are quick to reject checks that are not properly submitted (e.g., the check writer does not have two forms of identification). Only two of every 100 checks ever bounce after being re-deposited. The creditor pays the premium anyway.
Now, let’s take a look at a better way to collect outstanding debt:
The ideal way to collect debt is to utilize a Cash Recovery methodology. The system would have you the merchant spending time collecting the 15-60 day late (this is the time they are most collectable, and then shifting the accounts to a professional service that charges a small fee per account ($9-$60 per based on average balances would be fair.) This service would have all the money remitted directly to the merchant and provide complete accountability on each step of the process. Anything short of this would not be beneficial in the long run. Once this system has a 120 days to mature you will see less and less accounts getting to the 60+ day late mark!
This is not a “simple” solution. It will take a focus of effort and a paradigm change to make it effective. I look forward to hearing from you on your progress. Please email me with any questions bblackburn@cashrecoverynetwork.com.
© Cash Recovery Network 2008
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