The Stevens-Lloyd Group, Inc.

Credit Management Services: 5 Additional Tips for Guaranteeing Recovery of Your Accounts Receivables

In our first installment of our Credit Management Services series, we discussed the importance of deploying successful debt collection techniques in order to help the creditor immediately settle their outstanding accounts receivables. In that article, we introduced you to Joy Paul, an in-house Collection Manger for TM Building Damage Restoration, the issues…

In our first installment of our Credit Management Services series, we discussed the importance of deploying successful debt collection techniques in order to help the creditor immediately settle their outstanding accounts receivables. In that article, we introduced you to Joy Paul, an in-house Collection Manager for TM Building Damage Restoration, the issues she faced when attempting to collect, and 7 of her Tips for Success to Guarantee Recovery 100% of Your Outstanding Receivables.

If you have not had a chance to read that previous article you can do so by CLICK HERE.

In Today’s post we are continuing on with Joy’s Tips for collection of Your Accounts Receivables.
Tip #8 – Make Copies Of All Checks Received

Joy posts all checks she receives utilizing QuickBooks. This goes along with what we’ve discussed earlier
– documenting everything!

Tip #9 – Attend A Collection Law Seminar.

Joy attended a collection law seminar. The course taught her, among other things, the need for a punch list (discrepancies) such as having to amend the roof, warranties, etc.

The course also studied and examined the Federal Fair Debt Practice Act (FFDPA). The FFDPA applies to all persons attempting to collect a debt. For example, there are things you can’t say and times you can’t call, for instance before 8 a.m. or after 9 p.m. You must disclose the nature of your call. The FFDCPA regulates all activities. For a complete synopsis of the FFDCPA, see
https://www.ftc.gov/enforcement/rules/rulemaking-regulatory-reform-proceedings/fair-debt-collection-practices-act-text

It is important to ascertain whether your claim is commercial or individual. Mostly, FDCPA laws don’t apply when collecting against businesses that owe money. For example, it is okay to email and send faxes if the claim is for a commercial debt.

Even though the FDCPA is designed for the consumer, you do want to comply with the FDCPA within reason. Common sense facets to consider are not to make false threats of lawsuits, don’t harass the debtor, and keep conversation clean and professional. The latter is much more effective than yelling and screaming, which are completely ineffective!

Use finesse and tact. For instance, state that “I know that your company wants to do the right thing” or “We are not set up as a bank or lending institution.”

Tip #10 – Demand Letters

(Click on the image for a larger view)

Accounts Receivables | Debt Collection Demand LetterFor problem accounts, Joy deploys six invoices or demand letters asking for immediate payment. Your goals are to get the debtor’s attention, avoid being ignored, avoid any misunderstandings, and to get paid-in-full promptly. Make it clear when the bill is to be paid, how much, any discounts or penalties applicable, and in some cases, the consequences for not paying. Below is format Joy utilizes in her “Final Demand Letter”.

Joy utilizes a 10-day Demand Letter. This would be the 6th letter or invoice. Allow debtor 10 business days to pay. An account over 90 days is considered past-due.

See example to the right:

Tip #11 – Work Authorizations/Written Agreements

(Click on the image for a larger view)

Accounts Receivables | Work Authorization FormThrough the use of a work authorization form or proposal, Joy is able to recover collection fees, attorney’s fees and interest should legal action be deemed necessary. The work authorization form serves as a contract and detailed verbiage is stated at the bottom of the form.

In your business, if there are predictable reasons why debtors think they don’t need to pay, acknowledge those reasons. If you don͛t persist and you won’t be paid. For example, Joy in her work authorization form states that if the insurance company doesn’t pay it’s the responsibility of the customer to pay.

See example to the right:

As you can see, all of the terms and conditions are spelled out on the contract, including the fact that if the insurance doesn’t pay, the company will be responsible to pay TM Building. The proposal is in case of an out of pocket cost or upgrade.

Tip #12 – Personal Guarantees

It is a good idea to obtain personal guarantees and credit applications. If a company is sold or goes out of business, the personal guarantor can be contacted at home and a demand can be made against him personally.

On corporate debts, if the guarantor signs the PG as John Smith, President; this voids the effect of the PG. In this case, he would be signing it only as an agent of the corporation. The same principle applies for signers of NSF checks.

If a company is sold, the new owners will be responsible if the product was purchased after the sale date. Prior to the sale date, the old owners are liable.

If a company changes names, procure a new credit application and personal guarantee. If this hasn’t been done, it is possible that a claim can be made against the successor company. The sale can be considered as a constructive merger if a pattern of continuity can be established. Examples would be same management, same employees and the same shareholders.

Disputes

Joy discovered that in many cases, the debtor manufactures a dispute because they don’t want to pay. Through experience, she is skillfully able to get the debtor to admit how much they owe net of credit, the amount not in dispute. Never let the debtor off the hook without that information.

An example would be a $3,500 claim, debtor disputes $500 and $3,000 is admitted. An appropriate question: “When can I count on your check of $3,000, Mr. Jones?” Force-feed the debtor. Close the deal and confirm in writing

Writing Your Final Demand Letter

What do you do when all other debt collection attempts fail? You have a choice: either let it and your money go or take the matter to the courts. In the case of the latter, in order to file your suit, a written final demand letter is highly recommended by most small claims courts and is in fact required by some…

Always keep in mind that placing your debt collections in the hands of the court is the last thing you really ever want to do. You want to collect the monies you are owed, not jump through more hoops and invest more of your precious time leaving the decision in the hands of individuals not familiar with all of the facts. This is where the Final Demand Letter comes in. It conveys the need to pay while simultaneously fulfilling your legal requirements. A properly worded final demand letter results in payment in as many as one-third of all cases. We͛ve found that the written word is far more powerful at this stage of the game than verbal communication.

Think about the times you were embroiled in a heated debt collection situation. After exchanging angry words, perhaps even the threat of legal action, what happened? If you͛re like most people, nothing, you didn͛t pursue the claim.

Things change when you write your final demand letter. In your letter, lay out the reasons why the other party owes you money. Be clear to state if payment is not received, you will be left with no other option than to take the matter to small claims court or hand the account over to a professional debt collection agency. With the written word in hand, instead of just another voice of yet another bill collector, you and your claim take on a sobering reality.

With a final demand letter in hand, the debtor must now face the reality that you have no intention of simply going away but will take the matter before the courts or place your account in the hands of a collection agency.

Things to include in your Final Demand Letter
When writing your final demand letter, keep the following points in mind, regardless of whether or not you intend on pursuing them in small claims court

The Opening – Be firm. Immediately grab the readers attention by getting straight to the point of your letter.

Heavy Language – Reference Fine print or legalese in your contract or work order. This will add a serious tone to letter, especially if the customer has signed their name on the same document.

Demand Payment – It is imperative that you express exactly what it is you want. Ask for a specific amount of money to be paid, or for some other specific action to be taken, by a set date.

Consequence – State your intention near the end of the letter and give your customer an opportunity or a potential “out” of this situation (ex: Pay now and preserve your credit rating.).

Closing – Be Polite and professional. Though your attitude is firm and to the point, refrain from any personal attacks or antagonistic language in your final demand letter. You want the recipient to thinking upon receipt of your letter: How much of my time will this take? What are the consequences if I lose? How much more will my additional expenses be? You will often find the other party will be open to making a compromise or settlement.

Be sure to enclose a copy of your invoice or work order and be sure to review the history of the entire dispute. A judge or hearing officer will want to review your letter to familiarize themselves with the facts of the case.

Be sure to send your final demand letter by certified mail. This not only provides you with receipt confirmation if conveys the message to the recipient that you mean business.

(Though not used as much anymore, some business still handle everything via fax. If faxing the letter, be sure to print a confirmation report from your fax machine and attach it to your copy of the letter for proof.)

Note: If your debtor is a corporation, mail your final demand letter to the Statutory Agent, copying the debtor. You can call or visit their Sectary of State͛s website to obtain that information. If the debtor is not a corporation, be sure to mail your letter to the owner or partner; avoid sending it to a manager or clerk. You can pull the credit application you have on file to find the names of the owners, partners or corporate officers. You want maximum impact and who you send your final demand letter to can make all the difference.

Do you have questions regarding your final demand letter? contact The Stevens-Lloyd Group, Inc today. We͛ll gladly walk you through the process.

Debt Collection Software VS. Hiring a Collection Agency

Debt collection software are programs designed to help companies track debts. These software programs are designed to keep track of your outstanding receivables, payments owed, fines, penalties and other matters concerning the accounts of debtors. But is it beneficial for a company to buy and use one of these software tools or is hiring a commercial collections agency a more reliable option?
The Benefits of using Debt Collection Software VS. Hiring a Commercial Collection Agency
The Benefits of debt collection software
First of all, debt collection software can help you get organized. Instead of having piles of paperwork in the office, debt collection software can consolidate all the information in one place. At the same time, debt collection software can be easily updated. Once the debtor pays a certain amount, it can be easily recorded by the software. This way, you can keep better track of the activities in each account. You will have all the necessary information, including the date and time payment was made and the amount that was paid.

Second, debt collection software is a great way to keep track of your correspondence with your outstanding accounts. Debt collection software has features that allow you to record the exact day and time the collection letters were sent–– In some cases, debt collection software can even record portions of phone calls. If ever the case goes to court, you can use the software to show evidence that you tried to maintain correspondence with the debtor.

Lastly, using debt collection software can often be a cheaper alternative to hiring a commercial collections agency to track accounts for you. For smaller businesses, hiring an external agency or person to do organization and collection of debts can be a bit costly. Debt collection software can prove to be a cheaper alternative

The Benefits of hiring a Commercial Collections Agency

Software programs are tools that can be used to retrieve the funds that are owed you. However, they are just that, tools. And a tool is only as good as the experience of the one using it. With a commercial collections agency, expertise and experience are two things that come with the service and normally exceeds even the most robust programs. Having that expertise working for you improves your chances of recovering some, if not all of the amount you are owed. Agencies often use professionals to collect your money using proven techniques and systems to optimize success

The primary benefit of using a commercial collections agency over debt collection software is the whole point of using them it in the first place: getting paid. By using an agency, you outsource the collection process allowing someone else to aggressively pursue your collection efforts. When debtors are contacted by a collections agency, a certain amount of fear is instilled into the debtor. Without that fear, debtors may be less inclined to respond and are often less concerned about the risks of not paying you what they owe. The consistent and aggressive pursuit of an agency offers a better return on investment for you recovering most if not all of your outstanding receivables.

Documentation is an important factor. A collection agency will keep track of all of their correspondence and collection efforts including direct mail, email, telephone calls, and in-person collection attempts, noting any comments made by the debtor and/or any amounts that have been paid. In doing so, collection agencies put together a timeline and help solidify your case should you choose to sue the debtor in a court of law. As mentioned above, debt collection software will keep track of all of your correspondence, however, it is up to you to input all of that data.

The most important factor of all: time. The software you use should help make debt collection easier. It should help you monitor the accounts, and in the event that the debtor disputes the debt, you can easily use the debt collection software to verify the nature of the debt. Though debt collection software can aide you in the tracking, documenting, and collecting of outstanding debts, it still requires time on your part to monitor the activities, input the information and pursue collection efforts; not to mention all of the time necessary to learn the software in the first place. Your focus as a business owner should be on your business; obtaining new customers and maintaining relations with existing customers needs to be a priority. You need to weigh your time and decide whether your business can afford you spending precious time performing your own collections or if outsourcing the task is the better option.

So which is it, Debt Collection software or Collections Agency?

In the end, it comes down to what is the best fit for you and your business. Whether you use a commercial collections agency or debt collection software for your recovery efforts, the choice is entirely up to you. With either option, there is no guarantee you will recover what is owed. With a commercial collections agency, there is usually a set of standard processes that they follow in an effort to retrieve the outstanding debts. With Debt collection software, whatever processes are used will be entirely up to you.