Credit Management Services: 5 more Tips for Successful Receivables Recovery
- Commercial Debt Collection
In out first installment of our Credit Management Services series and successful recovery of outstanding receivables, we covered tips from documenting everything to payment plans and finance charges. In our second article, we discussed the importance of making copies, providing demand letters and personal guarantees when attempting to recover your delinquent accounts receivables.
In part three of our Credit Management Services series, we continue with Collection Manger Joy Paul͛s tips for successful recovery of outstanding receivables.
Credit Management Services
Tip #13 – Timing Is Everything
Credit Management Services | International Debt collector
Debts are not like fine wine, they don͛t get better with age! Remember that timing is everything. Debts become less collectible the older they get. The more time elapses, the more opportunity there is for the debtor to file bankruptcy or liquidate their assets and get out from paying their bills entirely
Businesses tend to hold on to their delinquents an average of nine to ten months, six months longer than they should. There is a systematic approach to recovery of outstanding receivables. This requires resolution of these accounts within 90 days and subsequent follow up if the debt is still not paid
After an account is ninety days past due, send a 10-Day Demand Letter. It is imperative to place a call to the debtor on the tenth day. Inquire if they received the 10-Day Demand Letter. State that if they don͛t pay, they will be sent to collections.
If the account is over 120 days and there is little to no movement towards money, it is time to deploy a collection agency or initiate legal action. The last statement or demand letter made to the debtor has to specify exactly what you will do and when you will do it. Holding on to accounts too long causes added internal costs. Time spent working on fresher account is far more productive than hacking away on older ones!
Tip #14 – Hiring Collection Agencies – Don͛t Spend A Dollar Chasing A Nickel
Most businesses wait twice as long as they should before turning accounts over for outside collections. For every 30 days, your chances of collecting in-house drop another 12%
Collecting debt is basically a financial process. We treat it as an ͞emotional͟ process because we͛re human. But it͛s the financial process that determines whether we make or lose money for our company.
Accounts up to four months old are 80% collectible. Files 4-12 months old are about 20% collectible. Because the older accounts are obviously less collectible than the new ones, and because you don’t have enough time to work on them all with equal effort, you have to focus on the most recent ones and give up on some of the older accounts
When the debtor is communicating with you, do not place an account with a collection agency. Only assign accounts to a collection agency when the debtors completely ignore demands for payment and do not return calls, refuse to pay, when they lie, or when there are numerous broken promises or an NSF check. Another reason to retain a collection agency is if there is an irreconcilable dispute.
According to Joy, collections agencies can also offer suggestions and act as sounding boards. For instance, The Stevens-Lloyd Group suggested on one problem account to hire an private investigator to locate assets. This advice actually paid off and Joy was able to recover the money through legal means
A collection agency can offer advice and encouragement. After all of the steps required to file a small claims case have been implemented, a collection agency can take over once a judgment is procured. This is advantageous because attorneys can be expensive and collection agencies work on a strictly contingency basis.
If a case is large enough to render an attorney cost-effective, a good collection agency, such as The Stevens-Lloyd Group, knows who the good attorneys are. They have the knowledge and experience to cull out expensive and mediocre attorneys.
There is definitely something to be said about getting a problem account off of your shoulders!
Tip #15 – Be Proactive With Legal
In some situations, legal action is necessary. In her business, Joy has come across debtors who received the insurance check but deny receiving it, therefore not paying TM Building Damage Restoration for the work they performed. Other situations may be debtors refusing to pay, never returning phone calls or responding to emails, or sending a check with a partial payment and marking it, “paid in full.”
In handling unpaid accounts, Joy realized that there comes a time when you have to quit working on an account and proceed with legal action. One option is a Small-Claims Court. Anyone can file suit in a Small-Claims Court, without representation by an attorney.
The chief advantage of filing in small claims is the low cost. In some cases, less than $200 covers the entire cost of filing a claim and having papers served on the defendant.
You can also hire an attorney to file suit on an account in civil court. But a far less expensive use of an attorney is to hire one to send dunning letters to your debtors on the attorney͛s stationery. The advantage of the letter is that it͛s not only relatively inexpensive, but, more importantly, a letter from an attorney, unlike regular bills from you, tends to get opened. Debtors realize that to ignore a legal-looking notice could result in a fine, repossession of physical assets, or worse.
Tip #16 – Going To Court
In a class she attended entitled ͞Collection Law 2013͟, Joy studied the key aspects of collection law. Attending this class plus going through the actual process and applying what she learned has helped Joy to be the success she is. This, combined with the expertise of The Stevens-Lloyd Group, Inc. have proved invaluable in Joy͛s pursuit of excellence
Joy won 5 out 6 small claims and one civil case. She handled 6 small claims cases, won them all and recovered them all. Get all of the court forms in triplicate. Joy reminds us that you must notify the debtor when taking them to small claims court. Joy recommends small claims court for cases $1,000 and over. The small claims office in Tucson, like many small claims courts throughout the country, is very helpful and costs can run $200 – $500.
Accounts owed for over $2,500 is considered a civil court case. However it must to be under $10,000. Be mindful of statute of limitations, 290 days in civil court to get it in the court. Joy learned that she can file $10,000 civil cases without having to hire an attorney
Through her experience filing small claims and justice claim lawsuits, Joy discovered the value of deploying Constables. They may cost a little more money, but Constables are much more effective than regular process servers in serving documents to debtors. Costs are $78 to file and $78-$140 to hire a constable. A constable is a sheriff and is highly recommended and critical. He or she wears a badge, which proves to be very intimidating plus effective when it comes to serving debtors. He or she will attempt service three times. The more information you can give the constable the better. The constable can also help you locate the debtor
You must notify a debtor if you win the case. You can collect all of the fees and court costs incurred from the debtor, but judges can be temperamental regarding the collection interest.
And lastly, keep in mind that the legal process is very intensive, all paperwork has to be properly filed and on time!.
Tip #17 – Locating Assets Once Judgement Is Rendered
Private Investigators can be hired for $75. For instance, a PI will check the debtor͛s utility bill to locate where they live. They will also conduct a comprehensive asset and liability investigation on the debtor, as well as extensive skip tracing. For large amount owed, this is the recommended step in order to locate the debtor and their assets.
If you are a business owner trying to collect on past-due accounts, you may find the process quite frustruating. Turning accounts over to a collections agency may seem like a desperate step. But debt collection is a team effort, with you and the collection agency working together to accomplish the same goal: recovering your money. Contact The Stevens-Lloyd Group today so we can start working together right away.