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

  • Commercial Debt Collection

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 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 CLICKING 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

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:
(Click on the image for a larger view)

Tip #11 – Work Authorizations/Written Agreements

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:
(Click on the image for a larger view)

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

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.