Business Debt Collection Letter Writing Secrets
Debt collection letters–an overview
“Debt collection letter” in the singular may be an oxymoron, since unfortunately, one is rarely enough. You should have a series of letters to send to deadbeat clients, each one becoming a little more insistent. Here are some ideas for a five-letter series.
Don’t make your first letter look like a collection letter at all. Make it a friendly note. You’re more likely to get money from someone who thinks of you as a partner than a dun.
If that first letter doesn’t get a response–and usually it won’t–send another the next week that’s more urgent and directly asks for the money. Express your concern that you have not been able to contact the client. Ask if he or she is all right, and if he or she is having any trouble paying.
The next week, if you still have not gotten a response, send a letter referring to the payment terms in the agreement you and the client originally made (you did have some kind of written agreement, even if it was just on the back of your invoice, right?). Mention the effect this nonpayment is having on your cash flow, and that your business’s cash flow is just as important as theirs.
Still no response by the next week? State plainly that you are asking for the money for the final time before referring it to collections. Include a copy of the entire agreement between you and the client.
If you still have not heard back from the client, and are confident that you do not simply have a problem with their contact information, call a collection agencyin fact, you may have wanted to have gotten a collection agency from step one (more on that below).
More Tips for Successful Debt Collections
Don’t wait to start asking for your money.
If it’s been a week since the payment deadline passed, it’s been a week too long. Send out that first “reminder” letter today. Don’t hesitate to send these letters as little as a week apart from each other. The longer your bill goes unpaid, the less likely it is you will ever see that money again.
If you’ve been sending email, try sending paper.
For whatever reason, there are people who take a paper letter more seriously. There’s also the real chance that your emails really are not getting through reliably, or are ending up at the bottom of an overflowing Inbox.
If you do send email, make sure it’s digitally signed. A digital signature proves that you sent the email to the specific recipient. In fact, you might want to make sure all your emails to clients and prospects are digitally signed, to have solid documentation of everything you said, and everything they owe.
Unlike with regular emails, the date, time, “to” and “from” fields can’t be forged, so the email has legal standing, even more than certified mail. While web-based email programs cannot send digitally signed email, there are third-party services that will let you send hundreds of digitally signed emails from a desktop email program for only a few dollars a month.
Follow up your debt collection letter with a telephone call.
As any collection agency will tell you, telephone calls are useful if your debtor has ignored the collection letters. But with caller ID, Caller Blocking and voice mail – if people don’t want to take your calls it is hard to reach them. This technique could be especially effective in the case of someone with whom you know will answer their own phone.
Of course, your writing skills won’t go to waste: you need to make sure you have scripted what you want to say. You should take the same attitude and touch on the same points as your letter. Whatever you do, don’t let yourself get sidetracked, and don’t be embarrassed. They’re the ones who are putting you out.
Don’t know your deadbeat’s telephone number? Try looking up the “Whois” record of the business’s website, which usually has the owner’s telephone number.
Does all this sound like too much work?
If you’d rather be writing proposals than collection letters, there are small business collection agencies that will take on debts for as little as $20 each. After all, your client had enough sense to go to you rather than doing your specialty themselves. Shouldn’t you have as much sense when it comes to your debt collection letters?
Steve Austin is a regular contributor to Let No Debt Remain Outstanding (http://www.let-no-debt-remain-outstanding.com/), a website with articles on choosing a collection agency, along with recommended the best collection agencies.
Debt Collection Techniques
Here are some sound debt collection techniques that can be followed by businesses to mitigate the bad debt crisis:
Sending a pre-collection letter.
Hiring a collection agency.
Doing it yourself.
Sending A Pre-Collection Letter
Most businesses don’t want to “play the bad cop” with their clients, so they approach a collection agency, which for a nominal fee sends a notice to the defaulter asking him or her to pay up.
Remember, a notice from a collection agency is much more effective than the notice from your company itself. It tells the defaulting customer that you have now hired a professional help to collect the dues and, thus, it increases chances of customer paying up the debt faster. The ‘fear factor’ of credit rating damage is associated with collection agencies.
Hiring a Collection Agency
A collection agency under the Fair Debt Collection Practices Act is one that recovers debt on behalf of others. It employs various methods to recover dues from errant customers:
Collection calls are a necessity in debt recovery. Handling the collection call in a calm and professional manner can make the difference upon which collections are made or lost.
Skip tracing is a detection method adopted to find a debtor who has absconded either intentionally or unintentionally.
Forwarding occurs when a collection agency forwards a debtor’s account to another collection agency, possibly because it does not have the authority to conduct business where it is currently located.
Flow Forwarding is a novel concept in which a collection agency contracts with a business to purchase all its bad debts on a periodical basis.
Doing It Yourself
As mentioned earlier, most businesses suffer from bad debts because of a lack of a clear debt management policy. Most organizations would minimize their debt management if they had clearly defined credit policies. Moreover, a clear understanding of the law needs to be had before a business drags its clients to court. This is the tedious bit and therefore businesses need to be very sure with their preparation.
Collection Agency Services offers you a wealth of information on how to select the best collection agency for your business.
Dealing With A Collection Agency
Step I – Selecting A Collection Agency
Selecting a credit collection agency is perhaps the most important and difficult task. Some factors you must consider while selecting a collection agency are:
- Experience and professionals
– Geographical presence
– Expertise
– Fees and charging model
– Customer references
– Collection Agency Services has covered this topic in depth through various free collections reports and articles on this site.
Step II – Hiring the Collection Agency and Setting Up Processes
Once you select the collection agency, the first two steps you have to take are:
Enter into a contract with the agency;
Set up processes on how you are going to communicate with the agency.
A contract is the legal document and your legal experts will, of course, prepare it correctly. Just make sure that you include important clauses such as confidentiality and non-disclosure. You are likely to pass sensitive information to the collection agency such as your account receivables, customer contacts, product and services pricing, etc. to facilitate faster debt collection. You want to be sure that this information does not fall in the wrong hands.
Setting up processes is a very important step in dealing with the collection agency. The success or failure of your partnership will depend a lot on how well-defined your processes are and how strictly they are followed. Important processes you need to define are:
Internal processes: You have to put in place a clear process on defining bad debt and referring the case to the collection agency. You don’t want to refer the case to the collection agency before you make a sincere effort to collect the dues internally.
Information transfer: How will you transfer the information to the collection agency about your dues and defaulting customers, and how will you receive the information from your collection agency? Debt collection software can make the information transfer process easy and secured.
Third party dealing: As mentioned earlier, it is very important for you to ensure the security of the information you give to the collection agency. The collection agency may use one or more of its associated agencies to get information about defaulting customers. Hence you need to set up a clear protocol on how much information they can share with such third parties.
Communication: You need to set up single point contacts for communication within the company and the collection agency. In debt collection practices, the timing of communication is extremely important and hence it will go a long way in deciding the success of your debt collection process. Again, the importance of debt collection software cannot be overemphasized here.
Step III – Performance Monitoring
Once all processes are set, start monitoring the performance of the collection agency. This is an ongoing process when dealing with a collection agency. Important parameters to monitor are:
Quantitative
- Number of cases referred to the credit collection agency and percentage of cases successfully solved by them.
- Percentage of debt recovered by the collection agency from all cases referred.
- Percentage of debt recovered by the collection agency from solved cases.
- Percentage of amount paid as fees/commission to the collection agency to the total bad debt cases referred to them.
- Average number of days taken by the collection agency for full/partial credit collection.
Qualitative
* How well do the collection agency professionals deal with your customers?
* Has the collection agency followed all legal requirements mentioned in the Fair Debt Collection Practices Act?
* Has the collection agency gone beyond the provisions of the Fair Debt Collection Practices Act?
* Has the collection agency followed all processes and guidelines set by you?
Step IV – Contract Closure
Hopefully, the selected collection agency will work best for you. But if it doesn’t, then you need to transfer all your debt collection processes from the agency. You should remember the following important points when you are ending the contract:
Confidentiality and non-disclosure clauses are applicable even after the end of the contract with the collection agency as well as its employees. The collection agency returns all documents related to your business and destroys all information related to your business from their data storage.
Following these simple guidelines will ensure that when dealing with a collection agency that it works best for you and your bad debts are minimized.
Collection Agency Services offers you a wealth of information on how to select the best collection agency for your business.
http://www.collectionagencyservices.net
Skip-Tracing Locating Debtors Who Have ‘Skipped’ Town With Your Money
Skip tracing is a technique usually employed by debt collection agencies to track down bad debtors looking to evade payment of debt. Hence skip tracing forms an integral part of debt recovery solutions.
Skip tracing can be literally defined as the technique employed to trace and locate persons who have intentionally or non-intentionally vanished without leaving behind a trail. Such an act of absconding can be due to evasion of financial or legal liabilities.
The factors that are critical for skip tracing include the nature of the case pertaining to which the person is to be located, the time elapsed since last recorded location, resources that may be relevant in tracing, and also the most likely whereabouts of the absconding person.
Collection agencies adopt the following techniques for skip tracing:
Past data or information assimilation. Collection agencies try and collect as much relevant information about the person as possible. This includes:
Identity Details
i. Person’s name
ii. Spouse’s name and occupation
iii. Social security number
iv. Date of birth
v. Address details
Occupational Details
i. Educational and occupation certifications
ii. Employment details
Documentation Details
i. Driver’s license
ii. Passport
iii. Credit report from credit bureaus
Verification of existing records.
All the above-acquired information is verified by collection agencies for authenticity and for exploring any further linkups to new information. Collection agencies, then, employ mining techniques such as tracking credit card transactions, insurance inquires, judicial documents, criminal records, notices from revenue departments, etc. Also used in skip tracing are:
Techniques such as making use of Internet search engines, email directories, public records, etc also help collection agencies in skip tracing
Credit bureaus are the best place to locate the absconding debtor as these agencies maintain their demographic information and their credit history.
Collection Agency Services offers you a wealth of information on how to select the best collection agency for your business.
http://www.collectionagencyservices.net
Collection On Bad Accounts Using A Collection Agency
When you hire a debt collection agency to act on your behalf to collect severely overdue accounts, the agency puts into action a streamlined process which works in the majority of cases. As a result, the debt will be made good and you will receive your money back, less a percentage reduction as fees for the work of the collection agency.
Essentially, this process is one of negotiation. The company will remind the debtor of the facts and seek to open up a dialogue with the debtor. What they want is for the debtor to respond meaningfully to them.
Ideally, a debtor will respond positively, whether by paying the debt in full or agreeing and sticking to a scheduled repayment plan. Either way, the collection agency has scored a success. More rarely, a debtor may refuse to pay and the collection agency may have to submit a poor credit report to the major credit agencies or take the debtor to court to force cooperation. This is regrettable, but necessary.
Collection agencies work within a legal framework and do their best to respect that framework which is there to ensure that the debtor is properly informed of the facts of the case, of their rights to dispute a debt and their rights to privacy, both with regards to the debt and with regards to how and when the agency communicates with them. In short, they will adhere to the legal framework of fair debt collection.
Tristan Andrews is a writer for Collection Agency Quotes.
About Debt Collection Agencies
Debt collection agencies act on behalf of creditors to collect debts when the creditors don’t have the time or resources to chase down severely overdue debts for themselves. Collection agencies specialize in this kind of work which means they have staff that specializes in debt collection, which covers a broad range of legal and negotiating skills, and a streamlined process for pursuing accounts.
As a creditor, when you hire an collection agency, they are assigned the job of collecting the debt. Normally, if the agency is successful in debt collection the collection agency will retain a percentage of the amount collected as payment for services.
Typically, collection agencies do not take over the debt. The debtor does not actually owe them money. It still owes to the creditor. But the collection agency will provide evidence (known as debt validation) that they have been empowered to collection the debt on behalf of the creditor.
Occasionally, collection agencies will purchase the debt from the creditor. However, usually all that the collection agencies acquire is the right to carry out the process of debt collection.
All collection agencies are governed by federal laws and no collection agency is, or wishes to be in, the business of collecting fraudulent debts. However, when acting on behalf of a legitimate creditor they will take all legal steps to enforce the collection of badly overdue accounts, if necessary going to court on behalf of the creditor.
Tristan Andrews is a writer for Collection Agency Quotes.
Types of Collection Agencies
Financial Credit Collection
Commercial credit collection agencies provide services to the financial sector like banks and financial institutions. The types of debts range from auto loans to credit cards to mortgage payments. These credit collection agencies buy bad debts at discounts from banks, retailers, and auto financiers and then engage in the debt recovery process.
Health Care Credit Collection
The prime motive of a health care provider is to ensure that a patient receives quality and timely medical attention. An additional responsibility to collect debts may dilute the focus of the health care provider and also affect the financial strength of the organization. Hence a health care provider can agree to partner with a credit collection agency for any legal debt recovery. The methods employed for debt recovery are determined by agreement between the healthcare provider and the collection company, in line with the parameters allowed by law.
Retailers
Credit collection agencies also offer their services to retail business operations. Debt collection for these creditors includes debts like unpaid health club memberships and telephone bills.
Bad Check Recovery
Bad checks/NSF can be detrimental to the cash flow of a business and the collection of bad debts arising due to fraud can become an unwieldy task for a business. Collection agencies are equipped with the necessary know-how and resources to tackle such cases involving bad checks. Such collection agencies would pay the receiver an up front sum of a certain percentage of the face value of the check.
Outsourcing the credit collection process allows the creditor to pass off debt liability to an agency that is better equipped to recover these bad debts. The bad debt account is evaluated and the creditor is paid an up front sum. The liability of the debts is then passed on to the collection agency.
Collection Agency Services offers you a wealth of information on how to select the best collection agency for your business.
Increase In-House Nursing Homes Collections
The following nursing home collections report outlines 11 guidelines you can follow to increase the amount of in-house long term care collections your facility collects.
1] Have A Defined Long Term Care Collection Policy
One of the major causes of delinquent nursing home receivables is that the facility has not clearly defined to its residents/responsible parties and business office staff when the accounts are to be paid. If you are currently ‘playing-it-by-ear’, and have no consistent guidelines for your business office to follow – you are inviting bad debt. These guidelines should be made clear to both your business office and admissions staff. If you consistently apply your collection policy to every nursing home account, you will enjoy a large decrease in delinquent accounts.
2] Educate Residents/Responsible Parties On Your Policy Before Admission
If residents/responsible parties are not educated that their nursing home accounts need to be paid on time – then chances are they’ll pay late or sometimes not at all. Make it crystal clear what day of the month that you bill, and when their payment is expected. Let them know the consequences of non-payment up front – not after they become delinquent. This eliminates potential future misunderstandings from your residents/responsible parties. Statement of your payment policy when payment is overdue is a strong first step in facilitating payment.
3] Invoice Promptly and Bill Regularly
If you don’t have a systematic invoicing and billing system – get one. Many times the resident/ responsible party hasn’t been re-billed or reminded to pay in a timely manner. This situation regularly occurs in homes where there isn’t enough billing staff in your business office, or the staff is spread to thin to invoice or bill on a timely basis. It is amazing how much money is often left uncollected because the resident/ responsible party was never billed or contacted a second time.
4] Keep Accurate And Timely Payment Records
Once a resident is admitted, it is vitally important to maintain accurate and timely records on their payment history. If you see any deviation from past payment patterns, and especially if payments become unusually slow, immediate follow-up is warranted. This not only gives you an early alert to impending payment problems, it also gives you the chance for early intervention if there is an outside influence (i.e. responsible party withholding payment, etc)
5] Contact Past Due Accounts More Frequently
There is no law prohibiting you from contacting a resident/responsible party more than a month. The old adage ‘The squeaky wheel gets the oil’ has a great deal of merit when it comes to collecting delinquent accounts. It is an excellent idea to contact late payers every 14 days. Doing so will enable you to diplomatically remind the resident/responsible party about your terms of payment and give you more chances to discover the real reason why they are late.
6] Develop A Systematic Plan To Follow Up On Past Due Accounts
Determine ahead of time what actions you will take and a defined time frame when the actions will take place. For example, at 15 days delinquent – make a phone call. Your business office can start with a ‘courtesy’ call to make sure the statement was received. At 30 days delinquent – send another statement with a message, “This balance is 30 days delinquent, please remit immediately.” At 45 days your business office can call and make a stronger demand for payment. Having a plan and adhering to it makes both you and your residents/ responsible parties aware of the fact you expect to be paid on a timely basis.
7] Use Your Aging Report – Not Your “Feelings”
Many well meaning business offices have let an nursing home account age beyond the point of ever being collected because they ‘felt’ that the resident/responsible party would eventually pay. While there certainly are a few isolated cases of unusual payment situations, the truth is that if you aren’t being paid, usually someone else is. So stick to your systematic plan of follow up. You’ll soon know who intends to really pay and who does not. You can then take appropriate measures once you know where you stand.
8] Make Sure Your Business Office Is Trained
Even experienced business office members can sometimes become jaded when dealing with debtors. This usually occurs when the residents or responsible parties: have made and broken promises for payment, did not file information at the county office, avoided your attempts to make contact, moved with no forwarding address, or just flat out declared they have no intention of paying. Make sure your business office is firm yet courteous when dealing with the residents/responsible parties. Your business office could benefit from customer service training because they must ’sell’ the residents/responsible parties on the idea that you expect to be paid. Make sure your business office is trained to not only bring the nursing home account current, but to also maintain good will with your residents/responsible parties.
9] Admit And Correct Any Mistakes On Your Part
Sometimes residents/responsible parties do not pay because they feel you have made a mistake. If the basis of the non-payment is a dispute over the quality of care, a mutually agreeable settlement between you and the resident/responsible party should be arrived at promptly. The resident/responsible party may use a minor dispute to withhold substantial payment. Insist that the undisputed portion get paid immediately, indicating the balance will be negotiated. This will not only help to collect payment payment, it shows the resident/responsible party that you are listening to his or her concerns.
10] Use Third Party Nursing Home Collections Intervention Sooner
If you have systematically pursued your delinquent nursing home accounts for 60 to 90 days from the due date, and they still have not paid, you are being delivered a message from your resident/responsible party. If you have implemented a good collections policy, you have requested payment four to six times in the form of statements, letters, phone calls and possibly personal visits. Statistics show that after 90 days, the effect of in-house collection efforts wear of 80%”. That means that the time and resources of your business office should be focused within the first 90 days of delinquency where you have the best chance to collect the delinquent nursing home balances. From that point on, a third party can motivate a resident/responsible party to pay in ways you cannot, because of both the perceived and real consequences of dealing with a collection agency or attorney.
11] Remember That Nobody Collects Every Account
Even by setting up and adhering to a specific long term care collection plan, there are always some accounts that will never bee collected. By identifying these nursing home accounts early your billing staff a great deal of time and money. Even though a few may slip by, you will find that the overall number of slow pay and nonpaying accounts will greatly diminish, and that’s a victory in itself!
Collection Agency Services offers you a wealth of information on how to select the best collection agency for your business.
How To Avoid Medical Collections
With medical collections costing doctors millions upon millions of dollars in unpaid bills and collection fees, many people have just one question: Who are these people who are trying to stiff the doctors who delivered them from great physical pain (or the flu, hypochondria, not-so-white-teeth, or a nose that didn’t look enough like Brad Pitt’s)?
Well, I’m here to tell you who these people are, or at least some of them.
They’re me.
Yes, I admit it: I left a dentist’s bill unpaid for three months.
OK, so dentistry isn’t technically considered “medical,” but it’s the same situation: a doctor left in the lurch.
Why did I do such a horrible thing, especially when I, a small businessperson myself, know how difficult unpaid debts can make cash flow, and how it could very easily make me persona non grata in that office?
Why Medical Collections Happen
Or, Possible Reasons for Me Being a Deadbeat
Here are reasons commonly advanced for why people like me might not pay a doctor’s bill.
They don’t have enough money, plain and simple. After all, if they couldn’t afford insurance, they probably are going to have trouble with the bill.
They don’t care about the poor doctors and either don’t know about or don’t care about the potential for damage to their own credit ratings.
They are chronically lazy, stupid, or just don’t know what they’re doing. OK, the terms used aren’t quite that specific, but that’s the general idea.
All of these possible reasons why a patient might not pay could be pretty discouraging for a practice looking to get the money it’s owed. After all, there’s not much even the best doctor can do about a patient’s poverty, venality, or fecklessness.
But is there really so little hope for collecting on medical debt?
Why Medical Collection Isn’t Necessarily So Hopeless
Or, The Real Reason I Didn’t Pay My Dentist’s Bill
I just signed and mailed a check for my outstanding dentist’s bill. That just goes to show the situation isn’t so hopeless after all, doesn’t it? Here’s at least one case of a healthcare practice getting its money back., and after three months at that .
No, my financial situation did not improve dramatically, nor did my slothful ways correct themselves.
Wondering what the dentist did to make me pay? Plead? Cajole? Shame? Threaten to put the tartar back?
Actually, the dentist didn’t do anything, and that’s the problem.
Here’s what happened: I remembered I had the bill to pay.
I had forgotten ever owing the dentist money. Since I wasn’t expecting the dentist’s bill, unlike all the bills that come every month, it got lost in a pile of credit card offers, appeals to help save trees being cut down to make paper, and news about really great products for writers. The follow-up letter reminding me to pay met a similar fate. It probably didn’t help when I took a trip to Las Vegas and then threw away the junk mail en masse when I got back.
I finally remembered the bill when someone asked me to write an article about medical collections. Sure enough, the follow-up letter (though not the original bill) was there in the pile of newsletters and friendly reminders from various businesses to schedule this or that appointment.
The moral of the story
If you are a patient, make sure to check your mail for letters from the doctor’s office. If you’re running a healthcare practice, follow up with your patients who have outstanding invoicesa phone call is preferable, since it’s less likely to get lost at the bottom of a pile of correspondence.
Don’t have time for that? Worried about the legal issues of collection law compliance? Don’t let that stop you. Go to a company that specializes in medical collections and accounts receivables management for healthcare practices.
It’s not about “putting debts in collection” anymore. Many of these companies offer everything from sending out a few polite phone calls and letters to end-to-end accounts receivable management. None of this has to impact your patients’ credit rating or cost you a fortune.
Your office can go back to healing people. Isn’t that why you got into this business in the first place?
Steve Austin is a regular contributor to Let No
Debt Remain Outstanding (http://www.let-no-debt-remain-outstanding.com/),
a website with articles on choosing a collection
agency, along with recommended the best collection agencies.
Don’t Let Your Small Business Fall in the FDCPA Trap
When someone owes your small business money, you certainly feel like a victim. But did you know that if you aren’t careful, you could break the law by trying to get the money back?
How to Break a Federal Debt Collection Law
You have a small business, and your bills are coming due soon. You could easily pay those bills if a few thousands dollars of overdue invoices were paid. It’s time to give your clients a few friendly reminders:
1] You call up the biggest debtor at his home number. The debtor’s girlfriend answers and you leave the message that you were just calling to remind her husband about the invoice you had sent last month.
2] You get into an argument over the phone with the next debtor. In the heat of the moment, you say you’re referring the debt to you attorney–when in reality, you know you can’t afford to do that.
3]It’s getting late–in fact, it’s already after 9pm. But you know that debtor number 3 tends to stay up quite late, so it’s practically midday for him. So, you cheerfully give him a call and remind him about the invoice of a couple of months ago.
Congratulations, you may have just broken a federal law three separate times. Plus, you could be sued for it.
Collections Laws Finer Points
Have you figured out what collections law you broke yet? It’s the Fair Debt Collections Practice Act (FDCPA), the federal law for collections. Meant to protect consumers from harassment, it has a clear list of things you can’t do. Let’s look at what you did wrong in the last example:
- Never tell someone other than the debtor that you are calling about a bill. You can, of course, leave a message that you called. You can even call someone simply to find out if they know if a hard-to-reach debtor has moved house. But you cannot under any circumstances let on that they owe money. Simply leave your name and phone number as with any other “call me back” telephone message.
-Never claim to be involving an attorney when you are not. Of course, this might seem like a soft area of the law, since intentions are fuzzy. But, for instance, if it’s clear that suing to recover the debt would cost as much as the debt itself, your bluff will be obvious in retrospect. To be on the safe side, don’t ever claim to have involved your lawyer.
-Never call before 8 am or after 9 pm, unless you have the explicit permission of the debtor. But unless that permission is in writing, you’re safer not calling during those hours, anyway. Of course, it’s not strictly this simple.
For instance, the law is only supposed to apply to consumer collections, not business collections. But with home business and telecommuting blurring the line between work and home, you’re better off following the law’s dictates in every case.
Plus, the law has numerous other protections for debtors–or traps for collectors, depending on your point of view. This is just one reason why you might want to outsource your over-aged accounts receivables to a professional service.
If you want to learn Collection
Laws, then visit http://www.debt-collection-laws.com for the latest information on debt
collection laws and collection agency regulation.