Collections Management
How long does it take your customers, clients or patients to pay you for the products or services you have provided?
Have you developed a consistent collection management program?
Your answer to the above questions is a leading indicator as to how well you collection management is. Sending an invoice doesn’t always result in payment. Successful collection management s a matter of making your payment terms crystal clear and separating collection management from new business functions, in other words – keep your emotions out of collection management!. You can’t be hesitant or soft in collection management.
Collection management is a sticky subject because it can require getting tough with the very same customers that pay your salary. Many small businesses handle the collection management process in-house, either by having their sales staff with the task of collecting their accounts (talk about playing on both sides of the fence) or by using billing staff that have never had formal collection management training.
Frequently, a business will consider turning over a past-due receivable to a commercial collection agency after it has been outstanding for 90 days. At their core, collection agencies try to get the money owed by using a combination of letters and telephone calls. The are just professional and full time collection management firms.
Monitoring slow-paying accounts and adopting timely and systematic billing practices are just two ways you can help reduce your receivables using collection management.
Collection Agency
Outsourcing offers you free information on collection agencies and debt collections issues.
Collection Agency Law Explained
If you have ever been contacted by a collection agency, you know that it can be an unpleasant experience. A collection agency can turn simple acts, such as checking the mail or answering the phone, into dreaded tasks. However, it is important to know that there is a law in place intended to protect the people that collection agencies contact. The FDCPA (Fair Debt Collection Practices Act) was enacted to keep debt collectors from abusing, harassing, or deceiving a person when attempting to collect a debt. It also gives debt collectors strict guidelines to follow when collecting a debt. In this article, we will have this collection agency law explained in simple terms, to better inform debtors of their rights.
For starters, the FDCPA outlines very clear practices for debt collectors to follow when contacting a debtor. Debt collectors are only allowed to call during reasonable hours (usually 8:00 a.m. – 9:00 p.m.), but they are also allowed to call a debtor at work. However, if the debtor notifies the collection agent that their employer wants the calls to cease, the debt collector must stop calling the person’s place of employment.
There are also rules of conduct a collection agency must follow when collecting a debt. A debt collector is forbidden from harassing any person from whom they are trying to collect a debt. Examples of harassment include excessively calling, insulting the debtor, or using obscene language. A debt collector is also not allowed to make false statements when collecting a debt. Examples of false statements include posing as a government official, making threats (lawsuits, imprisonment, seizing of home and property, etc.), or telling the debtor they owe more than they actually do. In addition, a debt collector can not use unfair practices in attempting to collect a debt. These practices include collecting an amount larger than what the debtor actually owes, or suing the debtor for a debt they do not owe.
The FDCPA requires collection agencies to notify debtors of their rights, and any correspondence (mail or phone) has to contain the information that the contact is being used to collect a debt. The only reason a collection agency can contact a third party (family or friend) is to acquire the debtor’s phone number or address. If the collection agency has this information, they are forbidden to contact a third party. It is also illegal for collection agencies to tell a third party that they are attempting to collect a debt.
The FDCPA is in place to protect the rights of debtor’s while making a collection agent’s job clear and concise. If a person being contacted by a debt collector feels that they are experiencing the violations discussed in this article, it is important that these misconducts are accurately documented. The reason for this is so that the claims can be proven if the debtor decides to take legal action.
Now that you have had this collection agency law explained, you should feel more confident about your rights if you are ever contacted by a debt collector. It is best to avoid the situation altogether by staying current on your debts, but it is good to know that the FDCPA exists if ever find yourself on the receiving end of a collection call.
Stu Pearson has an interest Business & Finance related topics. To access more information on collection agency law or on central collection agency, please click on the links.
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
Commercial Collections Billing Practices Advice
Swiftness is the key to collecting past due commercial accounts because commercial accounts depreciate more faster than consumer accounts.
In creating and implementing a billing system, a credit grantor should recognize that time is the safest refuge of any debtor. The more time they are given, the less likely they are to pay. Hence, sales documents should be explicit about payment terms, return privileges, interest charges on overdue accounts, guarantee and service costs.
Various Commercial Collection Programs Used
A series of letters used together with an account aging sheet or data printout will help to track slow-paying accounts.
All systems should have an organized and mechanical follow-up of accounts at regular intervals, for instance, 30, 60 and 90 days past due.
It is essential to establish regular billing and commercial collections procedures. Follow up on every account to the point where contactor lack of contactwith the customer indicates some alternative action should be taken.
Help Commercial Collections From The Beginning
Built-in commercial collections controls at the time of sale often assist in receivables recovery and help avoid delinquencies. These include such items as sales contracts or a well-defined vendor’s purchase order with conditions of sale clearly spelled out. Appropriate terms should be printed on sales documents (contracts, invoices, statements) clearly and without fail. Such terms will include notice of interest charged on overdue accounts and discounts granted for prompt payment.
Internal control of receivables should include an aging which permits periodic evaluation. This should fit together with commercial collections routines. The time for referral to a professional commercial collection agency should come from the aging at 60 or 90 days past due, and sometimes sooner.
After a first statement has gone unheeded, start your commercial collection procedure. Any program that permits three statementsor a two to three month time lagbefore the first collection step is taken will result in a lower recovery ratio.
Any procedures for handling slow-paying accounts should emphasize speed in contacting the delinquent bill payer. A company with a past-due account on your books is probably in the same condition with a number of other suppliers. The debtor may be on the verge of serious financial trouble, and the creditor who moves first is most likely to recover their money.
Get free information and advice on commercial collections.
Collection Agency
A collection agency is understood as another party, a third party, that acts as a representative of any business requesting such representation in order to collect an unpaid debt. Let’s face it, businesses are in whatever chosen market to make money, not to lose it, and in some instances it becomes necessary to hire a third party to actively pursue unpaid debts. A collection agency will sometimes collect debts for businesses or lenders and in other situations, they purchase unpaid debts so that the debt can be collected and the money then goes to the collection agency.
If a collection agency doesn’t buy the entire debt from a business or a lender, they may actively pursuit debts for a commission of the collected funds. The commission will obviously vary from one collection agency to another – an agreement between the business and the agency will be established before any debt collection action is taken. Typically, a debt agency will follow up with consumers that have not paid certain bills with an onslaught of telephone calls and multiple letters.
A debt agency is required to abide by certain laws. For example, they must always maintain a person’s privacy, whether they have contacted the individual by mail or by phone. Letters must remain discreetly addressed and messages that explain the nature of a debt cannot be left with anyone but the person that owes a particular debt. A debt collector can continue to contact a debtor for as long as they like, as long as they abide by the laws enacted. If a debtor fails to pay their obligation or they do not respond to the initial actions of the debt collector, the debt collector may attempt to follow through with legal steps like a law suit and reporting of the debt to all of the major credit bureaus.
All debt collecting agencies must abide by the Fair Debt Collection Act, which specifically defines the measures that any debt collecting agency can take in terms of trying to retrieve monies. Although there are certain solutions that debt collection agencies can engage in, such agencies are limited in what they can and cannot do. For instance, an agency cannot jeopardize one’s employment, nor can they simply take someone’s property because they owe money for a bill. Finally, there is no longer any such thing as debtor’s prison, so going to jail for a delinquent bill is not an option.
Lenders use debt collecting agencies in an effort to minimize their liabilities. Millions of dollars each year are lost due to unpaid debts. Thus, lenders and businesses make every effort to collect on outstanding debts with the help of professional debt collecting agencies. In doing so, the hope is to keep their businesses out of the red and into the black. Many outstanding bills pertain to credit card charges and medical billing and the losses are great and grow greater for such businesses each year.
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Michael Russell
Your Independent guide to Collection Agencies
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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.