Accounts Retrievable Systems - Small Business Uncollected Debts
How does a small or home-based business handle mounting unpaid invoices when there is not enough staff to make collection calls? Try hiring a debt collection agency.
There are times when a small or home-based business owner must deal with uncollected debts. The reasons customers do not pay may vary from an unexpected hardship to being an old-fashioned deadbeat customer. It is not something that business owners want to think about but it does happen and it’s better to be prepared than surprised.
An occasional unpaid invoice can be absorbed as a business operating expense. An accumulation of unpaid invoices, however, cannot and must be addressed. After all, any business, large, small or home-based is in business to make money, not to lose it.
Small and home-based businesses usually don’t have the administrative staff or the extra person power to spend countless hours tracking down unpaid invoices. Depending on the number of outstanding invoices, it may make financial sense to hire a collection agency to collect the outstanding debts. Generally, the outstanding amount should exceed certain dollar amount before it is worthwhile to hire a collection agency.
Here are a few things to consider when hiring a collection agency:
1. Look for a collection agency that works with small and home-based businesses. Finding an agency that is familiar with a particular line of business will prove to be more successful than an agency that is totally unfamiliar with the home-based or small businesses operations.
2. Know the debtors. Collection agencies vary as much as businesses do. Look for a collection agency that specializes in collecting from your type of customer. For instance, if the debtors are mainly individuals, find an agency that specializes in collecting from individuals. Same goes for commercial debts, find a collection agency that specializes in commercial debtors.
3. Consider the collection agency’s collection tactics. If the collection agency has been very successful in collecting outstanding payments by sending letters, ask to review the letter before they are sent out. Ensure the collection agency is complying with the Fair Debt Collection Practices Act. Additionally, debtors view the collection agency as an extension of the servicing business. As a result, a properly worded letter may not only prompt the debtor to pay, but it may also salvage the business relationship whereby the customer may come back to continue to do business. Tread carefully however. If they were delinquent before, they may be again.
4. Find out about skip tracing. Make sure the collection agency employs skip tracing. On the occasion when the debtor has moved with no forwarding address and has disconnected the telephone, collection agencies can use skip tracing (accessing various databases) to locate the debtor.
5. Ensure the agency is licensed in the states for which the debtors are located. The last thing any business would want is to receive the outstanding debt only to find out that it was illegally collected through an unlicensed agency.
6. Verify the collection agency has Errors and Omissions insurance. This insurance will protect the business and the collection agency in the event an unhappy debtor sues the collection agency for tactics used to collect monies on behalf of the business.
7. Compare costs. Collection agencies earn income based on either a set fee or on a contingency basis. The contingency is based on a percentage of the debts collected. Before choosing whether to agree to a set fee or contingency, find out the collection agency’s success ratio and contingency fee percentage. For example, if they have a 68% success ratio and are charging a 22% contingency fee based on $25,000 outstanding debts, they would retain $3,740 ($25,000 x 68% = $17,000 x 22% = $3,740).
Small and home-based businesses face many challenges. Collecting outstanding debts will add to the company’s bottom-line profits. Other ways to increase the profit margin is to squeeze as much productivity out of a day as possible and to look into saving money when buying office equipment.
Accounts Retrievable Systems – Hiring A Collection Agency
Are you hiring a Collection Agency? Many agencies today have an approach that is quite “cutting edge” and can change any delinquent account into one that is paid off very quickly; the trick is finding the right Collection Agency.
First we must really know exactly what a Collection Agency does. A Collection Agency is a type of company or business that goes after outstanding payments and debts that are owed by either a business or an individual. Many of the Collection Agencies are known to assist the “creditors” and act as their agents. They will pursue a debt and after they collect on that debt, they will usually receive a percentage or a straight fee on the total that was owed, not the total that was collected.
Another name for a Collection Agency is a “Debt Buyer,” since the Agency will buy a debt from a creditor for a smaller amount and then go after the debtor and collect the full amount owed.
Furthermore, a creditor may send a debt they are trying to collect to a Collection Agency for the purpose of removing that debt from their own company’s “accounts receivable” department, and then a loss is calculated by taking the difference between the amount that was obtained and collected and the total value of the debt.
Various countries have different rules and regulations for Collection Agencies and their function. Some are governed by regulations where the law prohibits abuse and where lawsuits may arise if companies fail to follow these government laws.
Below is a list of 6 easy tips to follow when you are hiring a Collection Agency:
1) Verify that your agent is hard working and that he or she has hours that are twelve hours a day and up to six days a week.
2) Downloading debtor information from one of the three national credit offices is easy to do and can be done online.
3) Make sure you are hiring a native English speaker when hiring a Collection Agency. If you are trying to collect a debt overseas, make sure your agent is fluent in the language of the country, as well as in English.
4) No need to look into “asset search” or “tracing,” when attempting to collect from a debtor, although you may want to learn what these terms mean.
5) A bankruptcy is never made on a beach or vacation resort.
6) You can now electronically recover your checks for “Insufficient Funds.”
Accounts Retrievable Systems - Debt Collection Basics
Fortunately something called ‘The Fair Debt Collection Practices Act’ sets the guidelines what actions debt collection agencies can and cannot participate in while trying to collect a debt. For example, they cannot call earlier than 8 AM Or after 9 PM. They cannot claim that they’ll be able to garnish wages. Of course, this is limited to states in which garnishment of wages is illegal. And, they cannot continue calling you if you ask them to stop.
The entire text is worth looking through if you are in this situation. You can read it here – http://www.ftc.gov/os/statutes/fdcpa/fdcpact.htm#801
In such situations you have multiple options. These range from simply not picking up the phone, screening calls via caller ID or even getting calls blocked if your phone has that feature.
By any chance if you do pick up the phone, you can insist that you do not wish to be contacted any further. By law, they are obligated to stop pestering you. Of course, if you have sent the collectors a formal notice (such as ‘cease and desist’) you can take legal action against them. This could be your most expensive option so you might want to hold off on this one.
The fastest way to get them off your back is by paying off the debt. If the debt is a valid one then you do owe them the money. If money is really tight, you can try by renegotiating the terms of your agreement like lower rates of interest etc.
Keeping track of your call history along with any terms that were renegotiated is a good idea in these cases. This will help you keep tabs on your new debt obligations and in case they keep calling you after being told not to stop you can try recording calls if its legal and take action against them. Pretty often the debt collectors will be more careful with their choice of words if they know that their call is being recorded.
One key point to bear in mind is that collection agencies will accept amounts that are a lot lesser than their original claims. Of course, since they get a percentage of their collection amounts they will try to keep the amounts similar to the originating debt. But they do know that 50% of $200 is a lot better than a 100% of $0.
If you do negotiate new terms on your payment, make certain that there aren’t going to be any additional negative information placed on your credit history. Its always a good idea to remind them to report any payments you make.
One other tip – get the creditor to send you the terms in writing. If they are unwilling to do so, you can send them a small percentage of the amount to show good faith in keeping your end of the deal. If you pay all of it upfront, they have little reason to honor their end of the bargain.
In times like these be patient, keep your cool and be realistic about the outcomes. These attributes will be immensely beneficial while dealing with these stressful situations.
Accounts Retrievable Systems – New York State Debt Collection
Want to learn more about state by state debt recovery? What about debt recovery in New York? Following is some important information on New York debt collection laws including: New York Statute of Limitations, New York Judgments, New York Garnishments, New York Interest Rates, New York Bad Check Laws and New York Collection Agency Requirements.
INTEREST RATE
Legal: 16%
Judgment: 9%
STATUTE OF LIMITATIONS (IN YEARS)
Open Acct.: 6
Written Contract: 6
Domestic Judgment: 20 (1 0 yr. renewable lien)
Foreign Judgment: 20 (1 0 yr. renewable lien)
BAD CHECK LAWS (CIVIL PENALTY)
Face value of check plus two times check amount up to a maximum of $400 on NSF or $750 on “no account” (Demand prescribed by law). GEN.OB.1.1-104
GENERAL GARNISHMENT EXEMPTIONS
90% of earnings, except 1st $127.50 wk. wholly exempt.
Accounts Retrievable Systems - Debt Collection Recovery Rates
It’s not important to know what an agency’s rate of debt collection is, because every debt is different. The only rate that matters is what percentage the debt agency will take and if it actually collects something. It is helpful to the agency (and the attorney) if you as the business owner have a bottom line figure in mind when negotiating a settlement. Yes, it’s depressing to think about a debtor getting away with anything but settlements are frequently the only way that at least some money can be recovered using good debt collectors. Agencies (and attorneys) will naturally want to collect as much as possible, because they are being paid on a contingency basis, which means they receive a percentage of what they collect.
They also have an inclination to work out settlements, so that they can guarantee making something acceptable on the deal. Effecting debt collections takes time, which means that is costs money to make the effort. One way or another, it is going to cost you as the business owner money and good debt collection agencies are worthy of their hire, as are good attorneys. since you the owner have already successfully written off the past-due balance on the books, anything that comes your way is found money. It’s only fair that you split the proceeds with the person(s) who helped you find it.
Accounts Retrievable Systems - Basics Of Debt Collection
Ten Tips to Successful Debt Collecting
Tips on how to collect debt:
PREPARE: Review the paperwork on the debtor before making the call. Know the history of the account, credit record, the promises kept/broken. Have all records in front of you, ready for reference.
ATTITUDE: Adopt a straight, professional business-like attitude. You have a contract, you delivered the goods, money is owed, and you have a right to expect payment. Never let it become personal. Don’t yell or raise your voice; and NEVER swear. Don’t threaten; legal action is your recourse.
CONTACT: Make sure you’re talking to the right person. Don’t let the individual brush you off with “You’ll have to talk to the bookkeeper.” Identify the person who will pay the bill. If you can’t get through after several calls, tell the secretary that you know your calls are being screened. Indicate the purpose of your call and if necessary give deadlines.
CONTROL: Control the conversation. Keep it focused on the debt and on the repayment schedule. Don’t let the customer sidetrack you with personal history, excuses, etc. Remember, the object of your call is to collect money, or get a commitment, not to become buddies with the customer or win arguments.
FLEXIBLE: Be ready to adjust to the situation. Think about the kind of customer you’re dealing with and adapt to meet the circumstances. Be prepared to accept a reasonable payment schedule, and a willingness to deal with a customer’s circumstances.
NOTES: Keep detailed, accurate notes of every contact with the customer. Probe for further information on the customer. Notes of these contacts will help you in subsequent phone calls, and may be invaluable in litigation. Good notes will also help in further credit decisions, or in cases where skip tracing may be needed.
PRODUCTIVE: Keep contact brief and to the point. This is a business call, not a social one. View your efforts on a ratio of time expended to results achieved. Long conversations probably mean the customer is stalling you, or trapping you in the buddy syndrome.
PRECISE: Never leave a contact open ended, such as “We’ll talk next week,” or “I’ll send what I can.” Every contact should result in a commitment to payment, of a specific amount, by a specific date, even the check number the customer is using to pay the pledge.
TIME: The longer an account is held, the less likely it is that it will be recovered. If payment or a payout is not arranged within 90 days, place the claim with a collection agency or start legal proceedings.
PLACEMENT: Use only an agency that is a member of the American Collectors Association OR the Commercial Collection Agency Section of the Commercial Law League of America. This will insure that you’re dealing with ethical professionals who are fully bonded to guarantee your remittance.
Accounts Retrievable Systems - Finding A Great Collection Agency
Good debt collectors are hard to come by when choosing a collection agency. Good debt collectors once they are talking with a debtor, probe to find out what is going on. Often, the loss of a job, an illness, divorce, or maxing out the credit cards results in a person becoming dysfunctional when it comes to handling his/her financial obligations. He/she is embarrassed and frequently a little frightened and reluctant to discuss the problem. Good debt collectors and a good debt collection agency will often be able to draw the debtor out. Debt collectors are not allowed to play attorney by advocating bankruptcy. In fact, they have to be very precise when talking with debtors.
However, they can suggest debtors who said they have financial difficulties contact a legitimate credit counseling service. the credit counseling service will help the debtor to work out a payment plan that will enable him/her to gradually pay off creditors. You as the collection agency will have a small commission deducted from the money that is earmarked for you, but it is well worth it because you will be cashing checks on a monthly basis.
Accounts Retrievable Systems - Debt Collection Agencies
Having customers who delay payments has become a common scenario these days. Unpaid dues or bad debt is an unavoidable problem for all organizations which further lead to restricted cash flows hampering the growth of the business.
Debt collection companies play a vital role in settling differences between the debtors and creditors. They act as solution providers at both ends. The collectors offer services to creditors and ensure that all their debts are collected within the shortest time possible. They also assist debtors manage their bills in an organized way. Collection agencies are an asset for all businesses as they are experts in the collection of unpaid dues from delinquent customers. They save valuable time and resources that can be used for business growth. 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.
It is important that one should visit these organizations over the Internet to know the services being offered. Many companies have special training programs for their agents for handling their clients with much care and better understanding.
The main aim of these agencies is to make sure all payments made by the debtors reach the creditors within the shortest time and, no bills are left unpaid. When one hires the services of a collection agency then they have an agreement wherein the agency takes on the responsibility of tracing the debtors and collecting the debt in accordance with the Fair Debt Collection Practices Act (FDCPA).
Small businesses are hesitant to ask for unpaid dues too strongly. This is because they are not familiar with the rules and regulations of collecting debts. They are not clear on how and when to ask for payment that is overdue. Another reason for their hesitancy is the fear of losing future business with the customer. It is where the debt collection companies come into the picture.
Collecting debts is arduous and time-consuming. Collection agencies offer professional services to handle this task efficiently. By reducing bad debts and enjoying good customer relationships, the business is bound to do well.
Accounts Retrievable Systems - Choose Collection Agencies
In current market scenario, incidences where customers are not repaying their debts or are abruptly delaying it for a considerable period of time, has become quite common. These unpaid dues have turned into a kind of regular and unavoidable issue for almost every large, medium and small organization. This kind of issues, where the bad debt obstructs the flow of capital, of these organizations, heavily damages their future growth prospects.
Although, such issues are really very grievous in nature. But, there are many Debt Recovery Companies and Collection Agencies who offer solution from such kind of problems. These organizations play a pivotal role, in settling the differences. They act like a kind of mediator between the creditors and debtors and try to settle the arisen differences between both of them. This way they play a very vital role by acting like a solution provider at both the end.
These organizations offer their services to those parties, who have given credit, by ensuring that their complete debt will be collected with in a very short period of time. However, for delivering such solutions, these organizations also offer their advise to the debtors and help them arrange finance or make them manage their burgeoning bill, but in a very disciplined and organized way.
There are many significant aspects of these organizations, which has made them very much popular and preferred option for every organization. However, they are a must for those who want to collect their unpaid dues from their customers. The most important benefit of availing the services of these agencies is that they save a considerable amount of time and resources, which otherwise would have spent behind the delinquent customers. This way the saved valuable time and resources are utilized on more important things which are very necessary to intensify the growth of the organization.
Debt Collection Solutions offering organization never just only assist the debtors manage their bill. There are many cases where these organizations have even purchased the complete debt, on behalf of debtors, from the creditor. This way they provide solution to the creditors and also buy time for the debtors to settle their debts.
Accounts Retrievable Systems - Hiring A Collection Agency
As an account ages, the chances of collecting on it decrease dramatically. It’s expensive to carry accounts that you will not be able to collect using the methods at your disposal. It sometimes becomes a better use of your company’s time and resources to concentrate on other aspects of your business. You might do this by hiring a credit manager, to do the collection work you have been doing, but as your business grows, you may then have to place the accounts with an outside collection agency. Using a collection agency can be profitable for your business and help you grow. Some collection agencies charge more for older accounts; this is because they are much harder to collect.
A professional collection agency service can assist you in collecting accounts that remain delinquent. Collectors have a vast knowledge of collection techniques, technology and compliance issues. Using a professional collection service will save time and likely yield better results than you can achieve on your own.
When accounts reach 90 to 120 days past due, it’s time to consider placing them with a collection agency. Some people place accounts at 60 days; some wait over a year-it is completely up to you. If you wait over a year it is unlikely you will get paid, but possible. If you are letting something sit on your books and grow older without actively pursuing it, it is worth it to give it to a collection agency. It’s not going to get collected if you keep it, and the percentage you will pay the agency will be well worth it.
Look for the following signs that indicate that you may need to work with a collection agency:
• A new customer does not respond to the first letter. For some unknown reason, the consumer will not or cannot pay. Potential losses could be kept to a minimum by prompt referral to a collection agency.
• Payment terms fail. In some cases irresponsible consumers pay when and if they want to. This group is responsible for 25 to 50 percent of the cost of collections. Cost and potential losses are reduced by quick action.
• The consumer makes repetitious, unfounded complaints. Such consumers are often better handled by a collection agency. You have to decide if this is worth your time or would you rather pay an agency a small percentage for that time and still get paid.
• The consumer totally denies responsibility. Without professional help, these accounts are usually written off as total losses. This is when it is good to have a signed credit application or contract and also, if possible, proof of the order and who placed it.
• Delinquency coexists with serious marital difficulties. These also require professional collection help, with the added urgency of obtaining payments before the disappearance of one or both of the responsible parties. If divorced people say the other is responsible, get a copy of the divorce decree, which will state who is responsible.
• Repeated delinquencies occur along with frequent changes of address or jobs. This group is responsible for 90 percent of all “skips.” A skip is a consumer who has moved without informing creditors or leaving a forwarding address. The chance of finding a consumer and collecting a debt will decrease over time, so quick action is important. Most agencies provide a skip-tracing service.
• Obvious financial irresponsibility is apparent. In such cases, little hope exists for voluntary payments and a quick settlement.
• There is an unauthorized transfer or disposal of goods delivered in a conditional sales contract.
Working With a Collection Agency
Once you decide on a collection agency, use their forms to list accounts or their format to upload accounts electronically. Give as much information as possible-accurate information about the account will improve collections.
In all cases, the minimum information should include:
• The correct name, address and telephone number of the debtor
• Name of the debtor’s spouse, if applicable
• Whether mail has been returned
• Debtor’s and/or spouse’s occupation or last known occupation and phone number
• Names of relatives, friends, neighbors and references
• Summary of any disputes
• Date of last transaction, order or payment
• Cellular phone, fax, e-mail address
• Nicknames or aliases, maiden name
If you have had all new customers fill out a credit application, all of the above information should be listed on there. The summary of disputes would be in the computer notes for the customer’s account. This makes it very easy–all the information you need, basically all in one place, on one piece of paper. This is one of the reasons why a credit application is so important. Cooperate with your collection agency. Rely on their experience, diligence, and judgment for the best and quickest results and promptly refer any contact from the debtor to the collection agency. Make sure that your collection agency is familiar with the nature of your goods or services–some agencies even specialize in collecting on specific services. For example, you might find an agency that only collects on delinquent auto loans, or medical bills, or hot tub sales. If you find an agency that specializes in your field, check them out; there is a reason they only do those types of collections. Don’t place any accounts with more than one agency. Make sure that if you change collection agencies, the accounts are only being worked on by one agency. Collection agencies’ fees are based on results, not on time spent on the account. Don’t expect payments to be made immediately.
How Collection Agencies Get Paid
Most collection agencies charge a commission or percentage based on the many factors of the accounts they are trying to collect. Some agencies charge a flat monthly fee, and some charge per letter or call.
If an agency charges a commission, it will normally be a percentage for “standard” accounts. That would be accounts that are maybe 60 days old, have a good address and phone number, and the debt is probably collectible. My collection rate was 25 percent when I owned my agency. That was for everyday accounts my clients placed. If they had an account that was under $75 or over one year old, I charged a 50-percent commission. When I had a large client placing many accounts weekly or monthly, I would give them a special flat rate of 18 percent on all accounts across the board.
Some agencies will charge a flat monthly fee based on the number of accounts you place, how frequently you place them, the dollar amounts, and age. They also may charge per letter or per phone call and let you decide the frequency of each. Collection agencies may also offer other paid services at a flat fee. Check out their websites and compare to see what the average fee structure is and what works for you and your business.
