If you are like many small businesses, even a few late payments on your accounts receivable can seriously crimp your cash flow. It is vitally important that you take immediate and systematic steps to limit the number of past due receivables that you have at any time. The number one strategy is to have a system in place that limits the number of accounts that go past due in the first place. There are numerous tools and strategies for doing just that. However, today, we will concentrate on how to deal with the past dues once they appear.
Here are some tips that will help you to reduce your outstanding receivables:
– Address the issue immediately. Never wait more than 3 business days past the due date to contact the customer. This allows for mail delays, but is early enough to catch a situation before it becomes worse.
– When you contact customers, don’t give them an excuse to use (“Did you receive your invoice?”). Rather, ask them, “When did you send your payment?” If they tell you it hasn’t been sent, ask them if they intend to send it today. If they say “no,” ask when they expect to send it. Get a commitment from them and follow up if the commitment is not honored.
– Ask your customers why they haven’t paid your bill. Remember, if they are honest with you, you should treat them with the utmost respect. Everyone has cash flow issues from time to time and your treatment of them will be remembered long after their problems are over and they are looking to purchase products or services that you offer again. As a matter of fact, proper etiquette when collecting could not only result in you getting paid more quickly, but can also allow you to keep them as customers for life. You see, if they are indeed having problems, chances are there will be many who will not treat them very well and this will sour their relationship going forward.
– If you get an excuse, remove your emotions from the equation and address the situation logically. Get a definitive commitment on a date or time frame for when you can expect to receive payment from them. Make sure you are in agreement, so that there can be no claims of misunderstanding later. Find out how (mail, credit card, etc.) and when. Then note the conversation in your file so that you can follow up immediately if the commitment is not honored.
– If they give you a good reason (“My product was defective”), try to remedy the situation, if it is within your control. For example, if you find that the product was indeed defective, make certain that a new, defect free product is delivered immediately.
– If your customer is a larger company, understand that they will generally pay their invoices on a set schedule. You will need to know when your invoices need to be received by them in order to be included in their weekly, bi-weekly, or monthly payment cycle. If you find yourself with a past due from one of these companies, be sure to call or contact them several days prior to that time to make certain that they have all the documentation they need to include your invoice with their payments.
These are just some of the many proven steps you can take to collect your receivables once they are past due. To limit future past dues, you will need to revisit your entire process. To compete in business today, you will almost certainly have to have some level of credit for your customers. The key is to limit it to those who will pay you! If your process needs an overhaul, it is important to tackle that issue immediately. While sales are important, it is still cash that is king!
One of the biggest drains on the cash flow of small businesses is the slow collection of accounts receivable. In cases where accounts receivable are out of control, you can bet that cash flow is out of control as well. I don’t know about you, but the folks I have to pay are not very concerned with whether or not I am getting paid in a timely manner. They want their money. Why is it then that we have such a difficult time holding our customers to the same standard. Why on earth should we feel guilty calling our customers to ask for OUR money? I don’t know, but many of us do.
The easiest thing to do is to put off contacting the customer for another day or two or worse, send a letter that either gets ignored or thrown in the trash. Most businesses take the easy way out. A short impersonal letter asking for past due payment helps you to feel as though you are doing something about your problem and also helps you avoid the personal conversation with your customer. Unfortunately, letters while better than nothing, do not get nearly the results that are obtained through personal contact.
The best and easiest way to make sure that all of your past due customers are contacted and contacted regularly and at scheduled intervals is to set up a system for contact. Your system should include the timing and content of each of your contacts. For instance, set up your contact to be x days after the due date. Your second contact should be x+7 days later, etc. The second and third contacts are just as important as the first. It shows that you are on top of the situation and are not going to go away.
You should have a script that you use in these situations. This forces you to make the contact. Each day you will know exactly who is late and what call or contact they are due for. This takes away the guesswork and the procrastination.
There is a time for letters and written communication. That time comes when your personal contact has not been rewarded with payment. It is now that, unfortunately, you must begin to build a file that you can use should collection or legal action become necessary. As with the personal contacts, you should have standard letters for each situation. Letters for x days past due, letters for missing a promised payment, etc.
Yes, there is a lot involved in setting up an accounts receivable collection system. But what is it worth to you? How much of YOUR cash is currently out of your reach because of past dues? Once you have the system set up, it will save you hours and hours of time and thousands of dollars in bad debts. How great would it be if you could look at all of your past dues and know exactly what to do and exactly when to do it? What if you already knew exactly what you were going to say or write for each? How much would it be worth to cut your past dues in half? How about cutting them by 75% or more?
That’s the power of a system. Specifically that’s the power of having an accounts receivable collection system. No more guesswork, no more inconsistencies and lots more cash in your bank account.
Customer bills that are unpaid after the terms that were set are considered past due accounts. Many business owners and managers have a billing processes, but no process for collecting on past due accounts.
One of the biggest dilemmas small business owners face when managing a business in collecting on past-due accounts. Why, do we have a fear of contacting clients or customers who owe us money? Most business owners avoid calling a client of customer on a past-due account, they prefer to send a letter, which do not bring results. Here are a few step to collecting on past due accounts.
1. Once an invoice has been sent to the client or customer, and payment has not been made with in the terms. Give the client or customer a professional courtesy call to confirm that they received the invoice.
2. After 1 week if payment has not been paid, place another professional courtesy call, advising that the payment still has not been received, be sure to ask when payment will be send, the check number and amount of check.
3. Send out a demand letter immediately after call.
4. Contact a reputable collection agency who specializes in collecting on business accounts for past due account over 90 days.
Constant communication trains customers to pay bills promptly and establishes an efficient, professional relationship between you and them.
Be sure to view your accounts receivable aging reports periodically to avoid delaying the contact of past due accounts.
Bonus Tip: Be consistent, don’t hesitate, the longer you wait to contact, the harder it would be to collect.
If your financial problems have grown from too much debt or your inability to repay your debts, a credit counseling agency may suggest that you sign up for a debt management plan (DMP). Only enroll in one of these plans after a certified credit counselor has thoroughly reviewed your financial situation, offered you detailed advice on money management, and determined that this is the best debt consolidation tactic. Only make payments into your DMP when your creditors have accepted you into the program.
When in a DMP, you work towards debt consolidation by depositing money every month with the credit counseling organization, which uses your deposits to pay your unsecured debts. Your credit counselor should estimate how long it will take to complete your DMP and ask if you are permitted to apply for or use additional credit while you are enrolled in the DMP. It is important to know that even with regular, timely payments; your DMP could take more than four years to complete.
7. Debt Consolidation
Acquiring a second mortgage or a home equity line of credit may be attractive debt consolidation options as well. These loans can help lower your cost of credit and might result in unique tax advantages. However, you risk losing your home because you are putting your home up as collateral. So it is very important to not make late payments or fail to make them at all. In addition, not only do you have to pay interest on these loans, but you might have to pay “points.” One point is equivalent to one percent of your borrowed amount, and these fees add up over time.
8. Bankruptcy
Personal bankruptcy should be a last resort in debt management and debt consolidation. If and only if you have exhausted all of your other options, you can declare bankruptcy. This gives you a court order saying you are no longer responsible for paying off certain debts. On the other hand, bankruptcy information remains on your credit report for 10 years. This can be a major roadblock in obtaining credit, purchasing a home, securing life insurance, or even getting a job.
Debt consolidation may seem like an overwhelming task, but you have to be proactive if you want to get your finances in order. No matter how bad your financial situation is remember there is hope. There are a number of realistic ways to improve it, or at least to make sure it does not get any worse and begin your debt consolidation. Use this information as a guideline for getting back on the right financial path and take your first step towards debt consolidation today.
Are you in debt and feel trapped? Even though your situation may be overwhelming and gradually more stressful, there is no reason it has to get worse. Has the thought of debt consolidation ever crossed your mind? There are many practical options available for you to help improve your financial situation and start you on the road to becoming debt free.
Depending on how much money you owe, how disciplined you are, and what your future options consist of are all variables to help you find the best debt consolidation solution for you. Consider the following, and remember it is very important to do your homework before starting down the road to debt consolidation.
1. Create a Budget
The first step towards debt consolidation is assessing how much money you bring in versus how much money you spend. Begin by determining the total amount you take, and then list your usual monthly expenses such as mortgage payments or rent, car payments, insurance, etc. Once this is completed, you can now move onto the more complicated task of listing your variable expenses such as entertainment, recreation, and clothing. By having a written list of all your expenses can help you identify your spending patterns and make debt consolidation much more realistic.
2. Get in Touch with Your Creditors for Debt Consolidation
After you have a structured budget in place, contact your creditors and explain why you are having financial problems. Then, you can work together to create a customized payment plan that is manageable for you. This step is vital on the road to debt consolidation. Ignoring your creditors, will result in your accounts being passed on to a debt collector.
3. Debt Collectors
If you have been contacted by debt collectors already, there are a few important things you should know. According to the Fair Debt Collection Practices Act, a debt collector may not call you before 8 a.m., after 9 p.m., or while you’re at work. Collectors must honor a written request from you to cease contact and are not permitted to harass you or lie.
4. Home and Car Loans
In order to understand debt consolidation, you should know that there are two kinds of debt: unsecured and secured. Unsecured debts — like credit card debts, signature loans, and debts for services — are not tied to any asset. Secured debts may tie your car to your car loan or your house to your mortgage. Failure to make your payments, your car faces repossession and your house could be foreclosed.
The majority of automobile financing contracts allow a creditor to repossess your car any time without any notice if you’re in default. In order to get your car back, you may have to pay the balance due on the loan plus towing and storage costs. Failure to do this can result in the creditor selling the car. If you know you are unable to make your car payments, you might be better off selling the car to pay off your debt and avoid repossession expenses and a blemish on your credit report.
If you find yourself falling behind on your mortgage payments, get in touch with your lender immediately to avoid foreclosure. Many lenders will work with you if you seem honest and the situation is temporary. Some lenders may temporarily cut or suspend your payments, but you may have to pay extra towards your past due total when you resume regular payments. Another option is to have your lender alter your mortgage by extending the repayment period. It is important to ask whether there are additional fees for these changes. If so, figure out how much they will be in the long run so that it does not negatively affect your debt consolidation.
5. Credit Counseling for Debt Consolidation
If the methods above were unsuccessful, consider contacting a credit counseling organization to fix your financial troubles. Highly regarded credit advisors are certified and trained in the areas of consumer credit, money and debt management, and budgeting. They can help you develop a personalized plan for debt consolidation. Though many credit counseling organizations are nonprofit, their services may not be free, cheap, or even legitimate, so do your research. Steer clear of any organizations that try to pressure you into making “voluntary contributions,” will not send you free information about their debt consolidation services, or charge high up-front or monthly fees.
Bank debt collection is a totally different animal than other kinds of collection for a variety of reasons. If you understand the basics of bank debt collection, you’ll be armed with the knowledge necessary to find a collection agency that understands your unique needs.
Bank debt collection means collections on mortgages, HELOCs, personal or commercial loans, auto loans, or credit card debt. The first few types, mortgages, HELOCs, and auto loans, are secured debt. Personal and commercial loans can be either secured or unsecured, and credit card debt is virtually always unsecured, with the exception of some credit cards for people with very bad credit that require them to make a deposit in the bank in the amount of the credit card limit.
Secured debt means that the bank has a claim on property tied to the loan if the consumer defaults on the loan. This means that they can repossess the car or foreclose on the house to make their money back. In practice, most banks would rather get their money than get the property, but the threat of losing the property means that consumers are more likely to keep their payments current on secured loans for as long as possible.
One fact you need to know when it comes to bank debt collection is that if customers haven’t paid by 60 days past the due date, they’re most likely not going to pay without prompting. When you come up to that signpost it’s time to hire a collection agency that understands this specific area of the collection business. This should be your first step in the process of collections, not your last, because most of these agencies don’t charge until they recover money for you. They have a better recovery record than in-house collections, and if they don’t collect there’s no fee, so there’s no risk.
Bank debt collection can get creative. For example, programs designed to help people dealing with financial difficulties are unique to this area of the collections industry. Such programs present the customer with a carrot rather than a stick. Instead of scaring them, they give the debtor incentive to try to make things better.
On the other hand, for secured debt, the techniques are very different. Whether you have an in-house collection department or use a collection agency that specializes in bank debt collection, you’ll want to approach the debtor differently. Financial hardship programs are common among secured loans like mortgages and car loans.
Financial hardship programs restructure the client’s payments in one way or another. They can defer payments and tack on the missing money to the principal, lengthen the loan terms (from, say, 30 years for a mortgage to 40 years), or switch the payments to interest only for a period of time.
Financial hardship programs help out both the institution and the borrower when it comes to bank debt collection. For this reason, any bank debt collection program should consider such methods of turning bad debt into debt recovery.
Divorcing individuals usually come across the possibility of paying or receiving spousal support (also called alimony). This can make a serious impact on your financial situation, and – depending on the length of time you were married – on your ability to support yourself in the future.
If you or someone dear to you is going through a divorce and would like more information about alimony payments, you should consider contacting an experienced attorney to understand your legal options.
Types of Alimony Payments
Alimony agreements differ depending on your living and earning situations, and those of your spouse. Some of the most common include:
– Temporary Alimony: The judge may award temporary alimony payments if a divorce has been initiated and not yet finalized.
– Permanent Alimony: Prolonged economic dependence and sustained contribution to a marriage call for a permanent alimony arrangement.
– Modifying Alimony: A change in circumstances may justify a change in alimony payments, such as loss of employment, the remarriage of the spouse receiving payments, or another serious change in circumstances.
Spousal support is obviously an issue that can become quite contentious. If you will be paying alimony, you may understandably be concerned with minimizing the amount you have to pay. Similarly, if you are to be receiving alimony payments, you may be concerned with maximizing the size of the payments you are to receive. Either way, it is in your interest to seek legal counsel and make sure you do what is right for you. An experienced attorney may be able to work with you to secure an agreement you can be happy with.
When dividing two lives apart, divorce can sometimes be extremely difficult financially. Being awarded alimony can sometimes help to relieve this financial burden. The following is what you should know about divorce and alimony.
Sometimes one spouse relies heavily on their partner to support them, and divorce can be like pulling the ground out from under them. When a court decides that a couple has an obligation to support each other during a marriage, they can mandate that payments be made to the suffering party. Unlike child support, this is treated as income and is subject to tax deductions.
Each state has different laws surrounding this. Some require that a couple be married for a specific period of time for a payment order to be issued. In some places, it can only be paid for a certain amount of time, like half the amount of time the couple was married. Certain states have limitations on how much can be paid, whether it be a number or a percentage of income. Though there are very specific laws regarding this in many states, some still have very vague stipulations. In these states, the decision surrounding it is left largely up to the judge.
It is important to understand that there are almost no circumstances that cause a person to be exempt from payments once they have been court ordered. Even if the person required to pay files for bankruptcy, they are still responsible for making payments to their ex-spouse. If someone is delinquent in their payments, their ex-spouse can report them to a collection agency and they will then go into debt.
Alimony is often demanded from a spouse during a divorce. There are a lot of different laws when it comes to alimony payments. Understanding what you should know about divorce and alimony will help to have the most desirable result possible.
In New Jersey, your wages from your workplace can be served if you are the non custodial parent. The wage garnishment can include child support and spousal support better known as alimony. The wage garnishment will come out pre tax out of your net pay.
It’s important to recognize the collection of child support continues even in the event that a worker is no longer able to work and receives his or her pay through workers compensation or disability insurance. New Jersey recognizes child support as the right of the child, it is not the right of the non custodial parent.
When a workplace has been served by having a wage garnishment order, the workplace should describe any sort of changes in the non custodial parent’s employment condition to the issuing agency. Extra info on New Jersey child support assortment is provided below.
New Jersey Child Support Collection
Because New Jersey sees child support as the right of the child, and further more requires non custodial parents to protect that right, by judgement, order and decree, (not necessarily in that order) the state requires, non custodial parents to provide for expenses that are normal and necessary for taking care of a child and other costs associated with that care. Depending on the case, the order of child support may include spousal support, better known as alimony. A typical order of support will provide for the payment of the child support for financial support, child support arrearage, health care or compensation for support paid. The child support may also include lawyer fees.
That Withholds the Money
When an employer or human resource administrator gets an order for support against their worker, they should impose the order. The New Jersey definition of “employer” is offered by area 3401 (d) of the Internal Income Code, and integrates any sort of labor organization and or governmental entity. A human resource administrator or employer of further sources of repayments, from sources such as; 401k plans, pension plans, worker’s compensation, sick pay insurance. In the event that employees under a child support order become eligible for benefits, such as disability or workers compensation, the employer or human resource administrator must forward all orders of disability or workman’s compensation insurance to the New Jersey’s probation department, when the claim is to be filed. This may be a certified true copy.
When is Money Withheld
When a company receives a support order for one of their workers, they should begin withholding on the next payday following the date on the order for support. The employer is responsible, by court order, and is obligated to remit payment of withholding, each and every payday. Repayment of child support can be made through EFT which is digitally transfers monies in Money Concentration and Disbursement (CCD +) format or by Corporate Trade Exchange (CTX) format or they can be remitted by check. A New Jersey workplace with greater than one worker that is subject to a support order can blend repayments for all of them. When the company blends payments, they should determine the amount owed by each worker, along with their names, case, number, and pay day date. The company must withhold and remit each pay day, implying that a New Jersey company can not collect withholdings to make one month-to-month repayment.
Orders Of Child Support That Are Out Of State
The state of New Jersey participates and observes guidelines form UIFSA which is the uniform interstate family support act. This act mandates companies to uphold and honor orders of support that they are served with, even if that order comes from out of state.
By companies doing their part and honoring and upholding out of state court orders of support, the employer should be able to keep up with and follow both the employee’s work state laws and the laws of the issuing state. When figuring out the period of the order, the amount to withhold, and where to remit payment, the company really should look to the releasing state’s laws. When determining the withholding limitations, exactly, what is included and defined as earnings that are disposable, and deductions, and when to begin and remit holding, the workplace must follow the laws of the state where the worker works.
For many families, child support is essential for their month to month survival. Enforcing this form of support is one of the most vital functions of the courts and an extremely important use of their power. Because of the crucial nature of child support payments for many families, some states are able to extend their jurisdiction to nonresidents in order to collect child support payment. For single parents or any other family that receives child support, the need is real and the courts should be able to uphold an action that they have decreed.
Some states have jurisdiction over residents of other states, or nonresidents, because of the actions or orders that were brought against them in that state. Financial support for children is one of those actions. Parents who are attempting to flee their responsibility can not escape by simply leaving the state. States have outlined regulations regarding who and how they can pursue the collection of support from nonresidents.
A nonresident of a state can still be served with a support collection action if they are in the state. So if a fleeing parent establishes residency in another state, but comes back to the state where they owe financial support to a child, they can be served with an action to collect their overdue payment. Also, if a nonresident ever resided with the child whose support the are supposed to pay, they can be served with an action by that state. Finally, if a child was conceived in a state that a person is not a resident of, they can still be within the jurisdiction of that state in regards to support payments.
