After reading Article #1 titled "Is Your Business Owed Money?" in my series of "Recover Your Business Profits" blog posts, your business should have concluded to use a third party which is a profit recovery company to free up those profits which are tied up in late past due accounts receivable.
Another critical question that must be asked before selecting which profit recovery company to use is, "Do I have to pay upfront before I get the money I am owed recovered?"
Some profit recovery companies charge the creditor a flat up front fee per submitted debtor account.
The immediate thought in most creditors' mind is to ponder about why in the world they should pay for a recovery that has not yet happened. The creditor feels they do not want to pay before a recovery occurs since they believe the profit recovery company will work harder if they only get paid when the debt is recovered. Most creditors initially instead want to work on a contingency basis so they only pay after the debt is recovered. This drives some creditors towards working with a standard collection agency that operates on a percentage contingency basis rather than working with the up front flat fee profit recovery company.
The fallacy with this belief is that collection agencies are really NOT paid after the creditor collects the money owed!
Infact, ALL collection agencies, debt recovery companies, and profit recovery companies ARE paid
before you, the creditor, are paid the money that is recovered. It is unfortunate but many creditors fall into the trap of believing that collection agencies working on percentage contingency basis are only paid after the recovery.
You as the creditor must think carefully through the cash flow trail of a collection or recovery as money is recovered from the debtor until the point it actually arrives in your pocket.
So let's take a look at the typical collection agency-to-creditor cash flow assuming the debtor owes $100:
1) debtor is contacted by the collection agency and is coerced
into paying
2) debtor sends the $100 to the collection agency just as
demanded
3) collection agency receives the creditor's $100 from the debtor
4) collection agency takes their 30% to 50% fee or $40
(assume mean fee)
5) collection agency holds the remaining $60 owed to the creditor
for another 30 to 60 days (earning interest on the creditor's
held money owed and impacting the creditor's cash flow further)
6) collection agency sends the $60 to the creditor
7) creditor receives the net back of $60
In summary, who got paid first, you the creditor or the collection agency? Yes, the collection agency did!
Next, let's take a look at the typical profit recovery company-to-creditor cash flow assuming the debtor owes $100:
1) profit recovery company receives its up front fee of $10
from the creditor
2) debtor is contacted by the profit recovery company and is
coerced into paying
3) debtor sends the $100 direct to the creditor just as demanded
4) creditor receives $100 from the debtor for a net back of $90
after the profit recovery company fee is considered.
In summary, who got paid first, you the creditor or the profit recovery company? Yes, the profit recovery company did!
Now that it is clear collection agencies and profit recovery companies both get paid their fees first before you, the creditor, get your money, if you are assured both will recover the money owed from the debtor then which would you prefer to hire? Would you want to get $60 net back or $90 net back? Few creditors would choose the $60! So, yes, the profit recovery company is the better choice when recovery performance from both is assumed equal. If you choose a profit recovery company with a top industry recovery rate then there is no question that it is the best business decision based upon the financials.
So do not ponder over not paying up front for a recovery since all collections are paid for up front. Instead, ponder over recovery rate and net back!
To inquire about how you can work with a profit recovery company that has an average 56% recovery rate in 40 days for accounts turned over before they exceed 90 days late and where the debtors pay you what is recovered directly while you only pay the profit recovery company an up front flat fee of @$10 per late past due account
call us at:
818-710-0244
Series: "Recover Your Business Profits"
Article: #7 "Should I Pay for Collections Up Front?"
Friday, December 25, 2009
Saturday, December 19, 2009
Require Third Party Flexibility on How It Handles Debtors
After reading Article #1 titled "Is Your Business Owed Money?" in my series of "Recover Your Business Profits" blog posts, your business should have concluded to use a third party which is a profit recovery company to free up those profits which are tied up in late past due accounts receivable.
Another critical question that must be asked before selecting which profit recovery company to use is, "How does it legally handle the debtors when contacting them?"
All creditors are not created equally. For that matter, nor are debtors all the same.
In some cases the business the creditor is in dictates the way their debtors should probably be treated.
For instance a bail bondsman creditor probably wants its criminal debtors contacted in a firm and forceful way for effectiveness. However, in contrast, a psychologist creditor probably wants its mentally disturbed patients treated in a polite and negotiating way for effectiveness. Moreover, other creditors may want debtors treated differently on an individual basis. Debtors whom the creditor never cares to do business with again can be handled in a tough manner. Debtors whom the creditor wants retained as a repeat customer can be handled in a coercing manner.
An effective profit recovery company will be able to adapt to the creditor’s desired debtor contact method.
The profit recovery company should be able to:
1) legally “turn up the heat” with an aggressive intensive approach or
2) legally “charm the snake” with a negotiating diplomatic approach.
These 2 methods should be able to be assigned uniquely to individual debtors on an account-by-account basis by a good profit recovery company. This fosters the ability for the creditor to get paid and then:
1) never do business with that debtor again or
2) retain the debtor as a repeat client.
Do you as a creditor always feel the same way about all debtors who are also clients? Does your opinion on how they should be contacted by a third party vary based upon how they dealt with you during your internal collection effort attempts? Did they insult you, taunt you, or laugh? Were they polite, apologetic, and humble? In summary, should all your debtors be dealt with in the same way? You need the ability to decide. In the end you want your money but you may or may not want a continued revenue steam from that debtor!
So insist that your profit recovery company offer intensive and diplomatic contact methods!
Finally, in those situations when a diplomatic method is desired with the hopes of retaining the debtor as a client, it really helps when a Thank You letter goes out when they do pay as “icing on the cake”. Inquire if your third party can do this?
To inquire about how you can work with a profit recovery company that has both intensive and diplomatic debtor contact methods as well as a flat fee of @$10 per late past due account and an average 56% recovery rate in 40 days for accounts turned over before they exceed 90 days late,
call us at:
818-710-0244
Series: "Recover Your Business Profits"
Article: #6 "Require Third Party Flexibility on How It Handles Debtors"
Another critical question that must be asked before selecting which profit recovery company to use is, "How does it legally handle the debtors when contacting them?"
All creditors are not created equally. For that matter, nor are debtors all the same.
In some cases the business the creditor is in dictates the way their debtors should probably be treated.
For instance a bail bondsman creditor probably wants its criminal debtors contacted in a firm and forceful way for effectiveness. However, in contrast, a psychologist creditor probably wants its mentally disturbed patients treated in a polite and negotiating way for effectiveness. Moreover, other creditors may want debtors treated differently on an individual basis. Debtors whom the creditor never cares to do business with again can be handled in a tough manner. Debtors whom the creditor wants retained as a repeat customer can be handled in a coercing manner.
An effective profit recovery company will be able to adapt to the creditor’s desired debtor contact method.
The profit recovery company should be able to:
1) legally “turn up the heat” with an aggressive intensive approach or
2) legally “charm the snake” with a negotiating diplomatic approach.
These 2 methods should be able to be assigned uniquely to individual debtors on an account-by-account basis by a good profit recovery company. This fosters the ability for the creditor to get paid and then:
1) never do business with that debtor again or
2) retain the debtor as a repeat client.
Do you as a creditor always feel the same way about all debtors who are also clients? Does your opinion on how they should be contacted by a third party vary based upon how they dealt with you during your internal collection effort attempts? Did they insult you, taunt you, or laugh? Were they polite, apologetic, and humble? In summary, should all your debtors be dealt with in the same way? You need the ability to decide. In the end you want your money but you may or may not want a continued revenue steam from that debtor!
So insist that your profit recovery company offer intensive and diplomatic contact methods!
Finally, in those situations when a diplomatic method is desired with the hopes of retaining the debtor as a client, it really helps when a Thank You letter goes out when they do pay as “icing on the cake”. Inquire if your third party can do this?
To inquire about how you can work with a profit recovery company that has both intensive and diplomatic debtor contact methods as well as a flat fee of @$10 per late past due account and an average 56% recovery rate in 40 days for accounts turned over before they exceed 90 days late,
call us at:
818-710-0244
Series: "Recover Your Business Profits"
Article: #6 "Require Third Party Flexibility on How It Handles Debtors"
Monday, November 30, 2009
Use a Third Party Before Year's End
After Reading Article #1 titled "Is Your Business Owed Money?" in my series of "Recover Your Business Profits" blog posts, your business should have concluded to use a third party which is a profit recovery company to free up those profits which are tied up in late past due accounts receivable.
At the end of the year it is even more important to leverage this assistance for more than just the recovery.
Even with the best profit recovery company, getting more than 50% after 90 days of aging via written demands is an excellent recovery! For verbal demands to bring in another 20% after 130 days of aging would also be excellent! What this means is that the other 30% best case goes unrecovered! Businesses typically have no choice but to write this debt off.
What "writing it off" really means is to take a positive tax situation for it with the US federal government's IRS department. However, if your write-off is higher than it has been on average in past years then an audit trigger is likely to be set. In the current economy, a higher write-off than normal is likely. The IRS will in an audit situation want justification that the write-off is valid versus being an illegal transfer of money to someone else or you "under-the-table". They will also want to know that it truly was unrecoverable.
Only an unbiased third party collection agency or debt/profit recovery company can offer irrefutable evidence that the write-off was valid and truly pursued yet unrecoverable.
The other thing most creditors must realize is that the debtors that put you in a write-off situation are really no better than a common criminal and infact are maybe even worse. Here is an example (relating to product vs. service) demonstrating why. A typical criminal sneaks in the back door of your business and takes product. A debtor, on the other hand, smiles as they walk in your front door and have you load good product onto a truck on your dock while you incur the cost of shipping to drop it on their doorstep yet they never pay you! You have to ask which is worse!
A key piece of final advice to consider at years end, following an unsuccessful third party collection/recovery attempt and subsequent write-off, is to send the debtor and the IRS a 1099 equaling the price of goods or service delivered. Basically, since they did not pay you, you have paid them income in the form of free un-paid-for product or service. Talk to your lawyer to get specific legal advice relating to doing this before proceeding. This will atleast give you some satisfaction to know that they will have to "pay the piper" taxes on this "stolen" good or service!
To inquire about how you can benefit from a flat fee of @$10 per late past due account via a profit recovery service which has an average 56% recovery rate in 40 days for accounts turned over before they exceed 90 days late,
call us at:
818-710-0244
Series: "Recover Your Business Profits"
Article: #YE "Use a Third Party Before Year's End"
At the end of the year it is even more important to leverage this assistance for more than just the recovery.
Even with the best profit recovery company, getting more than 50% after 90 days of aging via written demands is an excellent recovery! For verbal demands to bring in another 20% after 130 days of aging would also be excellent! What this means is that the other 30% best case goes unrecovered! Businesses typically have no choice but to write this debt off.
What "writing it off" really means is to take a positive tax situation for it with the US federal government's IRS department. However, if your write-off is higher than it has been on average in past years then an audit trigger is likely to be set. In the current economy, a higher write-off than normal is likely. The IRS will in an audit situation want justification that the write-off is valid versus being an illegal transfer of money to someone else or you "under-the-table". They will also want to know that it truly was unrecoverable.
Only an unbiased third party collection agency or debt/profit recovery company can offer irrefutable evidence that the write-off was valid and truly pursued yet unrecoverable.
The other thing most creditors must realize is that the debtors that put you in a write-off situation are really no better than a common criminal and infact are maybe even worse. Here is an example (relating to product vs. service) demonstrating why. A typical criminal sneaks in the back door of your business and takes product. A debtor, on the other hand, smiles as they walk in your front door and have you load good product onto a truck on your dock while you incur the cost of shipping to drop it on their doorstep yet they never pay you! You have to ask which is worse!
A key piece of final advice to consider at years end, following an unsuccessful third party collection/recovery attempt and subsequent write-off, is to send the debtor and the IRS a 1099 equaling the price of goods or service delivered. Basically, since they did not pay you, you have paid them income in the form of free un-paid-for product or service. Talk to your lawyer to get specific legal advice relating to doing this before proceeding. This will atleast give you some satisfaction to know that they will have to "pay the piper" taxes on this "stolen" good or service!
To inquire about how you can benefit from a flat fee of @$10 per late past due account via a profit recovery service which has an average 56% recovery rate in 40 days for accounts turned over before they exceed 90 days late,
call us at:
818-710-0244
Series: "Recover Your Business Profits"
Article: #YE "Use a Third Party Before Year's End"
Friday, November 27, 2009
Demand Good Communication from Your Collection Agency
After reading Article #1 titled "Is Your Business Owed Money?" in my series of "Recover Your Business Profits" blog posts, your business should have concluded to use a third party which is a profit recovery company to free up those profits which are tied up in late past due accounts receivable.
Another critical question that must be asked before selecting which profit recovery company to use is, "How excellent is its communication capability?"
The level of communication excellence should be determined based upon:
1) its ability to work bi-directionally
2) its technology
3) its accessibility
4) its flexibility
On point 1), insure the profit recovery company has the ability not only to accept submitted debtor information from the creditor but just as importantly has the ability to supply needed debtor pursuit status back to the creditor. This debtor pursuit status should include information such as whether the debtor is in bankruptcy, if the debtor address is good or if it has changed, what the recovery phase (written, verbal, or litigation) and step (how many letters have been sent or calls have been made) is, if the debtor has contested the recovery, if the debtor has made partial payment, etc.
On point 2), insist that the profit recovery company have an internet based primary creditor interface for debtor information submission and debtor status monitoring. It is fine if a secondary option exists in a paper or phone format if you are one of those few creditors that do not have internet capability. However, if you do not have internet access as a creditor, it is highly recommended you do so to reap the great benefits. If you are not comfortable with the internet, hire someone full-time or part-time to assist.
On point 3), demand that you as a creditor have the ability to submit debtor information and to request debtor status from the profit recovery company 24 hours per day and 7 days per week. It should be noted that one of the biggest complaints heard from creditors about their collection agencies is that they call their agency and have to leave a message inquiring about a debtor's status and no one ever gets back to them! This really goes hand-in-hand with point 2) since an internet interface is always available per the schedule of you the creditor. An internet creditor interface eliminates the need for information to be "pushed" from the collection agency to you since it is simply "pulled" from the profit recovery company whenever you want it.
On point 4), confirm that debtor information can be submitted to the profit recovery company on a single debtor basis via manual entry or on a multiple debtor basis via a batch file. Also confirm that batch files can be submitted in a variety of formats (ie. Excel, Access, ASCII, Comma De-limited, etc.) so it is compatible with your creditor's business accounting software or ERP system. Make sure that you the creditor can also flexibly select the format in which the debtors are contacted in writing based upon the debt specifics (unpaid invoice, bounced check, un-returned equipment, etc.). Check if there is flexibility in the manner in which the debtors are contacted so that it can be done diplomatically if you the creditor want to retain the debtor as a customer or intensively if you never care to do business with the debtor again.
So as you can see, you as a creditor must select a profit recovery company that has the ability to communicate with you in a bi-directional, high technology, accessible, and flexible fashion.
To inquire about how you can work with a profit recovery company that has high technology 24 hour 7 day a week accessible client internet based interface for debtor upload and recovery status that has a flat fee of @$10 per late past due account and an average 56% recovery rate in 40 days for accounts turned over before they exceed 90 days late,
call us at:
818-710-0244
Series: "Recover Your Business Profits"
Article: #5 "Demand Good Communication from Your Collection Agency"
Monday, November 23, 2009
Get Paid What You Are Owed Now or Plan on Getting Paid Later
After reading Article #1 titled "Is Your Business Owed Money?" in my series of "Recover Your Business Profits" blog posts, your business should have concluded to use a third party which is a profit recovery company to free up those profits which are tied up in late past due accounts receivable.
Another critical decision that must be made now is when to hire the third party!
Well an important fact to know is that the majority of what will get recovered will occur within less than 2 months after starting the third party effort.
So the first question you need to ask yourself this time of year (especially if your debtors are consumers - B2C) is, "Do you realize that the holidays are almost here?"
Wouldn't you agree that the holidays are an expensive time for businesses and individuals? There are typically special business lunches/dinners, parties, bonuses, raffles, greeting cards, gift certificates, etc. Individuals typically buy presents, cook meals, travel, etc.
What expenses do you think will take priority during the holidays if there is a limited budget? The priority will inevitably be business expenses to build employee morale and personal expenses for the family. Paying externally focused debts over internally focused expenses will not be the priority! Even worse, those internally focused expenses may be covered via credit cards resulting in an accumulation of even further debt.
So if your business does not get paid for the money it is owed now before the start of the holidays, these clients will probably spend the money they owe you on their holiday priorities versus paying you!
Get the third party profit recovery company hired by mid October to allow sufficient time to obtain the money owed before Thanksgiving and Black Friday (which is the biggest shopping day of the year). Otherwise do not count on a high likelihood of getting paid before the end of January after credit card bills are paid.
Finance your holiday and not theirs!
Now the second question you need to ask yourself this time of year (especially if your debtors are businesses - B2B) is, "Do you realize that most businesses close their financial books at year's end and base bonuses on it?"
Wouldn't you agree that business executives drive very hard at the end of the year to exceed objectives and financial targets to get the largest bonus possible?
Are you aware that in addition to financial targets relating to revenue/sales and profitability, most businesses have a financial target relating to cash flow? Do you know that cash flow is increased by not only getting customer payments in early plus reducing capital expenditure and inventory but also by paying suppliers as late as possible?
If they know you are "flexible on your terms" and they can take advantage of you by paying late, do you think they would delay paying until after December 31st if at all possible knowing that it would improve their cash flow in comparison to their target and increase their bonus?
So if your business does not get paid for the money it is owed now before the holidays at the end of November, these clients will probably delay paying you the money they owe you to help "lock-in" their bonus.
Get the third party profit recovery company hired by mid October to allow sufficient time to obtain the money owed before Thanksgiving. Otherwise do not count on a high likelihood of getting paid until January.
Finance your bonus and not theirs!
To inquire about how you can get your money before the holidays and benefit from a flat fee of @$10 per late past due account via a profit recovery service which has an average recovery rate of 56% in 40 days for accounts turned over before they exceed 90 days late,
call us at:
818-710-0244
Series: "Recover Your Business Profits"
Article: #H "Get Paid What You Are Owed Now or Plan on Getting Paid Later"
Another critical decision that must be made now is when to hire the third party!
Well an important fact to know is that the majority of what will get recovered will occur within less than 2 months after starting the third party effort.
So the first question you need to ask yourself this time of year (especially if your debtors are consumers - B2C) is, "Do you realize that the holidays are almost here?"
Wouldn't you agree that the holidays are an expensive time for businesses and individuals? There are typically special business lunches/dinners, parties, bonuses, raffles, greeting cards, gift certificates, etc. Individuals typically buy presents, cook meals, travel, etc.
What expenses do you think will take priority during the holidays if there is a limited budget? The priority will inevitably be business expenses to build employee morale and personal expenses for the family. Paying externally focused debts over internally focused expenses will not be the priority! Even worse, those internally focused expenses may be covered via credit cards resulting in an accumulation of even further debt.
So if your business does not get paid for the money it is owed now before the start of the holidays, these clients will probably spend the money they owe you on their holiday priorities versus paying you!
Get the third party profit recovery company hired by mid October to allow sufficient time to obtain the money owed before Thanksgiving and Black Friday (which is the biggest shopping day of the year). Otherwise do not count on a high likelihood of getting paid before the end of January after credit card bills are paid.
Finance your holiday and not theirs!
Now the second question you need to ask yourself this time of year (especially if your debtors are businesses - B2B) is, "Do you realize that most businesses close their financial books at year's end and base bonuses on it?"
Wouldn't you agree that business executives drive very hard at the end of the year to exceed objectives and financial targets to get the largest bonus possible?
Are you aware that in addition to financial targets relating to revenue/sales and profitability, most businesses have a financial target relating to cash flow? Do you know that cash flow is increased by not only getting customer payments in early plus reducing capital expenditure and inventory but also by paying suppliers as late as possible?
If they know you are "flexible on your terms" and they can take advantage of you by paying late, do you think they would delay paying until after December 31st if at all possible knowing that it would improve their cash flow in comparison to their target and increase their bonus?
So if your business does not get paid for the money it is owed now before the holidays at the end of November, these clients will probably delay paying you the money they owe you to help "lock-in" their bonus.
Get the third party profit recovery company hired by mid October to allow sufficient time to obtain the money owed before Thanksgiving. Otherwise do not count on a high likelihood of getting paid until January.
Finance your bonus and not theirs!
To inquire about how you can get your money before the holidays and benefit from a flat fee of @$10 per late past due account via a profit recovery service which has an average recovery rate of 56% in 40 days for accounts turned over before they exceed 90 days late,
call us at:
818-710-0244
Series: "Recover Your Business Profits"
Article: #H "Get Paid What You Are Owed Now or Plan on Getting Paid Later"
Tuesday, October 27, 2009
Make Sure Your Collection Agency Isolates You from Liabilities Due to Their Errors
After reading Article #1 titled "Is Your Business Owed Money?" in my series of "Recover Your Business Profits" blog posts, your business should have concluded to use a third party profit recovery company to free up those profits which are tied up in late past due accounts receivable.
However, another critical decision that needs to be considered when choosing which third party profit recovery company to hire is whether it has a creditor hold-harmless contractual clause to protect and isolate you, the creditor, from liability resulting from their actions coupled with an umbrella insurance policy against any third party violations of law!
The first key criteria that must be used in order to make the decision is whether the third party has a "hold-harmless" clause in its contract with you, the creditor. This is very important to minimize your risk as a creditor since in many cases the hirer of the third party is liable for illegal collection practices by the hired agency or company per the federal FDCPA (Fair Debt and Collections Practice Act).
The profit recovery company should be able to point out the exact clause on the contract where they are isolating you from any legal mistakes their employees might make in complying with federal, state, or local laws. While there are many reputable third party collection agencies, debt recovery companies, and profit recovery companies who make every attempt to follow the "letter of the law," there are some which are not compliant. Even the best in the industry might have only one employee who fails to follow procedure even if as an isolated event. The most likely phase in the collection or recovery process to have this risk is in the verbal demand phase when phone calls are being made from the third party to the debtor. This is why a contractual "hold harmless" clause is a must!
The second key criteria that must be used in order to make the decision is whether the third party is insured. Once again, this is very important to minimize your risk as a creditor since in many cases the hirer of the third party is liable for illegal collection practices by the hired agency or company per the federal FDCPA (Fair Debt and Collections Practice Act).
The profit recovery company should be able to display to you a valid in-force policy for an umbrella insurance coverage with a face value of at least US$1,000,000 dollars per incident and US$20,000,000 dollars cumulative. This protects you from an attempted lawsuit if the debtor sues the third party, even if they have a "hold-harmless" clause, and they can not pay due to a lack of funds.
Make sure you, the creditor, are contractually and financially isolated from liability from unlawful third party practices!
To inquire about how you can minimize your risk with a profit recovery company that has a hold-harmless contractual clause and a multi-million dollar umbrella insurance, while at the same time benefiting from the flat @$10 fee profit recovery service that has an average 56% recovery rate in 40 days for accounts turned over before they exceed 90 days late,
call us at
818-710-0244.
Series: "Recover Your Business Profits"
Article: #4 "Make Sure Your Collection Agency Isolates You from Liabilities Due to Their Errors"
However, another critical decision that needs to be considered when choosing which third party profit recovery company to hire is whether it has a creditor hold-harmless contractual clause to protect and isolate you, the creditor, from liability resulting from their actions coupled with an umbrella insurance policy against any third party violations of law!
The first key criteria that must be used in order to make the decision is whether the third party has a "hold-harmless" clause in its contract with you, the creditor. This is very important to minimize your risk as a creditor since in many cases the hirer of the third party is liable for illegal collection practices by the hired agency or company per the federal FDCPA (Fair Debt and Collections Practice Act).
The profit recovery company should be able to point out the exact clause on the contract where they are isolating you from any legal mistakes their employees might make in complying with federal, state, or local laws. While there are many reputable third party collection agencies, debt recovery companies, and profit recovery companies who make every attempt to follow the "letter of the law," there are some which are not compliant. Even the best in the industry might have only one employee who fails to follow procedure even if as an isolated event. The most likely phase in the collection or recovery process to have this risk is in the verbal demand phase when phone calls are being made from the third party to the debtor. This is why a contractual "hold harmless" clause is a must!
The second key criteria that must be used in order to make the decision is whether the third party is insured. Once again, this is very important to minimize your risk as a creditor since in many cases the hirer of the third party is liable for illegal collection practices by the hired agency or company per the federal FDCPA (Fair Debt and Collections Practice Act).
The profit recovery company should be able to display to you a valid in-force policy for an umbrella insurance coverage with a face value of at least US$1,000,000 dollars per incident and US$20,000,000 dollars cumulative. This protects you from an attempted lawsuit if the debtor sues the third party, even if they have a "hold-harmless" clause, and they can not pay due to a lack of funds.
Make sure you, the creditor, are contractually and financially isolated from liability from unlawful third party practices!
To inquire about how you can minimize your risk with a profit recovery company that has a hold-harmless contractual clause and a multi-million dollar umbrella insurance, while at the same time benefiting from the flat @$10 fee profit recovery service that has an average 56% recovery rate in 40 days for accounts turned over before they exceed 90 days late,
call us at
818-710-0244.
Series: "Recover Your Business Profits"
Article: #4 "Make Sure Your Collection Agency Isolates You from Liabilities Due to Their Errors"
Wednesday, October 21, 2009
Make Sure Your Collection Agency Follows Federal and State Laws or You Could do Time and be Fined
After Reading Article #1 titled "Is Your Business Owed Money?" in my series of "Recover Your Business Profits" blog posts, your business should have concluded to use a third party which is a profit recovery company to free up those profits which are tied up in late past due accounts receivable.
However, a critical decision that needs to be considered when choosing which third party profit recovery company to hire is its licensing and where its offices are located!
The first key criteria that must be used in order to make the decision is whether the third party is licensed (not necessarily located) in the state where the debtor resides. Federal law states that a collection, debt recovery, or profit recovery agency or company can not collect out of state by mail or phone in a state unless they are licensed in that state. So the simplest way to avoid having an issue where your third party can not collect from your debtor because they are not licensed in the state the debtor resides in or, worse yet, where your third party breaks the law is to insure they are licensed in all states. This is very important to minimize your risk as a creditor since the hirer of the third party is liable for illegal collection practices by unlicensed agencies and is subject to a $10,000 fine or up to 5 years imprisonment per section 897(c) of the federal FDCPA (Fair Debt and Collections Practice Act).
The second key criteria that must be used in order to make the decision is whether the third party physically has an office located in restricted/closed or partially closed states if the debtor resides there. At the time of the writing of this article, 18 states were closed and 8 were partially closed. Each state law is unique but the closed and partially closed states basically require that a collection, debt recovery, or profit recovery agency or company can not collect in their state by mail or phone unless they are located (with an office but not headquartered) in that state. So the simplest way to avoid having an issue where your third party can not collect from your debtor because they do not have an office located in that closed or partially closed state that the debtor resides in or, worse yet, where your third party breaks the law is to insure they are located in all closed and partially closed states. Again this is very important to minimize your risk as a creditor since the hirer of the third party based upon the state may be liable for illegal collection practices by non-local agencies and may be subject to fines and/or imprisonment.
Make sure you the creditor do not do time or pay the fine for internal unlawful practices or an unlawful third party!
To inquire about how you can minimize your risk by using a profit recovery company which is licensed in every state and which has offices in all states where it is required, while at the same time benefiting from the flat @$10 fee service that has an average 56% recovery rate in 40 days for accounts turned over before they exceed 90 days late,
call us at
818-710-0244
Series: "Recover Your Business Profits"
Article: #3 "Make Sure Your Collection Agency Follows Federal and State Laws or You Could do Time and be Fined"
However, a critical decision that needs to be considered when choosing which third party profit recovery company to hire is its licensing and where its offices are located!
The first key criteria that must be used in order to make the decision is whether the third party is licensed (not necessarily located) in the state where the debtor resides. Federal law states that a collection, debt recovery, or profit recovery agency or company can not collect out of state by mail or phone in a state unless they are licensed in that state. So the simplest way to avoid having an issue where your third party can not collect from your debtor because they are not licensed in the state the debtor resides in or, worse yet, where your third party breaks the law is to insure they are licensed in all states. This is very important to minimize your risk as a creditor since the hirer of the third party is liable for illegal collection practices by unlicensed agencies and is subject to a $10,000 fine or up to 5 years imprisonment per section 897(c) of the federal FDCPA (Fair Debt and Collections Practice Act).
The second key criteria that must be used in order to make the decision is whether the third party physically has an office located in restricted/closed or partially closed states if the debtor resides there. At the time of the writing of this article, 18 states were closed and 8 were partially closed. Each state law is unique but the closed and partially closed states basically require that a collection, debt recovery, or profit recovery agency or company can not collect in their state by mail or phone unless they are located (with an office but not headquartered) in that state. So the simplest way to avoid having an issue where your third party can not collect from your debtor because they do not have an office located in that closed or partially closed state that the debtor resides in or, worse yet, where your third party breaks the law is to insure they are located in all closed and partially closed states. Again this is very important to minimize your risk as a creditor since the hirer of the third party based upon the state may be liable for illegal collection practices by non-local agencies and may be subject to fines and/or imprisonment.
Make sure you the creditor do not do time or pay the fine for internal unlawful practices or an unlawful third party!
To inquire about how you can minimize your risk by using a profit recovery company which is licensed in every state and which has offices in all states where it is required, while at the same time benefiting from the flat @$10 fee service that has an average 56% recovery rate in 40 days for accounts turned over before they exceed 90 days late,
call us at
818-710-0244
Series: "Recover Your Business Profits"
Article: #3 "Make Sure Your Collection Agency Follows Federal and State Laws or You Could do Time and be Fined"
Monday, October 19, 2009
"Cost of Collection or Recovery Rate Itself, Which is More Important?" That is the Question!
After reading Article #1 titled "Is Your Business Owed Money?" in my series of "Recover Your Business Profits" blog posts, your business should have concluded to use a third party which is a profit recovery company to free up those profits which are tied up in late past due accounts receivable.
However, another extremely critical decision that needs to be considered when choosing which third party profit recovery company to hire is what that third party's recovery rate is!
The fact of the matter is that the largest account receivable losses a creditor will incur has nothing to do with the cost of collection loss against them but rather the loss due to what is not recovered at all.
This is why a third party needs to be hired by creditors no matter what in order to increase the likelihood of recovery and the creditors must remember "the earlier the better"!
Obviously, a creditor wants to pay the least amount possible for the collection and that is why a profit recovery company is better than the other alternatives. However, if that third party's recovery rate record is not substantiated with facts and is not good compared to the industry, whether a profit recovery company or not, then you should look for another third party! Ask to see reports from the third party substantiating results and ask for client recommendation letters supporting this. Ask how that third party compares to the average based upon the American Collectors Association (ACA) statistics. Look to see what reputable magazines and journals like Fortune, Investor's Daily, and Barron's say.
Recognize though that recovery rate is also affected by things outside the control of the third party and here are the 3 most important outside effects:
1) Age of the debt (most important)
2) Consumer or business debtor type (consumers are more difficult to collect from than businesses)
3) Industry or market sector of the debt which really reflects the classification of debtor (for instance if a creditor is from the bail bondsman sector their debtors are criminals and are much more difficult to collect from than if the creditor is from a court reporter sector where their debtors are lawyers and are much more simple to collect from).
So when a third party's recovery rate is looked at, these above points need to be considered.
When looking at reports, look for ones that are similar to your situation and preferably in the same industry or market sector.
When looking at ACA statistics, look for the third party's overall total recovery rate for the previous year across all debtor types and classifications and within a similar aging range (ie. less than 90 days and/or less than 1 year) but it should probably not include debts greater than 1 year old since the number of old accounts included can unfairly taint the statistics and since age is a more significant effect than effectiveness.
Another important thing to remember is that all recovery or collection efforts transition through 3 basic phases as governed by federal law. Written demands (phase 1) must be issued in writing first to the debtor followed by verbal demands (phase 2) where phone calls are made to the debtor and ultimately litigation (phase 3) by taking the debtor to court. It is important to note that the facts show that the greatest percentage (@80%) of debts which will get recovered get recovered in the first phase! So understanding the recovery statistics of a third party relating specifically to this first phase for debt less than 1 year old versus the ACA norm is of the utmost importance. Average phase 1 recovery rates of greater than 40% for debts with aging less than 1 year would be considered very good. Next, understanding the recovery statistics of the third party relating to the second phase for debts less than 3 years old versus the ACA norm should be investigated. Average phase 2 recovery rates of greater than 20% for debts with aging less than 3 years would be considered very good.
To inquire about how you can increase your recovery rate by using a profit recovery company which Fortune Magazine says "... has a collection rate well over 50%" while at the same time benefiting from the flat @$10 fee per late past due account,
call us at
818-710-0244.
Series: "Recover Your Business Profits"
Article: #2 ""Cost of Collection or Recovery Rate Itself, Which is More Important?" That is the Question!"
However, another extremely critical decision that needs to be considered when choosing which third party profit recovery company to hire is what that third party's recovery rate is!
The fact of the matter is that the largest account receivable losses a creditor will incur has nothing to do with the cost of collection loss against them but rather the loss due to what is not recovered at all.
This is why a third party needs to be hired by creditors no matter what in order to increase the likelihood of recovery and the creditors must remember "the earlier the better"!
Obviously, a creditor wants to pay the least amount possible for the collection and that is why a profit recovery company is better than the other alternatives. However, if that third party's recovery rate record is not substantiated with facts and is not good compared to the industry, whether a profit recovery company or not, then you should look for another third party! Ask to see reports from the third party substantiating results and ask for client recommendation letters supporting this. Ask how that third party compares to the average based upon the American Collectors Association (ACA) statistics. Look to see what reputable magazines and journals like Fortune, Investor's Daily, and Barron's say.
Recognize though that recovery rate is also affected by things outside the control of the third party and here are the 3 most important outside effects:
1) Age of the debt (most important)
2) Consumer or business debtor type (consumers are more difficult to collect from than businesses)
3) Industry or market sector of the debt which really reflects the classification of debtor (for instance if a creditor is from the bail bondsman sector their debtors are criminals and are much more difficult to collect from than if the creditor is from a court reporter sector where their debtors are lawyers and are much more simple to collect from).
So when a third party's recovery rate is looked at, these above points need to be considered.
When looking at reports, look for ones that are similar to your situation and preferably in the same industry or market sector.
When looking at ACA statistics, look for the third party's overall total recovery rate for the previous year across all debtor types and classifications and within a similar aging range (ie. less than 90 days and/or less than 1 year) but it should probably not include debts greater than 1 year old since the number of old accounts included can unfairly taint the statistics and since age is a more significant effect than effectiveness.
Another important thing to remember is that all recovery or collection efforts transition through 3 basic phases as governed by federal law. Written demands (phase 1) must be issued in writing first to the debtor followed by verbal demands (phase 2) where phone calls are made to the debtor and ultimately litigation (phase 3) by taking the debtor to court. It is important to note that the facts show that the greatest percentage (@80%) of debts which will get recovered get recovered in the first phase! So understanding the recovery statistics of a third party relating specifically to this first phase for debt less than 1 year old versus the ACA norm is of the utmost importance. Average phase 1 recovery rates of greater than 40% for debts with aging less than 1 year would be considered very good. Next, understanding the recovery statistics of the third party relating to the second phase for debts less than 3 years old versus the ACA norm should be investigated. Average phase 2 recovery rates of greater than 20% for debts with aging less than 3 years would be considered very good.
To inquire about how you can increase your recovery rate by using a profit recovery company which Fortune Magazine says "... has a collection rate well over 50%" while at the same time benefiting from the flat @$10 fee per late past due account,
call us at
818-710-0244.
Series: "Recover Your Business Profits"
Article: #2 ""Cost of Collection or Recovery Rate Itself, Which is More Important?" That is the Question!"
Saturday, October 17, 2009
Is Your Business Owed Money?
Your business, like most, does great work and you should not feel guilty about expecting to get paid promptly on-time per the agreed upon terms!
Unfortunately, the facts show that for every 100 clients billed at least 3% go late past due and depending on the market sector the percentage may be much higher. To complicate the matter, in the current economic situation, these percentages have been rising.
Now your business is inevitably spending time and resources on trying to get those clients who are late and have not paid to pay. The problem is though that many Accounts Receivable departments spend far too much time internally trying to get those late past due clients to pay.
Numerous expert recommendations have been quoted in newspapers like the Wall Street Journal as well as in magazines like the LA Business Journal stating that after 90 days internal collections should be turned over to an external third party for assistance with the collection. The facts are clear, if a late past due client (debtor) has not paid after 3 months of encouragement from the business (creditor) who has sent extra invoices, letters, and probably made phone calls then they probably will not react to additional efforts. This is why banks foreclose on late mortgages after 3 months of missed payments (ie. 90 days).
Even more important is the fact that, per the U.S. Department of Commerce, a debt which is late starts to rapidly reduce in its probability of being recovered just after 90 days. Just after 90 days, it reduces at its highest rate of 1/2% per day being lost.
What is needed is the involvement of a third party after 90 days to contact the client debtor on behalf of the business creditor. The fact that a third party has the ability to affect the client's credit wields a great wealth of power.
Surprisingly, far too often a third party is not hired by the business though! The two most common reasons given are:
Relating to point 2, if a client really must be retained then there are ways that a good third party can diplomatically handle the payment pursuit so as to not offend. Even more important is how the business itself responds to the client if and when they call to ask why they have been placed into "collections". The most appropriate way to respond to an irate or concerned key client who is a debtor is simply to say that the billing and collections efforts have been out-sourced, that you were unaware that they were so late in paying, and that if they simply expediently pay you will insure the collections pursuit is terminated. Getting paid on-time even by some of your biggest clients is very critical for your business viability. Do not confuse the fact that a client is large with the fact that they will inevitably eventually pay. How many suppliers do you think considered General Motors or Chrysler as key large customers who they did not want to offend? These same businesses (suppliers) probably tolerated outstanding late payments and did not involve third parties early enough to beat the declaration of bankruptcy which left those businesses "holding the bag" of most the debt at pennies on the dollar! So point 2 also must really be discarded as a valid justification for not hiring a third party as well.
Now that you see that a third party must really be hired to help get late past due accounts receivable collected, the question that must be asked is, "What is the right third party to use?" Well here are the options:
a) Handle it internally by taking it to small claims court if the
debt is small enough
b) Handle it internally by placing a lien on the client's property
if applicable
c) Hire a lawyer to pursue the debt if the debt is large enough
d) Hire a collections agency
e) Hire a profit recovery company
Option a) typically requires allot of internal time to be spent filling in court forms, pulling together backup facts, and attending at least a half day at court. A court fee is also required. With an internal labor cost estimate of a conservative $10/hr., it is quite reasonable to expect at least $200 in cost to be incurred for the paperwork preparation, time in court, and court fee.
Option b) typically requires time to be spent filling in government forms, pulling together backup facts, and spending time at a government office. A government fee is also required. With an internal labor cost estimate again of a conservative $10/hr., it is quite reasonable to expect at least $100 in cost to be incurred for the paperwork preparation, time at the government office, and government fee. Even more important is the fact that no money will be recovered until the property with the lien is actually sold. If there is no sale then there is no money collected and years and years can go by before a sale ever happens.
Option c) will run at least $100/hr. for the most novice of lawyers and can run over $400/hr. for a seasoned expert lawyer. As you might imagine, it would not be uncommon for a lawyer to spend several hours on the simplest of collections resulting in a bare minimum of $200 for the novice lawyer. It would be much more typical though for >30% of the debt to be consumed in lawyer costs and for an upfront retainer to be requested. You also must remember there are internal costs incurred again to pull together backup facts for the lawyer.
Options d) will typically cost 20% to 50% of the amount of the debt whether the debt is collected in the written demand, verbal demand, or litigation phases. This means no profit is left in the collection since very few businesses make in excess of 20% profit!
Option e) will cost a low flat fee of @$10 per late account. On debts over $100, it is highly likely that some profit will be retained after the recovery!
To inquire about how you can benefit from a flat fee of @$10 per late past due account via a profit recovery service which has an average 56% recovery rate in 40 days for accounts turned over before they exceed 90 days late,
call us at:
818-710-0244 .
Series: "Recover Your Business Profits"
Article: #1 "Is Your Business Owed Money?"
Unfortunately, the facts show that for every 100 clients billed at least 3% go late past due and depending on the market sector the percentage may be much higher. To complicate the matter, in the current economic situation, these percentages have been rising.
Now your business is inevitably spending time and resources on trying to get those clients who are late and have not paid to pay. The problem is though that many Accounts Receivable departments spend far too much time internally trying to get those late past due clients to pay.
Numerous expert recommendations have been quoted in newspapers like the Wall Street Journal as well as in magazines like the LA Business Journal stating that after 90 days internal collections should be turned over to an external third party for assistance with the collection. The facts are clear, if a late past due client (debtor) has not paid after 3 months of encouragement from the business (creditor) who has sent extra invoices, letters, and probably made phone calls then they probably will not react to additional efforts. This is why banks foreclose on late mortgages after 3 months of missed payments (ie. 90 days).
Even more important is the fact that, per the U.S. Department of Commerce, a debt which is late starts to rapidly reduce in its probability of being recovered just after 90 days. Just after 90 days, it reduces at its highest rate of 1/2% per day being lost.
What is needed is the involvement of a third party after 90 days to contact the client debtor on behalf of the business creditor. The fact that a third party has the ability to affect the client's credit wields a great wealth of power.
Surprisingly, far too often a third party is not hired by the business though! The two most common reasons given are:
- We have a great A/R group and will handle it ourselves!
- I do not want to offend my client since I want to retain the client!
Relating to point 2, if a client really must be retained then there are ways that a good third party can diplomatically handle the payment pursuit so as to not offend. Even more important is how the business itself responds to the client if and when they call to ask why they have been placed into "collections". The most appropriate way to respond to an irate or concerned key client who is a debtor is simply to say that the billing and collections efforts have been out-sourced, that you were unaware that they were so late in paying, and that if they simply expediently pay you will insure the collections pursuit is terminated. Getting paid on-time even by some of your biggest clients is very critical for your business viability. Do not confuse the fact that a client is large with the fact that they will inevitably eventually pay. How many suppliers do you think considered General Motors or Chrysler as key large customers who they did not want to offend? These same businesses (suppliers) probably tolerated outstanding late payments and did not involve third parties early enough to beat the declaration of bankruptcy which left those businesses "holding the bag" of most the debt at pennies on the dollar! So point 2 also must really be discarded as a valid justification for not hiring a third party as well.
Now that you see that a third party must really be hired to help get late past due accounts receivable collected, the question that must be asked is, "What is the right third party to use?" Well here are the options:
a) Handle it internally by taking it to small claims court if the
debt is small enough
b) Handle it internally by placing a lien on the client's property
if applicable
c) Hire a lawyer to pursue the debt if the debt is large enough
d) Hire a collections agency
e) Hire a profit recovery company
Option a) typically requires allot of internal time to be spent filling in court forms, pulling together backup facts, and attending at least a half day at court. A court fee is also required. With an internal labor cost estimate of a conservative $10/hr., it is quite reasonable to expect at least $200 in cost to be incurred for the paperwork preparation, time in court, and court fee.
Option b) typically requires time to be spent filling in government forms, pulling together backup facts, and spending time at a government office. A government fee is also required. With an internal labor cost estimate again of a conservative $10/hr., it is quite reasonable to expect at least $100 in cost to be incurred for the paperwork preparation, time at the government office, and government fee. Even more important is the fact that no money will be recovered until the property with the lien is actually sold. If there is no sale then there is no money collected and years and years can go by before a sale ever happens.
Option c) will run at least $100/hr. for the most novice of lawyers and can run over $400/hr. for a seasoned expert lawyer. As you might imagine, it would not be uncommon for a lawyer to spend several hours on the simplest of collections resulting in a bare minimum of $200 for the novice lawyer. It would be much more typical though for >30% of the debt to be consumed in lawyer costs and for an upfront retainer to be requested. You also must remember there are internal costs incurred again to pull together backup facts for the lawyer.
Options d) will typically cost 20% to 50% of the amount of the debt whether the debt is collected in the written demand, verbal demand, or litigation phases. This means no profit is left in the collection since very few businesses make in excess of 20% profit!
Option e) will cost a low flat fee of @$10 per late account. On debts over $100, it is highly likely that some profit will be retained after the recovery!
To inquire about how you can benefit from a flat fee of @$10 per late past due account via a profit recovery service which has an average 56% recovery rate in 40 days for accounts turned over before they exceed 90 days late,
call us at:
818-710-0244 .
Series: "Recover Your Business Profits"
Article: #1 "Is Your Business Owed Money?"
Thursday, October 15, 2009
Would You Like Tips to Help Improve Your Internal Collection Effort Results Prior to Involving a Third Party?
To inquire about how you can benefit from a flat fee of @$10 per late past due account via a profit recovery service which has an average 56% recovery rate in 40 days for accounts turned over before they exceed 90 days late,
call us at:
818-710-0244 .
Series: "Recover Your Business Profits"
Article: #0 "Would You Like Tips to Help Improve Your Internal Collections?"
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