Should Your Business be Using a 1st Party to Help Accelerate Slightly Late Client Payments?

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.

Even if you are a business who has concluded that a 3rd party profit recovery company should be used as Article #1 recommends, you may not have considered using a 1st party cash flow accelerating company as well!

First, let’s get terminology straight:

• The 1st party is the creditor or business supplying the product or service.

•  The 2nd party is the debtor or client receiving the product or service.

• The 3rd party is a company who is not directly involved in the product or service transaction but which is a vendor supporting the 1st party to acquire money owed from the 2nd party.  Quite often a 3rd party is called a collection agency or a profit recovery company.

Now that terminology is clear, if the creditor is the 1st party then how can a 1st party be used to help accelerate slightly late client payments? Well the creditor can hire a company to politely represent them (outsource it) as if they are the creditor prior to going to a more firm 3rd party collections approach. Most creditors try to resolve late past due payments for months internally before finally turning the debtor accounts over to a 3rd party.

The good ones only work it internally for 2 to 3 months but unfortunately some work it longer. No matter what, virtually every business who offers credit spends a fair amount of time and effort working their late past due debtors with additional invoices or statements, letters, and phone calls. The Dartnell Institute, many years ago, showed that creditors on average spent $20 to $30 per late paying debtor trying to recover their money owed. Be assured, the internal collection cost today has risen well above this with estimates indicating that it costs $8 for each contact made to a debtor. So 5 contacts to get paid equates into $40 spent doing it! When the fully loaded cost is really analyzed by a financial person and the A/R department labor and benefit costs, mailing costs including paper and ink and postage, the phone costs, and associated overhead costs for things like floorspace and computer systems to support the A/R department is considered they will surely validate the total cost as being surprisingly high to do non-value-added internal collection work. Finally, this cost is incurred regardless of the actual recovery results obtained which can not be ignored.

Sometimes an outsourced 1st party is thought of as a billing company but in the context of this article we are not talking about simply sending open-loop the first invoice to a debtor who is not late per payment terms and waiting to receive payment. Instead we are talking about a closed-loop following up with debtors who are 1 day past payment terms to actively work getting payment. Do not confuse billers with cash flow accelerators. Best case, most billers simply send multiple statements but they do not write letters and make phone calls.

So to decide if your business should be hiring a 1st party cash flow accelerating company (not a biller) instead of doing internal collection work yourself, ask yourself these questions:

1) Do you struggle simply getting the first invoice out to non-late paying clients?

2) Do you get the second statements and letters sent out that you want to for late past due debtors?

3) Do you hate making collections calls and because of this find yourself never getting to them?

4) Do you not understand the legalities of asking to be paid without breaking the law?

5) Do you delay sending late past due debtors who are more than 90 days past terms to collections because you feel guilty you have not done proper followup in-house first?

6) Have you been thinking of hiring additional collection personnel even if just temporary or part-time?

7) Do you want to reduce the amount of clients sent to 3rd party collections?

If you answered yes to one or more of these questions then your business should consider hiring a 1st party cash flow accelerating company.

When doing so utilize cash flow accelerating companies that employ state-of-the-art dialer technologies to assist in getting through to the debtors since statistics show it takes 7 calls to typically get through to a debtor in person.

You will not only find out that it is much less expensive but that just taking calls to accept payment is much less frustrating than making calls in hopes of getting it.

Now that you know more about 1st parties, hopefully you can decide if using one makes sense to accelerate your business’ cash flow!

To inquire about how you can work with a cash flow accelerating company that has 40 years of experience and is now offering cutting-edge dialer technology as part of a 1st party service that was previously only offered to its very large Fortune 500 clients plus how you can do it with 5 contacts over 1 month for a flat @$10 fee per slightly late debtor account,

call us at:

818-710-0244

Series: "Recover Your Business Profits"
Article: #13 "Should Your Business be Using a 1st Party to Help Accelerate Slightly Late Client Payments?"

Speeding up Healthcare Insurance Claim Resolution!

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.

Even if you are a healthcare provider who has concluded that a 3rd party profit recovery company should be used as Article #1 recommends, you may not have concluded how to handle drawn out late past due insurance company claim payments!

Most healthcare providers ask the question, “Why should I pay a collection agency or debt recovery company to pursue late past due insurance claim payments when I know I will ultimately get paid the money or be told the claim will not be covered at which point I will pursue recovery from the patient?”

The fact of the matter is that selective submissions of late past due insurance claims to a 3rd party for recovery can help the healthcare provider in these ways:

1) Eliminates office staff from spending large amounts of non-value added time on the phone with the insurance company trying to get claim resolution so the office gets more productivity with less staff

 2) Identifies coverage policy for new medical procedures rapidly

 3) Quickly identifies if a claim will be paid or rejected

 4) Increases cash flow by reducing claim submission to claim payment turnaround time

What most healthcare providers do not realize is the policy that healthcare insurers have in place when a 3rd party contacts them on behalf of the provider to get claim resolution on a patient. The untold policy is that insurers elevate all 3rd party contacts to a supervisory level rather letting normal claim handlers manage it. The reason this is done is to insure these claims get priority attention. The priority attention and focus is needed since insurers’ JACO insurance/bonding rates are directly affected negatively by the number of annual 3rd party pursuits occurring since JACO requests statistics from 3rd party suppliers. Governmental insurance oversight agencies also track this to publish the insurers’ slow pay rating.

Healthcare providers who were not previously assigning late claim resolution to a 3rd party and then later did so frequently encountered a regular drop in resolution time from 3 or more weeks to 1 week or less whenever they had their 3rd party contact the insurer via a written demand on multiple occasions. Moreover, some providers have even been contacted by the insurer to participate in a special meeting in order to bargain an ongoing quick turnaround for a stoppage in 3rd party submissions.

Once again, the lesson learned is to involve a 3rd party early even when an irritating insurance claim is not being paid on-time!

Now that you know the insurance secrets, hopefully you have concluded from Article #1 and Article #11 that you MUST use a 3rd party early even with late insurance claim payments to minimize recovery time! If this 3rd party is a profit recovery company you will even better yet minimize the cost of recovery in order to leverage the best alternative to free up those profits which are tied up in late past due accounts receivable!


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 how you can do it for a flat @$10 fee per debtor account recovery cost,

call us at:

818-710-0244


Series: "Recover Your Business Profits"
Article: #12 "Speeding up Healthcare Insurance Claim Resolution!"

Secrets Every Creditor Should Know!

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.


If you have not yet concluded this from Article #1, consider these extremely important secrets that every creditor who is owed money from late past due debtors MUST know!

1) Spending internal company resources to pursue collecting from past due debtors who are more than 60 days late is expensive, creates lost opportunities for resources to work on other things, and impacts cash flow. Internal collection costs more than 10 years ago were shown by the Dartnell Institute to range from $20 to $30 per late past due debtor account. We had prospective clients doubt these costs. However, their own recent studies really surprised them as they came up with internal costs in the $50 to $60 range per late past due debtor account! You might ask, “Where in the world could this much cost be incurred?” Well, one major part of it is comprised of the fully loaded salaries and benefits of the people in the company’s Collection Department times the average amount of time worked on a late past due debtor’s account to try to get payment by sending duplicate invoices, writing and sending letters, and making phone calls. There is also the cost of paper, ink, envelops, and postage to send duplicate invoices and letters. Additionally, there is the cost of telephone charges to make the phone calls. Finally, do not forget the overhead costs for IT, building office space, utilities, etc. While all the internal collection pursuit is going on, the Accounts Receivable Department is taken away from correctly managing invoicing to customers who have not yet passed terms. Last but not least, cash flow is constrained while internal resources, who really wield no power over late past due debtors, are feverishly trying to coerce them with polite requests.

2) Continuing to ask debtors to pay over and over in different ways with internal resources is futile. If a debtor is late past due by 60 to 90 days maximum then ongoing attempts are a waist of time. Just check your company’s own data. Be assured that debtors who have not paid by the 3rd statement (re-invoice and letter) do not pay on the 4th, 5th, or 6th statement! There is nothing more you can do internally to strongly motivate them to pay. Collection agencies and debt recovery companies exist for a reason. Very simply put, they are effective because the debtors know they have the potential to impact their credit. Realize though that a credit impact is never the real goal. The real goal is to get the creditor paid and not simply to “black mark” the debtor. After credit is affected then there is no real inspiration for a debtor to pay so it should only be done as a last resort. This is why so many judgements go unpaid.

3) The expense of the depreciation of debt far out weighs what any collection agency or debt recovery company could charge. After 90 days late past due, the probability of recovery of 100% of the debt begins to depreciate at its fastest rate of ½% per day! By 1 year late past due, only 10% of what is owed by an individual or 29% of what is owed by a company will be recovered. Inotherwords, the cost of depreciation is 90% for a B2C transaction or 71% for a B2B transaction! Even the highest cost percentage collection agency will only charge 50% of what is owed. So see, focus on recovery early as the priority by using a third party versus worrying about what a third party will cost you!

4) There is such a thing as diplomatic collections. Infact, many companies believe they should pursue late past due debts solely in house to insure the clients (debtors) who are desired as long term customers are not offended in the process. So if companies believe their own in house Collection Departments can be diplomatic then why on earth should they believe that a third party can not. Infact, third parties can treat debtors just as diplomatically while wielding the threat of a credit impact subconsciously in the debtors mind simply because they know a third party versus the first party is contacting them! No threats or impolite treatment is necessary. All that is necessary in most cases is for the debtor to simply know that it is a third party who is talking to them. Some debt recovery companies offer unique account-by-account debtor treatment in a diplomatic or intensive way and even send a thank you letter after payment is made in full.

5) Collections is a way to keep customers. Put simply, if a debtor owes your business money and many other suppliers compete with you then it is easiest for a debtor to simply go to your competitor rather than face you to explain why they have not paid. A great analogy is as follows. Assume you rack up a large debt at your dentist and never pay. If you have a bad tooth ache one year later, would you go back to the dentist you owe or go to another dentist? Obviously most late past due patients will avoid the owed dentist like the plague to avoid embarrassment! So see, collecting early but politely from clients you want to retain is actually a way to keep them coming back!

6) The vast majority of money is collected through the mail. Federal FDCPA law dictates that all collection attempts start with letters or written demands. The facts show, and all insiders within the collection industry know this, that 80% of everything that does get collected which is late past due gets collected during the written demand phase! Only 20% needs to go on to phone calls and maybe litigation. Moreover, the lowest cost phase of collections is the mailing/letter/written demand phase. So why pay third parties high percentages for the 80% that are collected via a low cost method?

Now that you know the secrets, hopefully you have concluded from Article #1 and Article #11 that you MUST use a third party early to maximize recovery! If this third party is a profit recovery company you will even better yet minimize the cost of recovery in order to leverage the best alternative to free up those profits which are tied up in late past due accounts receivable!


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 how you can do it for a flat @$10 fee per debtor account recovery cost,

call us at:

818-710-0244


Series: "Recover Your Business Profits"
Article: #11 "Secrets Every Creditor Should Know!"

Will Your Business be Able to Get a Bank Loan?

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.


A critical question that must be asked if your business is not using any third party to help with collection is, "Will your business be able to get a bank loan?"

The facts speak loudly that if only internal collection efforts occur, whether the business clients are B2B or B2C, inevitable late past due accounts receivable will occur and drive extended days sales outstanding (DSO) resulting in required standard accounting procedure write-offs.

As tax time arrives, the IRS may question and even audit a business to make sure that write-offs are truly above board and justified. The IRS will want to insure that goods or services were not supplied to friends and/or family for free and for personal gain while the business writes them off and avoids paying taxes on the income. Issuing 1099’s to delinquent debtors helps avoid ethical inquiry from the IRS (and forces debtor tax payment on the “charitable” income) but so does having a third party profit recovery company on contract with evidence of a valid documented attempt to collect from each written off debtor.

Even though the chances of an IRS audit can be virtually squelched with the above approaches, write-offs after this can still have great negative impact on the business! Why? Because of what banks call a “non-performing asset” otherwise known as “written-off A/R or DSO”!

You may ask, “So what if I have a uncollected debt which is written off as a non-performing asset? Well, in this economy with extremely tightened credit being offered from banks to businesses, you definitely do not want to have an inability to get credit to expand the business or to cover cash flow fluctuations. It could be the difference between flourishing and going bankrupt.

The fact of the matter is that banks look closely at non-performing assets (debt write-offs) as a key criteria to determine whether a loan will be granted or not.

Do not strap your business for cash by not taking full advantage of a profit recovery company to avoid or minimize unpaid client A/R based write-offs!


To inquire about how you can keep your business financial standing high enough to acquire needed bank loans by working 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 doing so for a flat @$10 fee per debtor account,

call us at:

818-710-0244


Series: "Recover Your Business Profits"
Article: #10 "Will Your Business be Able to Get a Bank Loan?"

Psychology of a Delinquent Debtor

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.


After having discussed many other topics, it is very appropriate to revisit and re-stress the importance of recovery, which is really where all the money is, via early third party involvement and how this links to the psychology of a delinquent debtor.

Not paying a bill that is owed is really like stealing!

Hence, the following psychology-based observation or analogy can be made:

1) Before most people build up the courage to "steal," they go through a process of increasing tension that builds up to the moment of the act or decision.

2) After that, the anxiety trails off fairly quickly, usually accompanied by some form of internal explanation as to why the decision was right or justified known as rationalization.

The thief’s ambiguity is greatest just around the moment that they execute the behavior of hiding the unpaid for goods in their coat which is the theft (non-payment).

This is a compelling reason to not wait long after the act occurs (failure to pay on the due date) to try and coerce (internal collections attempts) the building up of a self-motivated guilt by reminding them of the inappropriateness of the act which might drive a rescinding of the behavior. This is like a friend saying, “Hey don’t do that! It’s not cool!”

However, the friend is not always with enough influence to alter the behavior. It may take someone of authority like a store employee or security officer (a collection agency or debt/profit recovery company) to say, “Put those goods back now!” to drive a modification of the behavior. In the end it is like a guardian angle sitting on the thief’s shoulder and just after the act occurs whispering in their ear these words, “Do not steal that. It is not correct to do so. Return the goods. There could be terrible repercussions by not doing so. Your reputation (credit rating) could be ruined.” then chances are they will return the stolen goods (pay) before walking out the door (becoming very delinquent).

Isn’t the real priority in the end to get the merchandise returned to the shelf (recovery)? Isn’t this more critical from a non-emotional business standpoint than hoping they are able to walk out the door just so you might be able to apprehend them in order to send them to jail (affect their credit rating) which is emotional versus logical?

Remember, after they walk out the front door of the store (fail to pay before 90 days late) with the stolen merchandise, the farther and farther away from the door they get (older the debt becomes) the less and less likely the store security and police are to catch them to recover the merchandise (collect). This is a direct corollary to the “aging debt decreasing chance of recovery curve”. If the thief gets so far away from the store’s front door that you lose site of them then you probably will never catch them (never recover your money)!

The moral of the story is: “Get a third party involved early and not late to help improve the chance of recovery!”


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 cost is a flat fee of @$10 per debtor account,

call us at:

818-710-0244


Series: "Recover Your Business Profits"
Article: #9 "The Psychology of a Delinquent Debtor"

How Will Debtors be Phoned?

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, "Will the phone calls made to my debtors be compliant with the law and handled professionally?"

Everyone has seen the TV reports and newspaper articles about collection thugs harassing people who owe money. Tactics have been documented and shown where collection agencies call the debtor’s employer and bad-mouth the person to ruin their reputation, call at 5 AM in the morning or 12 AM at night to wake up the debtor, and even threaten to physically harm the debtor just to name a few.

These are the exact tasteless tactics that drove enactment of the federal FDCPA law and various other state laws to protect the rights of the debtors and rightfully so!

As discussed Article #4 “Make Sure Your Collection Agency Isolates You from Liabilities Due to Their Errors”, the creditor is liable for the actions of any third party it hires to collect or recovery money for them. Even if the third party has a hold harmless contractual clause legally isolating the creditor from liability, poor third party practices shed a very bad image on the creditor’s business and this negative publicity can affect sales! So there are many reasons you as the creditor want to avoid inappropriate collection practices from your hired third party at all costs.

In studying the debtor complaints filed regularly in the judicial system, it is clear that they almost all happen in what the industry calls the second phase of collections or verbal demands better know as the phone calling phase. The complaints do not originate in the first phase of written demands nor do they happen in the third phase of litigation.

So you want to insure you understand how your collection or recovery company handles phone calls to debtors. Carefully and specifically make sure that they abide by all laws in the phone-calling phase.

This is the minimum set of criteria you should insist on from your collection or recovery company:

     1) third party call center employees are college educated and with more than just a high school degree

     2) third party call center employees are well trained on the federal, state, and local laws

     3) the third party has corporate phone call monitoring (ie. recording) so management can audit call center employees to confirm they are abiding by the law

     4) the third party has corporate fake debtors in the system, unbeknownst to the call center employees, who confirm that correct practices are occurring per the law

In summary, you want a reputable and professional call center process that makes every attempt to conform to the letter of the law!


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 call center employees are college educated professionals and monitored to insure they comply with the law

call us at:

818-710-0244


Series: "Recover Your Business Profits"
Article: #8 "How Will Debtors be Phoned?"