What to do with Delinquent or slow paying accounts

One of the most frustrating things for any business owner is to provide a service and then not get paid for it. Some situations are understandable like bankruptcy but others are simply not forgivable. In this article I will tell you how I help companies around the nation to Collect before they have to send accounts to a collection agency.

A lot of times we are conditioned to continually make calls or send invoices and letters to try and get money that is rightfully ours. A lot of times we don't take into consideration how much money and time we put into collecting on our accounts. A national study shows that on average companies spend approximately $31 per account on the collection efforts. WoW! Sometimes we even do that when the balance was less than the effort. It is simply a matter of principle.

I am not saying that you should not use a collection agency or law firm to make collections. I am simply saying that using a percentage collection agency should only be a very last resort.

The department of Commerce did a study that shows the longer we go without collecting our receivables the higher the chances are that we will not get our money. In fact if we have not collected our money by the 12th month there is a 90% chance that we will not collect the money.

There are several things that can be done and every state has different collection laws so please check with your state laws before implementing these ideas or you can call me or e-mail me and I will assist you.

First make sure that you have a plan in place and stick to the plan regardless of who owes you a debt. For instance you should send an invoice at 30 days and on the invoice you should have something that tells your customer what your policy on collections are. For instance a 1 line at the bottom saying any invoices not collected in 60 days will be turned over to collections. Now don't put this on the invoice unless you plan on following through. Some states it is illegal to say you are going to send someone to a collection agency as a tactic to collect.

Now I know you are looking at me funny saying I can not afford to send my receivables to a collection agency and give away 20 - 50 percent of what is owed to me at the 60 day period. I am not saying that at all. A lot of companies are not aware that there are indeed collection agencies that you can use and simply pay a flat rate fee for their service. If you utilize an agency like that make sure they have a few things in place. Not every flat fee collection agency is the same. Make sure and do your homework and know the differences. A flat fee agency can not be affective by sending demands every 30 days. They have to be more consistent than that. They should send the demands every 10 - 14 days. They should use demands that are not clearly marked on the outside but are very clearly marked on the inside that they are from a Collection Agency. Also, choose a collection agency that allows the demands to be set up to where your customers pay you. Why would the collection agency want to take your money if they are a flat fee agency? Always stay in control of your collections even while using a third party collection agency.

It is also very important that you have the ability to view your accounts status at anytime day or night. Smaller collection agencies will give you the ability to view status only during office hours. You should be able to utilize an online software to view your accounts at anytime. A good collection agency will also provide you with information when they receive it such as a new address for one of your customers. A nice online product allows you or any of your staff around the nation, who you give access, to quickly make payment updates or account updates. It is important that you remain in control. If you want to suspend the demands, because a customer made a partial payment and promised to bring the remaining payment next week, you should have the ability to do so.

Now you should also have a choice when using a flat fee collection agency to either continue collections with them or to choose a percentage agency of your own. It is always nice to have 1 source for your collections and not have 2 or three. I have visited with several companies that were not aware that 2 separate companies can not be making collection calls on the same individual for the same account. Once you turn an account over to a percentage agency you can not continue to make collection calls to your customers. Once the account is turned over to a percentage collection agency the account and debt now belongs to them.

You will see a dramatic difference in your receivables by setting up a plan to turn over to a flat fee collection agency at the 60 day period. You will collect a lot more money and reduce your internal cost as well. Once you turn over your accounts to the Flat Fee Collection Agency then there is no reason to continue sending an invoice as long as you have all the things mentioned above in your collection agency. Your collection agency should also give you the ability to send a Thank you letter to your customers if they pay during the flat fee agencies demands.

So how much should you have to pay a flat fee collection agency for this type of service? It really depends on how many accounts a month are going delinquent. The prices should range between $4.99 to $15 an account depending on the amount of volume you use. You can see how you would save money at these rates. As I mentioned earlier the national average to collect on an account is $31.

Don't allow your customers to play games with your money. Set up a plan and stick to it. Banks don't play around when the have a DDA account for either a pre or post charge off account they quickly take action. Even Banks should be implementing the Flat Fee Demand Letter approach as long at the Flat Fee Collection Agency has Demands set up for such situations.

I would love to help you set up your processes and pick a Flat Fee Collection agency. Let me know how I can help. E-mail me at kmcdugle1@yahoo.com with "Collections" in the subject line. I have helped small mom and pop shops and large multi office companies. I have companies all over the great United States of America that have taken advantage and collected a lot more money on their receivables by simply putting a plan in place and utilizing a Flat Fee Collection Agency to provide third party collection agency support.