What to do if a payment is late

What should I do if a payment from a customer is late?

Immediately stop shipping or providing services until you have a conversation with the customer.  Contgact the customer right away, do not wait.

The sooner you contact the customer and work out the payment arrangement the better your chances are of getting paid.  Keep the lines of communication open!

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Posted in Ask Michelle, Being a Great Collector, Collection Calls, Collection Letters, Collections for Creditors, Collections for Landlords, Credit Policy Questions | Tagged , , , | Leave a comment

How do I get clients for my collection agency?

Dear Michelle,

I was directed to you as a result of looking for ways and steps to start my own collection agency.  I currently live in a city where there is ample opportunity to start someting like this.  I have a business degree and a sales degree and would like to start my own business in collections.  I would appreciate any information that you may be able to provide me with.  I am mainly interested in how to obtain clients to collect for, and by looking at your websites, I discovered that you may be able to help me with this.

Thank you, Danny.

Dear Danny,

Once you have taken the steps needed to start your own agency, ushc as coming up with a name, writing your business and marketing plan, obtaining licensing and bonding if needed, you should start working on your marketing plan. Your marketing plan will help you to gain clients.  Once you have your plan, you will systematically follow the plan and take the steps needed to create awareness and interest in your agency.  Some tips I can give you off the top of my head:

1.  Check the classifieds in your local papers for businesses that are looking for accounts receivable managers, credit managers or book keepers.  If they need this type of personnel, they may need help with their collections.  If they are hiring someone new for those positions, you can introduce yourself and your agency to these new employees and begin a relationship with them, which could end up in them trying your services even if another agency is already in place within the company.

2.  Create brochures, flyers and folders for your marketing materials, put on nice clothes and visit local business owners to introduce yourself and your business.  Leave your information with them, follow up in a week.  Follow up can be in person, which is the most effective especially if you bring coffee or promotional post it notes, or by phone.

3.  Offer a lower rate for new customers for a limited time, or an additional service at no cost to get your foot in the door.

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Posted in Ask Michelle, FAQ's, Marketing, Purchasing Debt, Starting a Collection Agency | Tagged , , , , | 5 Comments

Improve your A/R with 6 Easy Steps

Some things you can to do improve your cash flow and lower your A/R:

  1. Offer discounts
  2. Get 50% down
  3. Check new customers credit
  4. Sell old outdated inventory
  5. Issue invoices immediately
  6. Follow up right away with slow paying customers

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Posted in Bad Checks, Being a Great Collector, Books, Business Credit, Collection Calls, Collection Letters, Collection Tools, Collections for Creditors, Credit Crisis, Customer Service, Economic Crisis, Recession | Tagged , , , | Leave a comment

5 Questions to ask your Customers…Before its too late!

  1. Please fill out and sign the enclosed credit application, we are updating our files and credit limits.
  2. Are you (and/or your spouse) working or have an income?
  3. Do you own your own home?
  4. Can I have a bank reference?
  5. Do you understand my terms and conditions, and what will happen if payment is not received?

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Posted in Business Credit, Checking credit, Credit Crisis, Economic Crisis, Recession | Tagged , , , , , | Leave a comment

Top 7 Debt Collection Tips

Delinquent accounts have always been a part of every business, and now it is an even bigger part of every business and the older the debt becomes, the harder it is to collect.

  1. Begin collection efforts immediately once an account is approaching the due date.
  2. Follow up.
  3. Utilize certified mail or delivery confirmation.
  4. Hire a collection agency.
  5. Have a credit policy and FOLLOW IT!!
  6. Have signed credit applications from ALL customers.
  7. Check references.
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Posted in Ask Michelle, Being a Great Collector, Business Credit, Collection Calls, Collection Letters, Collection Tools, Collections for Creditors, Credit Policy Questions, Scripts, Skip Tracing, Social Networks, Training | Tagged , , , , , | Leave a comment

Collecting from a Closed Business

Michelle,

I am currently attempting to collect a past due debt from a company that has just closed its doors. I have a collection agency working with me but they have states that since the company is out of business they cannot contact the owner and there is nothing else they can do. Are there any steps I can take to try to collect on this debt?

Thanks, Brian

Brian,

First you will need to know how the business was set up, was it a corporation, an LLC or maybe a sole proprietorship? Depending on that, you may or may not be able to go after the owner. Another thing to look at is the type of debt, was there a contract or agreement or a personal guarantee? If you find the owner is liable for this debt, depending on the amount you can file with small claims court or if the dollar amount is more than small claims court in your state provides for you can sue civilly.

Good luck!

Michelle

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Posted in Ask Michelle, Being a Great Collector, Business Credit, Credit Crisis, FAQ's | Tagged , , , , , | Leave a comment

What to look for when extending Credit

When you extend credit, you are opening yourself up for risk.  When you do offer credit, you must make some assumptions:

  • That your customer will pay you and has every intention of paying you even after they leave your store or office.
  • That they are able to pay you, and not in over their heads with other bills and not enough income.
  • That they won’t lose their job and be unable to pay you.
  • That your judgment and research on their credit history is accurate.

BE CAREFUL WHEN EXTENDING CREDIT – you are putting YOUR business on the line.

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Posted in Business Credit, Checking credit, Collection Tools, Collections for Creditors, Credit Policy Questions, Credit reports, Customer Service, Economic Crisis, FAQ's, Getting Paid - Michelle Dunn - Business Finance Columni | Tagged , , , , , , | Leave a comment

Adding Status & Credibility to our Industry

Writer’s Digest sent me a review of my Third edition of Starting a Collection Agency, how to make money collecting money and I wanted to share it with you.

“If one ever had any idea about starting a collection agency, here is the ultimate guide for getting going as well as maintaining the agency and enjoying success.  The idea (per the explicit subtitle) of making money collecting money should garner lots more readers who never even thought of such a possibility.  Using her considerable experience in the business, Michelle Dunn comes from all angles to answer all questions and then some to help a beginner set up from the get-go.  This comprehensive book is accessible, very readable, easy to follow; the resource lists, web sites, state contacts, questions and answers all make this a vital how-to.  Ms. Dunn’s book may add status and credibility to an industry that has historically received a bad rap. ” - Writer’s Digest

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Posted in About Michelle Dunn, Being a Great Collector, Books, Compliance, Education, Fair Debt Collection Practices Act, Professional Associations, Starting a Collection Agency | Tagged , , , | Leave a comment

Top 5 Tips for Starting a Collection Agency

One of the newer members of my Credit & Collections Association asked the group for tips or help with starting a new collection agency.  John Fahrlender from Greenberg,Grant & Richards and a member of my association had some great tips and I wanted to share them with you.

1. Realize that it is hard to get started and requires lots of work
2. Stay as low tech as possible until you have a consistent revenue stream
3. Learn to cull non-producing clients annually
4. Make sure you pay your clients before you
5. Incorporate, loan start up capital to the corp and file a UCC in case you don’t succeed on your first endeavor

Thanks John! These are GREAT tips!

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Posted in collection agencies, Education, Fair Debt Collection Practices Act, FAQ's, Licensing, linkedin, Networking, Professional Associations, Software, Starting a Collection Agency, The Life of a Bill Collector, Working at a Collection Agency, Working from Home | Tagged , , , , , , | 1 Comment

How to Choose a Collection Agency Part 1

How do you know what to look for when you decide to place accounts with a collection agency? It is important to do your homework and learn how to choose an honest and ethical agency. You want to be sure to select a qualified service.

Choosing a professional collection service to manage delinquent accounts and other related tasks is a wise decision.  The agency you choose should represent your organization in a responsible and professional manner, and provide a satisfactory rate of recovery while maintaining your public image. This decision involves more than just giving your business to the lowest bidder – it requires careful consideration.

Something to remember:  You get what you pay for.

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Posted in Being a Great Collector, Business Credit, Choosing a Collection Agency, collection agencies, Collection Tools, Collections for Creditors, Collections for Landlords, Credit Policy Questions, Dealing with debt collectors, Economic Crisis, Fair Debt Collection Practices Act, FAQ's, Getting Paid - Michelle Dunn - Business Finance Columni, Laws, The Life of a Bill Collector | Tagged , , , , | Leave a comment

What to do when your Customer’s Don’t Pay

“Persistence is key,” said Michelle Dunn, an expert on collections and the author of the Ultimate Credit and Collections Handbook. “I would put a deadline on when you want to get paid.”

Learn more about the best practices and increase your cash flow.

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Posted in Being a Great Collector, Collection Tools, Collections for Creditors, Credit Crisis, Credit Policy Questions, Economic Crisis, FAQ's, Recession | Tagged , , , , , , | Leave a comment

Top 5 Telephone Collection Tips that work!

Richelle Shaw is the country’s only female African American public utility owner.  Richelle has extensive expertise in telephone collections and was generous enough to share some tips that she has used for years to collect on public utilities that have worked very well for her:

1. Treat each customer as if they are your only customer – make sure that each situation is considered individually.  Review their payments and make sure before extending additional time to pay.  This can only work if you empower your collection department to make decisions.  The only decision should be to collect the money and make deals.
2. Ask for a small payment with a promise to pay.  If the customer is sincere, they will agree to make a small payment.  Normally we ask for 15% of their outstanding balance in order for us to extend their payments.  The good faith payment goes a long way in showing commitment.
3. Don’t harass, the customer.  They will just ignore your call.  Blocking the caller ID function just makes it more difficult.
4. Even with the regulations regarding collecting, leave a clear message regarding the call.  Don’t use language like this is the last call before legal, it just makes the customer ignore your calls or wait for your bluff.
5.  Best Tactic for collecting – create a promotion for collection.  It works with businesses and with consumers.  We reward customers for paying on time.  Not with the standard 5% discount because it is not enough to make some one take action, we offered free dinners for everyone who paid on time - we were able to get the restaurant to donate the gift certificates because they wanted new customers.  No one eats alone normally so it was a win – win for the restaurant and for my customers.

how-to-build-a-million-frnt.jpg

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Posted in Being a Great Collector, Collection Calls, Complaints, Customer Service, FAQ's, Helping Debtors, Know your Debtors, Online Collection Techniques, Scripts, Telephone Collection Tactics, Text messages | Tagged , , , , | Leave a comment

Tips for when accounts get Past Due

Jeff DiMatteo from the Worcester Business Journal shares some very helpful tips for anyone struggling to get paid from customers during this economic crisis.  He gives 4 tips that business owners can use to get their money from customers that are not responding to payment requests. Something we all need right now!

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Posted in Collections for Creditors, Credit Crisis, Credit Policy Questions, Economic Crisis, Recession | Tagged , , , , , | Leave a comment

Increase your Cash Flow Today

Some things you can do to keep track of and increase your cash flow as well as improve your accounts receivables might include:

  • Offer discounts
  • Get 50% down
  • Check new customers credit
  • Sell old outdated inventory
  • Issue invoices immediately
  • Follow up right away with slow paying customers
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Posted in Being a Great Collector, Business Credit, Credit Crisis, Economic Crisis, Recession | Tagged , , , , , | Leave a comment

Managing Cash Flow

I recently recorded a webinar for BusinessWeek called Managing Cash Flow that is about handling cash flow with two other people, Tom Taulli and Tim Berry, both very knowledgeable on this topic. I am quite excited and think it is very relevant information especially with the Wall Street Drama going on and business struggling everywhere, especially on Main Street. I thought it would be helpful to anyone struggling with their business right now.

Please let me know your thoughts and I hope it can help you!

Tim Berry
President and Founder of Palo Alto Software
Founder of bplans.com
Co-founder of Borland International
Michelle Dunn
Credit and Collections Expert:
Author, Teacher, Consultant
Tom Taulli
Author
Founder of BizEquity.com
Founder of Hypermart.com
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Posted in Ask Michelle, Being a Great Collector, Checking credit, Collections for Creditors, Credit Crisis, Credit Policy Questions, Economic Crisis, FAQ's, Recession | Tagged , , , | Leave a comment

Strategies for Building Business Credit

When you first start a business your personal credit is what is used to determine the types of credit or if any credit will be extended to you or your business.

Most Entrepreneurs or new small business owners don’t realize that their personal credit is crucial to their ability to successfully run a business. When you first start a business your personal credit is what is used to determine the types of credit or if any credit will be extended to you or your business.”

As you start to build your business credit, your personal side will phase out. So it is important to start the process sooner than later.

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Posted in Business Credit, FAQ's | Tagged , , , , , , , , | 1 Comment

Most people think checking credit alienates customers, but the real truth is you will make more money.

Most people I talk with think that if they ask new or potential customers to fill out a credit application or sign a contract that they will lose the sale. This could nto be further from the truth.

If a customer balks at filling anything out, you should take a step back and really look at the situation. Don’t be so eager to “make a sale” that you jepordize your business by extending credit where credit is not due.

When you blindly extend credit your giving the message that you don’t care about your money, or your business.  When you give out credit without making sure a customer is credit worthy, word gets around and soon all the good credit worthy customers will be at your competition and you will be stuck with the customers who knew they could get easy credit from you.

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Posted in Being a Great Collector, Business Credit, Checking credit, Collection Tools, Collections for Creditors, Collections for Landlords, Economic Crisis, Education, Recession | Tagged , , , , | Leave a comment

Starting a Collection Agency?

I wanted to remind anyone looking for more information on starting a collection agency that I have a podcast titled Starting a Collection Agency.  It can be very helpful to you if you are just starting out and have questions, so be sure to check it out!

Here is a description:  Michelle Dunn, author of Starting a Collection Agency: How To Make Money Collecting Money, shares her tips about how to start a collection agency. Learn what you need to know to get started including how collection agencies work, the Fair Debt Collection Practices Act, buying charged-off debt, and secrets for improving collection rates. [15 min.]

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Posted in Debt Collection in the News, FAQ's, Networking, New Technology, Paying Collectors, Professional Associations, Purchasing Debt, Starting a Collection Agency, The Life of a Bill Collector, Training, Working at a Collection Agency, Working from Home | Tagged , , , | Leave a comment

Changing the negative bill collector image

SLOWLY. Slower than slow. When I started my Credit & Collections Association in 10 years ago, one of my goals was to help to change the negative reputation bill collectors have.  With more and more news stories focusing on the negative stories and not enough focusing on the positive stories, this is a slow process.

I know this isn’t much but I think that just by being the opposite of what is expected we are making a move in the right direction.  It isn’t wind from a hurricane, just a little breeze but hopefully it will pick up!

What is expected:

  • Rude
  • Overbearing
  • Threatening
  • Mean
  • Pushy
  • Loud

How we should be:

  • Polite
  • Helpful
  • Calm
  • Nice
  • Considerate
  • Respectful

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Posted in Being a Great Collector, collection agencies, Credit Crisis, Credit Crunch, Customer Service, Debt Collection in the News, Helping Debtors, Honesty & Integrity | Tagged , , , , , , | Leave a comment

Unusual Excuses for not paying a bill – think you’ve heard them all?

This is an oldie but a goodie.

Professionals in the collection business get used to hearing excuses as to why someone can’t pay an outstanding bill or at least can’t pay according to terms. But, even seasoned and experienced collectors can get thrown on occasion.

The clients for an International Specialist in training for accounts receivable kept track of the unusual excuses they heard during the month of May. Three judges, once they were able to control their laughter, selected the top three.

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Posted in Being a Great Collector, Collection Calls, Collection Tools, Collections for Creditors, Collections for Landlords, Complaints, Credit Policy Questions, Customer Service, Excuses, FAQ's, Getting Paid - Michelle Dunn - Business Finance Columni, Scripts, The Life of a Bill Collector | Tagged , , , , , | Leave a comment

Software for debt buyers

I recently had a reader write to me asking about collection software specific to agencies or attorneys that purchase debt rather than work on commission.  If you have a collection agency that only collects on debt you buy, you might want to check out these software options:

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Posted in Being a Great Collector, Collection Tools, FAQ's, Purchasing Debt, Software, The Life of a Bill Collector | Tagged , , , , | Leave a comment

How One Simple Change can Make you Money

If you have a business and have customers that owe you money, there is one thing you can change about how you run your business that will make you more money today. Every business owner knows how important it is to keep their customers happy and coming back for more. If your customers are happy and coming back for more, they will tell everyone they know about you and your business. You can’t buy that kind of advertisement.

If you want to make one change to increase your profits, implement a credit policy. You don’t want customers that don’t pay on time or at all coming back for more, so by implementing a credit policy you can avoid that and have good paying customers that will pay on time, spend more money and spread the word about you and what you have to offer.

Customers that are approved for credit, will buy more if they can pay later, so make the process as streamlined as you can. Catering to a potential new customer is good business, so the easier you make it for them to spend more money with you, the more money and sales you will have. One thing that is often overlooked is how to prevent future credit or non-payment or late payment issues, don’t wait until you have bad debt to implement a credit policy, take control of your bottom line now.

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Posted in Ask Michelle, Being a Great Collector, Business Credit, Collection Tools, Collections for Creditors, Compliance, Credit Crisis, Credit Policy Questions, Education, Getting Paid - Michelle Dunn - Business Finance Columni | Tagged , , , , | Leave a comment

The Importance of Verifying your Debtor

Verizon recently sent an account to collections and it turns out the debtor was a dog named Andy.

This seems so unusual not because of what happened but maybe because Verizon is supposed to be a huge company, with values and someone you can trust. hmmmmmmm

A quote from Steve Fannell, the fluffy dogs owner:

“The point is that Andy has never had a Verizon account. We were just curious why this showed up,” Steve Fanelli said.”

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Posted in Being a Great Collector, collection agencies, Collection Calls, Complaints, Compliance, Debt Collection in the News, Fair Debt Collection Practices Act, FAQ's, Know your Debtors, Laws, Skip Tracing | Tagged , , , , , | Leave a comment

Collecting Debts can save your business U.S. News & World Report

On page 113 of the issue on stands now of U.S. News & World Report is an article called “Collecting Debts can Save Your Business”, a follow up article to a couple of weeks ago.  If anyone gets this magazine, check it out. I am also wondering if anyone could pick me up a copy at a news stand and send it to me?  I can’t find that magazine anywhere around here, someone just stopped by with a copy which is how I saw it. Pretty exciting,

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Posted in About Michelle Dunn, Accounts Receivable Outsourcing, Being a Great Collector, Books, Business Credit, Checking credit, Collection Calls, Collection Letters, Collection Tools, Collections for Creditors, Credit Crisis, Credit Policy Questions, Customer Service, Debt Collection in the News, Recession | Tagged , , , , , | Leave a comment

What is a Credit Department?

Michelle,

Hi! I’d like to ask a few questions.

1. What are the responsibilities of the credit and collection department?

2. What roles do the line and staff people play?

Joshua

Hi Joshua,

Credit managers are in high demand right now. The economy is forcing business owners to look at other ways to make money when they aren’t making as many sales because of the state of the economy. Collecting from past due customers is one of the most resourceful ways to make money without making more sales.

5 great qualities that will help a credit manager be successful.

  1. An economic background.
  2. Creativity.
  3. Flexibility.
  4. A strong sense of the customer.
  5. A good credit policy.

There are many books about this out there on this topic, a couple are “Become the Squeaky Wheel” and the “Ultimate Book of Credit & Collections”  you might also check with other business owners and ask about their credit & collections department, they should all be similar but will be a bit different based on the industry or the business.

Sales people and everyone else in the company should be aware of your credit policy.  Sales people need to be very involved with the credit department so that they don’t oversell to people who may not be able to afford the payments

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Establishing Credit for your Business

Dear Michelle,

What is the most expeditious way to establish business credit without the need for a personal guarantee?

Thank you! Eric

Dear Eric,

You should apply for credit under your business name with vendors you are currently working with or using. Also, pay your accounts on time or early and take advantage of early pay discounts, this will boost your credit and save you money at the same time. Try applying for smaller credit lines with vendors you have been doing business with and paying on time, the longer you do business with them, the more credit you can ask for as long as you are paying early or on time. Also, check out my blog for specific posts and tips about this topic that can help you with your business credit. Good luck!

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Posted in Ask Michelle, Business Credit, Collections for Creditors, Credit Crisis, Credit Crunch, Customer Service, Dealing with debt collectors, Economic Crisis, FAQ's, Getting Paid - Michelle Dunn - Business Finance Columni, Identity Theft, Improve Your Credit, Know your Debtors | Tagged , , , , | Leave a comment

Debt Collector Scrutiny – be educated!

The Better Business Bureau in CT has had an increase in complaints against what they are calling “rogue debt collectors.”

As Americans struggle to cope with rising debt loads, complaints to Better Business Bureaus about some debt collection practices increased 26 percent in 2007, says the Record Journal.

According to Connecticut Better Business Bureau President Paulette Hotton, so-called third party debt collectors are going far beyond what the law permits them to do.  With this in mind, make sure you and your collectors are educated.  I recently gave a tele-conference that was very well attended and I had very good feedback on it, it was called “Understanding the Fair Debt Collection Practices Act”.

Failing to properly train collectors is a top reason companies get sued.  Don’t let this happen to you, learn as much as you can about what constitutes a violation of the FDCPA and how you can avoid making those mistakes.

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Posted in Being a Great Collector, Complaints, Compliance, Customer Service, Debt Collection in the News, Education, Fair Debt Collection Practices Act, Training | Tagged | Leave a comment

5 warning signs you need to increase your collection efforts

When you are calling debtors day in and day out, you learn a lot about them.  Many debtors share many personal stories with bill collectors, trying to explain their situation or looking for mercy in the way of payment plans or discounts.

There are some things you can look for when talking to debtors that will give you an indication that they are falling more and more behind with all of their bills or that they are in more debt than just the bill you are calling about.

1. Regularly missing payments or paying late, debtors might tell you they can’t pay their mortgage, or are behind on their car loan or utilities.

2.  Paying only the minimum on credit cards.

3.  Using credit cards to live, such as for food and gas or to pay a bill.

4.  Taking money from their 401K to pay bills.

5.  Spending their savings or not having a savings account.

Listen to your debtors, make notes on their accounts. Be aware of when you need to pick up the pace or offer different payment options.

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Posted in Accounts Receivable Outsourcing, Ask Michelle, Being a Great Collector, Business Credit, Collection Calls, Collection Letters | Leave a comment

Steps to manage business credit successfully

In my experience many businesses do not have credit management plans or any credit policies in place.  Managing your business cash flow can be the single most important thing that can make or break your company, no matter if you are a new business or have been around for many years.

There are some things you can do to make this credit management easier.  The first thing is to manage your receivables, or hire someone to do it for you.  Managing your receivables means you keep an eye on them, you stay on top of payments and run aging reports, and look at them!  Another thing you need to do it make it as easy as possible for your customers to pay you, offer different types of payment options such as cash, credit or online payments.  One of the most important things you can do to manage your business credit successfully is to have a credit policy in place with payment terms and that you can stick to. It doesn’t help you to have a policy that you don’t follow or that doesn’t work for your business.  You need to do the same with your collection procedures, make sure you have collection policies in place that are easy for you to carry out.  You also don’t want to forget accounts payable, keep your eye on your payables reports as well.

The skills and resources you will need in order to successfully manage your business credit are:

Signed and filled out credit applications

Full knowledge of the FDCPA and any state or other Federal collection laws

Communication skills

Negotiation skills

Skip-tracing or location skills or resources

Mediation skills

Organizational skills

If you find these steps overwhelming or something you are not educated about and you don’t want to dive right in, you may want to hire someone to be your credit manager, collections person or accounts receivable clerk to handle these aspects of your credit for you.  If you decide to hire someone else to take on these tasks for you do some research and talk to other business owners who may have done this.  You will want to have a clear understanding of what a bill and/or account collector does, for example, they collect payments by phone or by using letters to collect payments on past due invoices.  They may negotiate repayment plans with customers and help them find solution to get the bills paid off in full.

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A Credit Policy Checklist

Who will be your credit manager, collector or in charge of the credit department?    Pick one person to be in charge of all credit applications and reports. Write that name down so you can talk to that person about this responsibility and the job and make sure they are willing to hold that responsibility.  Make sure everyone knows who this person is so they can go to them about anything credit related.

Get credit applications. Where to get them:  online, office supply stores, CD’s or books of business letters and forms, local printing companies.  Download free credit applications at http://www.MichelleDunn.com/free-from-michelle or if you have a copy of my Ultimate Credit & Collections Handbook, the check IS in the mail – you have a CD in the back of the book that has examples of different credit applications you can print out and use. If you want a copy of this book with the CD, visit my website store or amazon.com.

Get some collection letters ready.  Many businesses like “series” of letters, normally starting off with a friendly reminder and gradually getting stronger as payment is not forthcoming.  You can find letters online, on the CD in the back of my Ultimate Book or  in my book Debt Collection Letters and Forms, how to get your customers to pay or write your own.

Research and choose a collection agency.  You want to find an agency that you are comfortable with BEFORE you need it.  When choosing an agency make sure that they are fully acquainted with the nature of the goods or services that you provide.  If an agency is familiar with your industry, it will be better suited to handle complex situations that arise during collections.

Do not place accounts with more than one collection agency.  Make sure that if you decide to change collection agencies, the account is only be worked on by one service.  

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What is your credit risk?

As you write your policies you need to understand your credit riskCredit risk is the risk of loss due to a default on a contract, or the risk of loss due to someone not paying you as agreed.  If you don’t demand payment up front you are leaving yourself open to credit risk.

Your credit risk is the time in between when the customer leaves with your product or receives your service and when you get paid.

Some steps you can take and include in your policies to reduce your credit risk are:

Get a signed personal guarantee

Offer month-to-month credit

Offer ship-to-ship credit

Ask for a security deposit

Get a 50% (or more) deposit on every order

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The Credit Policy Mission Statement

Now that you have a clear picture of what you want this credit policy to do for you, take a look at your business mission statement.  You want to write a short concise mission statement for your credit procedures.  Every business has a mission statement and you want to apply that to your credit policy to write a mission statement for your cash flow.

Your credit procedures mission policy should state what the goals for these instructions are, what the goal of these procedures are, who is responsible for all the credit decisions and functions and then the actual policies or steps.  For example, your policies or what you want your credit procedures to accomplish might be:

Your payment terms and conditions

Processing new customers that want revolving credit accounts

Using credit applications to check credit worthiness

Joining a credit bureau in order to pull credit reports

Setting realistic credit limits

Dealing with any past due customers

When and how to use a collection agency

 

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How to write your Credit Policies

Now that you know why you need a credit policy you need to come up with one that will work for you and your business.  Some things to think about when sitting down to write out your credit policy steps are what you want your credit policies to do for you and your bottom line.  The purpose of your credit policy should be to accomplish any of the following objectives.

I want my credit policy to:

Provide timely notification to any of my past due customers automatically to help my business eliminate old balances left on the books.

Outline steps and procedures that will provide my customers with options when they find themselves unable to pay in full or on time.

To provide my employees the steps to take when an account has a small balance due (interest, shipping, disputed item) in some cases a company might implement a rule that they write off anything under $10.00.

To provide step by step instructions to my credit manager when checking credit and setting reasonable credit limits for customers approved for revolving credit accounts.

Give us strict guidelines to follow on how to legally collect money due to us as a result of returned checks.

Have an automated system that will send out reminders to past due customers every week or two weeks.

Include the proper legal forms so that my business can keep customer credit card or debit card numbers on file with permission to automatically charge them at the time of an order or a specified date each month.

To have specific steps in place so our credit manager knows at what point an account should be placed with a third party collection agency and written off to bad debt.

Have steps in place in the event a customer’s order is held due to a past due balance, I want this to include notification to the customer and an easy payment option.

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How Forecasting can help your bottom line

One thing you can do is make sure that forecasting is something you do for your business or ask your accountant to help you with this.  Look for growth in real wages, which drives consumer spending, and which accounts for more than 2/3 of the US economyConsumer spending is a huge indicator of what is happening and it also drives corporate profits which in turn affects the stock market.  Look for changes in the economy that will affect your business and remember every business is affected differently and at different times during the cycle of a recession, or down turn.

Keeping up to date on foreclosures happening in your area and the areas you may sell services or products to is crucial to your business.  You can make sure your business is protected by going over all of your accounts that you extend credit to, make sure they are in good standing and up to date on all invoices.   If you have signed credit applications and are authorized to pull credit reports and/or check with banks and vendors on someone’s payment history, now is the time to re-evaluate each customer’s credit and credit limits.  Look for things such as late or slower arriving payments, change or loss of a job, changes in incomes, change of address, and divorce.  Take immediate action if a customers’ mail is returned and/or if the phone is disconnected.  Many times when the economy suffers people lose their jobs, their relationships suffer, and they may move to cheaper housing or lose their vehicles.  All of these things are factors that lead to your bill not being paid and can sometimes end in bankruptcy.  The three steps you can take to help you in this situation are:

1.  Review your accounts receivables weekly or at least monthly

2.  Stay motivated by trying to collect as much past due money as possible

3.  Stay focused; don’t let customer excuses veer you off track

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Do you have a credit management plan?

As a credit manager or the owner of a business you should be able to answer the following questions or at least know how to find these answers if you want an effective credit management plan.

1.  How do debt and credit affect my business?

2.  Exactly what is my credit policy?

3.  What makes a successful credit policy?

4.  What is credit risk?

5.  How do I turn prospects into credit approved customers?

6.  How can I maximize my cash flow?

7.  How do I handle customer deductions?

8. How do I handle customer excuses for late payments?

9.  Why would I use a third party collection agency?

Your credit management plan should answer each of those questions; you and your employees should be able to flip through your credit policy to find out what steps to take in each of those instances.  Having a credit policy can help you create a plan that answers those questions and gives you a guideline and steps to take in each scenario, helping your cash flow smoothly and avoiding much bad debt and frustration.

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Top 3 things your Clients can do to Help their Credit

If you try to help your clients to have better credit polcies, you may want to share this blog post with them. Many of your clients and the debtors you are calling may be having credit problems because of the state of our economy. Here are three tips that can help them survive and help you collect more money.

If your not having trouble paying your bills now, you might in the coming months. As the economy sinks and the credit crisis continues, many businesses are closing and people are losing their jobs.

Are you one of the many that is worried about losing their home, or their car or their job? These things can be overwhelming but you can take care of the worry with some discipline.

Top 3 things you can do right now to feel better about your situation.

1. Start a budget, use a notebook and create a budget based on your income and your bills. Get a book at the library or look online for an example of a budget.

  1. Contact your creditors, tell them you lost your job, or whatever the case may be and you are having trouble making the payments. Ask to modify your payments, this is MUCH better than doing nothing and having the account turned over to a collection agency.
  1. Credit counseling might be for you. If you don’t know where to begin and really feel as though you need the help of a professional, seek credit counseling. Be skeptical of businesses that offer instant solutions to credit problems.

You are responsible for your debts. If you fall behind in paying your creditors you may be contacted by a debt collector.

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“Bad Paper” by Jake Halpern

Thank you to Jake Halpern for sending me a copy of his newest book, “Bad Paper” to read and review.  Having worked in the credit and debt collection industry for over 27 years, I looked forward to reading a book based upon someone else’s experience in the world of debt buying and collections. 

Everyone knows all the horror stories about bill collectors, debt buyers and credit and collections departments – even though folks may owe the moneythe collector – no matter who they may be – are portrayed as the “bad guy”.  Anyone who works in this industry knows this, is aware of this and finds ways to help dispel the negative perception and get the job done by following the law and behaving ethically.  Just like in any other industry – there will always be bad apples.

Jake Halpern dives into one man’s story and experience in this industry and probes into how he did it, his colleagues, employees and bottom line.  In all my years in this business, most try to hide anything shady they may do and so it was refreshing that Jake was able to find someone who would share their story without fear of repercussions so that we could all have a better grasp as to what can happen in some instances when debt is bought and sold.

Something to remember is that this is one man’s story – not the story of the majority – not all debt buyers and collectors break the law or try to swindle consumers.  Just like not every auto mechanic is trying to rip off someone who walks into their shop, though that is the reputation many have, just like in the debt collection industry.  A few bad apples don’t make the entire basket bad.

Jake writes a great story, it is very compelling and interesting to read, it almost reads like fiction but is so much more interesting because it is non-fiction.  Most consumers who have been in a debt collection situation may already be aware of how the collectors who collect on old paper or zombie debt work, especially after the financial crisis of 2008 when many banks were exposed.   This may just be an eye opener for people who have not experienced this, or who may have heard stories but didn’t have any concrete evidence to support that these types of things may really happen.

Kudos to Jake Halpern for gaining the trust of a collector/debt buyer who would share his story and then getting his story out there, I have spoken to many reporters and journalists who have been unsuccessful in this aspect of writing a story.  The more we can expose how much regulations and laws need to change, the more chance we have of making those changes happen.  Bill collectors continue to try and provide a service to businesses by helping them collect money that is owed to them and struggle to do this by following laws put into place in the 1970’s.  Let us hope that this book will prompt the debt buyers and collectors who break the law, treat consumers unfairly and look for any loophole in order to collect a debt to reconsider what they are doing and be held responsible for their actions.  Until that happens, this will never stop, just like in any other unregulated industry with outdated laws out there.

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Characteristics of Great Debt Collection Negotiators

New and Experienced bill collectors must hone their negotiating skills.

Everyone who is trying to collect money, even if the amount was agreed upon at the time of the sale, seems to be required to negotiate. Most bill collectors, especially new ones, are not as effective at negotiating as they could be. I do know some of the characteristics of a good negotiator and of a good bill collector and wanted to post the things that they have in common.

  • Understanding the negotiation process – highly effective bill collectors recognize that negotiations are a process. It requires an understanding of the billing, credit approval and payment processes.
  • Focusing on a Win-Win situation – Win-win means both parties feel like they have “won” during the collection process. Great bill collectors help their customers or debtors try to solve problems and look for opportunities to make that possible. They also know when to be firm and limit what they do in order to reach an agreement that is acceptable for both parties.
  • Patience – To many bill collectors try to go for the “quick fix” so they can get paid and move on to the next account. Great bill collectors know that patience is a virtue and that rushing the collection process often leads to not getting paid. Great bill collectors take time to gather information BEFORE contacting the debtor or customer, they think carefully about possible solutions and this is critical because major mistakes can be made when you rush, some of them involving breaking the law (FDCPA).
  • Confidence – Great bill collectors are confident when making a collection call or collecting in person, they aren’t arrogant, rude or cocky, they are CONFIDENT. To reach this level of confidence, you must believe in your ability to reach a win-win agreement with the debtor. This confidence is gained through experience, the more debt collections you do, the better you become at it.
  • Listening Skills – People will tell you just about everything you need to know if you ask the right questions or keep quiet long enough for them to continue speaking. The biggest mistake a bill collector can make is not listening, or bigger yet, interrupting a debtor when that might mean if they had just listened longer, they may receive key information that will assist them in their collection efforts.

Being a bill collector is a skill that takes time, effort and energy. To collect more money you need to work at it, invest the time learning the dynamics and science of negotiating and being firm.

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