Michelle Dunn’s Credit and Collections Blog

Hi, Michelle-

We have a slow paying client who is blaming an Angel investor death for their tardiness in payment. This client is 5 months late on their bill and it’s a rather large bill. (I could buy a car for the amount they owe our company.) We’ve offered payment plans and credit card solutions to this client without any response. This person states that they’re waiting on the death certificate of the investor who passed before they can access the funds. What is a small business to do when operating costs are piling up and we need to pay our own bills?

Thanks,
Dara Turransky
Founder & Creative Director, 7 Lucky Dogs Creative

Dara,

Hopefully you have a signed agreement or contract with this client. Refer back to your original agreement and what your payment terms are. Let them know that even though they are waiting for someone else to pay them for them, that really is not your problem and you need to get paid now. They can pay you and then when their Angel investor monies come in they will be repaid.

Many businesses will tell their creditors they are waiting to be paid from their customers so they can pay their bills, you have to remind them that those are not your terms. You did not agree to wait for them to get paid for their work in order for your bills to be paid.

Depending on your agreement and terms and conditions will determine your next step. If you have set terms and they are past due call them and tell them you need a payment by a certain date of a certain amount of money. No excuses, they have to set up a payment plan that you agree to and if they don’t let them know what action you will take, such as reporting to the credit bureau, placing the account with a collection agency or maybe repossession or small claims court.

Michelle

A credit policy that is too liberal will attract slow paying customers and reduce accounts receivable turnover.

The primary goal of a policy is to avoid extending credit to customers who are unable to pay their bills. Policies contain specific documented guidelines related to credit granting authority, customer credit applications, and credit checks. A credit policy has a direct effect on the profitability and cash flow of your business.

Michelle,

Would sending the “final opportunity” letter and/or the letter stating the account has been reported be considered advising the debtor that we are pursuing other “remedies?” Am I correct in my understanding that this is not a violation of the FDCPA?

Yes, that is correct. Once they send a cease & desist, you can only send one letter letting them know what step you will be taking whatever that step may be. This might be that you are closing the account, returning it to the original creditor, taking them to court, or maybe reporting to a credit bureau.  Most agencies have already reported the debt to the credit bureau at the time they receive a cease & desist, but that might not always be the case.

Michelle,

My company is Collection Results Inc. which of course is printed on the envelope as a return address.  I have not had an issue in 3 1/2 years with this, however I don’t want any issue in the future either!  Should I change the outside of the envelope to read “CRInc”?

Thank you, Judy

Dear Judy,

Yes, absolutely. Anything that indicates you are a collection agency is a violation. For example, my agency was named M.A.D. Collection Agency, I used a couple different return addresses so as not to violate the FDCPA. Such as:

M.A.D. and then my mailing address -OR-

M.A.D.  Agency and my mailing address.

Nothing can indicate you are a debt collector that anyone such as the mailman, a neighbor or anyone else can see. Otherwise this is equivalent to sending a post card stating someone is past due.

Michelle,

How do I get my clients to pay me on time. I’m an Inspirational Speaker & Life Coach. I’m a one-person operation and often have trouble collecting the balance on work done for my clients. Spending my time chasing clients for money is time I can’t spend building my business. Any tips?

Mark Black

Speaker, Author, Coach

Mark,

In order to get your clients to pay you on time, you have to tell them what your payment terms are before you do business with them. You have to let them know when and how you want to be paid and what will happen if you are not paid within that time.

As a credit grantor, your business is one of many that allow consumers to use goods and services immediately and pay for them later. While extending credit increases your gross sales, it also puts you at risk of some losses due to nonpayment.

You can keep bad debts to a minimum and have more success recovering them if you identify them early. Your actions at this point of your credit-collection procedures are vital. Your reaction can mean the difference between recovery or loss. When you identify a potential bad debt, you need to act promptly and decisively. Usually the more time that passes, the less consumers pay.

You should have a standard, in-house written policy on handling accounts. The policy should include when to call new customers, when to call established customers and when to send letters. It is up to you since you are a one person operation unless you hire a credit manager, to make sure the policy is followed and kept up to date. Your policy should change as you grow or add new products or services to your inventory, or if you just want to make more money by having a stricter policy and including discounts and other payment incentives.

Proper and consistent attention involves developing a collection schedule and following each step fully before moving on to the next step. It means that you never move backward or repeat a step in the hope of salvaging an account. Good luck to you!

Michelle Dunn

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.

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:

• AdvantEdge Collection Software
• Comtech Systems Inc.
• Ontario Systems

Kagan and her husband, Dan, try to make a game of their tightening budget, seeing just how much they can save, “so that it’s not too depressing,” she says. One bright spot: Dan’s in a profession that’s doing well these days. He’s a credit and collections analyst. “Collectors are really busy right now,” his wife notes ruefully.

Thoughts?

John McCain compares Barack Obama to a celebrity like Britney Spears or Paris Hilton.

Would you ever compare a debtor you call to a celebrity?

It was interesting to find out just how many celebrities are either in debt, filing or have filed bankruptcy, or had or have credit problems.

Being in debt can happen to anyone. Be nice. It could happen to you.

We have had an unusual amount of rain this year followed by hotter than normal temperatures here in New Hampshire. Normally we don’t notice the rain or heat unless they directly affect us or are unusual, like this season.

This is also true with small or new business owners. Unless they have unusual circumstances, such as a bad check, or non-payment of a large balance they don’t pay much attention to the credit end of their business. Most business owners do not plan or create rules about what to do when they receive a bad check until they are holding a bad check in their hand. In my years as a bill collector most business owners that I dealt with only realized they had a problem once it was to late. Do not let this happen to you.

There are easy steps you can take to avoid this from happening to you and your business.

One of the easiest and smartest things you can do for yourself and for your business is to implement a credit policy and have each new customer fill out a credit application. A credit application will protect you and your business and let your customers knows that you mean business. Done correctly, it can increase your overall profits and sales now and in the future.