Collections Insider

You ask “why would I choose to settle for less money than is due to me?” This article is focused on why settling your debt may be an extremely wise choice.

When approaching debtors we are given many reasons as to why they have not paid their debt. Some report that there was a problem with the quality of the merchandise or that they were not happy with the services they received. In these cases we can easily come to an impasse. Our client feels they did provide quality products and/or services and the debtor refuses to pay. Choosing to file a law suit is normally the next step at such an impasse however settling should be discussed first if the settlement offer makes you close to whole and happy.

A settlement offer can come in a few different ways. The debtor may offer to pay less and regardless of the offer we will contact you to discuss the figure. At that time we would discuss a reasonable counter offer and present it to the debtor. Another way a settlement can be presented is by the collector saying to the debtor “How much do you feel you should pay?” This gets the debtor to think and eventually respond with a figure. So, they have gone from saying they are not going to pay to offering a settlement and getting some dialogue going.

Recently a client placed a claim with our office that had been outstanding for a year. Our office contacted the debtor and they immediately brought up a dispute that had never been brought to our client’s attention. The debtor requested that the amount of the bill be reduced from $4,100.00 to $3,100.00. The client gave this considerable thought after we explained that filing a suit would cost approximately $150.00 plus testimony would be needed, which meant time away from their office. The client decided that $3,100.00 brought them close to being whole and put the money in their hands now as opposed to six months from now after a long dragged out law suit.

Settling is also an option when the debtor claims to only be able to come up with a portion of the money due to you or that they can only afford small monthly payments. You may feel it more beneficial to have a chunk of what is due to you now versus allowing the debtor to make small monthly payments each month, which could drag on for years.

Settling is not always advisable especially if it is clear the debtor has the means to pay the debt or there are assets and wages that can be executed on. However, settling should always be considered as an option. Be sure to advise your collection agency or account representative when you place your accounts if you are willing to consider settling. This will allow the collector some leverage when dealing with the debtor.

When folks owe us money we can become very emotional about the fact we have been “wronged” however don’t allow your emotions to cloud your judgment. Get your debt resolved quickly and move on to your good paying customers. Don’t worry about teaching your client a lesson, life will do that for you. Settling is just another way to move on faster.

About the author: Jan Conte is the President of Your Collection Solution, LLC, a debt collection agency out of Newtown, Pennsylvania. She has over twenty years experience in the debt collection industry. You can find more of her articles at www.yourcollectionsolution.com/blog/.

Collection agencies have long been integral to the success of the small business owner. Small businesses face special challenges in recovering outstanding debt. Unlike large businesses such as hospitals and credit card companies, the average small business owner does not have the time or resources to devote to chasing bad debt, nor does he have the financial security to easily write-off bad debt as one of the costs of doing business. For these companies, recouping past due balances can be the difference between financial success and complete failure. A good collection agency can prevent the small business owner from facing bankruptcy, lay-offs and closure.

However, most small businesses are overlooked by collection agencies, when a relationship between the two would be mutually beneficial. According to a 2006 study conducted by The Association of Credit and Collection Professionals (ACA International), nearly 56% of all collection accounts placed in 2006 were hospital accounts and delinquent credit card debts. Only 10% of all accounts placed during that period were non-hospital healthcare accounts (doctors and dentists in private practice), only 1.2% of accounts placed were commercial, or business to business debts, and only 1.5% of all accounts were “other” types of retail accounts. In other words, in a world overpopulated with small businesses, these companies are not benefiting from a relationship with collection agencies.

Small business owners often shudder at the idea of spending money to collect the money that is already owed to them. What many small business owners do not understand is that after time, they are less likely to collect the full amount owed to them, no matter how much time and energy they are spending on any given account. The United States Department of Commerce estimates that businesses are most successful in recouping monies owed to them during the first 60 days after the debt is incurred. At ninety days, businesses can expect to collect up to 74 cents on the dollar. After six months the figure drops to 58 cents on the dollar, and after a year to 27 cents on the dollar. How much time and effort would you put into an account that would only yield you 27 cents on the dollar?

Corporate America and large collection agencies have been working together for quite some time. Credit card debt alone constituted nearly 24% of all new collection agency business last year (ACA, 2006). Small businesses seem to be ignored by hungry collection agencies, and those collection agencies that do manage to reach out to the small business owner are often turned down due to the misconceptions that it will cost the business owner too much money to hire an outside agency. Despite these misconceptions and the lack of collection tactics geared toward the small businesses, a relationship between the two would not only be mutually beneficial, but surprisingly profitable as well.

According to the ACA, the average recovery rate for commercial debts was 27.6% in 2006. The average recovery rates for non-hospital healthcare debts and for the catch-all “other” category of small businesses were 19.3% and 16.1% respectively. This amounts to average payments of $387.00 for commercial accounts, $111.00 for non-hospital healthcare accounts, and $189.00 for “other” small business accounts. An agency that deals solely with accounts of this type can assume it will do relatively well. Likewise, small business owners can spend their valuable time on more important tasks, and feel confident that collection efforts will be successful on their types of accounts.

In the next article, look for what small businesses should expect from their relationship with a collection agency.

About the Author: April Magnuson is the Collection Manager for NeF Capital, LLC. NeF Capital handles consumer collections in Maine, Vermont, New Hampshire, Connecticut and Rhode Island.

Medical/Dental collection efforts can be extremely difficult for both the practice and its collection agency. Setting up policies and procedures for your practice and educating your patients can make a huge difference in collecting or even eliminating delinquent accounts. Here are some tips from my personal experience having managed several dental practices. These tips have been most effective in positive patient relations.

• PPO- Practice must be sure to inform the patient if they are or are not a PPO=Participating Provider Organization AKA In Network Provider, even if not asked specifically and to make sure the person knows the differences.
• Verify Eligibility – A practice must verify that the patient is eligible for the
  benefits that they’re expecting to receive, and to find out ahead of time about any common exclusions to the plan.
• Verification Form – Create a form that has the basic choices of benefit information on it already. Even note the effective date of the policy, some of the common exclusions, limitations, maximum annual allowance, has any of the maximum been used this year, frequencies for common procedures. This way you can just circle, check off or fill in the blanks for what’s relevant. This should also include the patients Plan, ID#, Toll free # and the mailing address to send the claims to or the information needed for electronic claims. Are there other family members covered? Are there any age specific limitations?
  Always note the name and/or badge# of whom you spoke with. Make sure you’re getting the benefits for a participating or non participating office, whatever the case is for this person.
• Financial Policies- Make sure all the paper work is filled out properly. Does it include the SS#? Some people are hesitant to give their SS#, if this is the case, ask them to put down the last four digits. Did they sign everywhere a signature is required? Make sure your policy includes that you may add billing, collection and or legal fees to any delinquencies. This gives you the freedom to do so if you choose, but doesn’t obligate you to do so.
• Patient Registration Forms should include – Address (if it’s a PO Box, keep it, but require a physical address if there is one), Phone #’s for home, work, cell, spouse’s work & cell. What dept. do they work in, and what position? Supervisor’s name. An emergency contact name & #, as well as a name and # for a family member not living with them. Are there any family members already in the practice? Email addresses are very useful these days. (if they have a business card, request one to keep in their file) Who referred them to your practice?

This is the beginning of great communication between you and your patients, and will only result in positive experiences for all involved.

About the author: Bethellen Keefe is the owner of Alpine-BAK, Inc. collection agency based in Coral Springs, Florida. Visit her online at www.alpinebak.com.

Many clients have asked my why some claims are treated differently then others. I would like to present the answer in two articles. This first article will explains how the claims are broken up into two categories and how they are treated from a regulatory standpoint. My second article will address issues such as why a president of a company cannot be held responsible for the debts of the corporation.

In the collection industry debtors/debts are broken up into two categories; consumer claims and commercial claims.

1. Consumer claims are debts owed by individuals, i.e. John Smith, Mary and Tom Jones

2. Commercial claims are debts owed by a business, i.e. XYZ, Inc., Z&Z, LLC.

Consumer collection efforts are governed by the FDCPA. The FDCPA protects debtors’ rights and provides guidelines for the behavior of the collector, collection agency and collection attorney. All third party collection agencies and attorneys must follow the FDCPA or face fines and or legal action. Collection agencies are required to send a debtor a thirty day demand letter which gives the debtor an opportunity to provide proof of payment, pay the debt or dispute the debt before legal action can be taken. The debtor has the right to request proof of the debt and the agency/attorney must provide proof under the guidelines of the FDCPA. Some of the finer points of the FDCPA are:

The hours in which collection agencies are allowed to contact debtors- no earlier than 8am and no later than 9pm. No time that is inconvenient to the debtor.

Written and electronic Communication- No e-mails or faxes. All written communication must include the mini-miranda, This is an attempt to collect a debt and any information obtained will be used for this purpose. Envelopes cannot show anything that indicates the letter is from a debt collector. No postcards.

Legal Representation- If a collector has been made aware that a debtor is represented by an attorney all communication with the debtor must cease. The collector must work with the attorney to resolve the debt.

False representation- A collector cannot use any false, deceptive or misleading representation or means in connection with the collection of any debt. The collector cannot threaten any action that cannot legally be taken or is not intended to be taken.

Harassment- A collector cannot use the threat of violence or criminal means to collect the debt. A collector cannot use profanity or use language that is intended to abuse the hearer.

To read the FDCPA in it’s entirety go to http://www.ftc.gov/os/stautes/fdcpa/fdcpact.htm.

Commercial debtors are businesses that fall under the following business structure; Corporation, S Corporation, Partnership, Limited Liability Company and Limited Liability Partnership.

If a business is a DBA, sole proprietorship or fictitious or assumed name the debt/debtor is considered a consumer claim and the collection agency must follow the FDCPA.

Commercial debtors are not protected by the FDCPA however the Collection agency/attorney should conduct themselves professionally and ethically when handling these claims. Certain tactics can still be viewed as harassment and could provoke a law suit.

I hope this clarifies things further. Don’t forget to check out November’s newsletter for the second part of this article.

About the author: Jan Conte is the President of Your Collection Solution, LLC, a debt collection agency out of Newtown, Pennsylvania. She has over twenty years experience in the debt collection industry. You can find more of her articles at www.yourcollectionsolution.com/blog/.

Sometimes you just can’t get in touch with somebody — especially when they seem to owe you money. They moved, changed numbers, etc. Before you go crazy, try these free online tools to assist you with background searches and debtor locates.

1. www.anywho.com Phone and address searches for individuals and businesses. Reverse directory as well.
2. www.google.com Enter your customers/debtors name and any articles or websites containing their name will come up.
3. www.argali.com Telephone directory
4. www.naco.org National Association of Counties. This is a great tool to locate which county your customer/debtor is located for court proceedings etc.
5. www.contractors-license.org This site will verify if a contractor is licensed. It is set up by state.

Have a locator resource that you would like to share? Post your reply with the link to your favorite resource and we’ll use it in our next resources follow-up article.

About the author: Jan Conte is the President of Your Collection Solution, LLC, a debt collection agency out of Newtown, Pennsylvania. She has over twenty years experience in the debt collection industry. You can find more of her articles at yourcollectionsolution.com/blog/.

In many organizations the Sales Department and the Accounts Receivables Department / Collection Department are on opposites sides of the building. Rarely do these departments interact. In this article, I’ll focus on eight areas that can make them a combined team.

The Sales department is considered the front line while Accounts Receivables Department / Collection Department is the back end or “clean up” crew. The Sales Department and Accounts Receivables Department / Collections Department should, and can, work as a team.

We all know that the Sales person works really hard to sell its companies products by pounding the pavement or phones in an attempt to get the potential client to say yes to their product. Most sales are good ones; i.e. the customer orders the product, is satisfied with the product and pays for the product. A small majority of customers for various reasons do not pay, hence the need for a collection department.

When the account winds up in the Collection Department for collection, the collector has to work especially hard to collect payment for a product that has already been consumed or resold and the sales person has already earned their commission on the sale. The fact that it is now considered a “bad sale” can create tension amongst these two departments. The Sales person is confident they did their job and feel that now the collector should do their job, and vise versa.

Here are eight suggestions to help your sales team and collection team work together to keep both ends running smooth and to keep them both thinking about how they affect one another.

1. Get correct detailed billing information. Have Sales persons get complete contact and billing information from the customer, i.e. company’s legal name, billing and physical address, telephone, fax, e-mail and name of contact person.

2. Get a Purchase Order #. Get a PO# if a customer’s payables department requires a purchase order for each sale. Make sure the sales person obtains the PO# before product is shipped.

3. Look for warning signs. Sales person should be mindful of signs that customer may be having financial problems. All sales are not “good” sales, i.e. if the customer never pays it’s not really a sale is it?

4. Get a credit card #. Get credit card number to be kept on file for all purchases. This process ensures customers are paying as they go along and prevents delinquenices. Some companies offer discounts to “fast payers”.

5. Keep a blacklist. The Collection Department should provide a list of delinquent accounts to the Sales Team so that they are aware of who they should be cautious about selling to, i.e. a “Blacklist”. When sales persons visit or receive calls from customer to place further orders the sales person should remind customer that they still owe for a previous invoice and should they pay that first.

6. Share information. A quarterly joint meeting could be held with the Sales Department and Collection Department to keep the wheels running smoothly.

7. Don’t take things personal. Both Departments should be mindful that they are both under pressure to meet their financial goals and sometimes that means having to be a little tough to make that happen.

8. Don’t leave yourself hanging. Don’t extend credit to delinquent customers until they are caught up. Customers worth their salt will understand why this is good business. If they don’t they may not be worth hanging on to.

Reminding yourself regularly of the importance of each department in your company is key to a well run business. Happy selling and happy collecting!

About the author: Jan Conte is the President of Your Collection Solution, LLC, a debt collection agency out of Newtown, Pennsylvania. She has over twenty years experience in the debt collection industry. You can find more of her articles at yourcollectionsolution.com/blog/.

In this article, I’ve listed eight highly effective techniques that successful businesses use to collect past due receivables before placing them with a collection agency.

1. Be prepared to discuss past due balance with debtor/customer

Be prepared when you make the call or speak to the debtor/customer in person. Have the debtors file or screen in front of you. If you sound or appear unprepared you will give the debtor/customer the impression that the balance due is unimportant to your office and the debtor will not take you seriously.

2. Listen to the debtor/customer

When calling the debtor/customer about their past due balance, identify yourself, state the reason for your call and then be quiet. Allow the silence to work its magic. The debtor will eventually speak and will continue to speak if you do not feel the need to fill the silence. You will get more information than you need. Use open ended questions. Do not interrupt the debtor, let them spill the beans. Long pauses are crucial. Repeat back what the debtor has shared with you to confirm your understanding.

3. Never take anything the debtor/customer says personally

When debtors/customers are unable to pay their balance they can become embarrassed, fearful and angry. Understand that these emotions and their comments have nothing to do with you. The debtor/customer may feel desperate and may lash out.

4. Ask for a payment date

Ask the debtor/customer when he/she will be paying their balance due. Tell the debtor/customer to call you on that date with their check number and ask how it was mailed, i.e. first class, priority or overnight. Keep a calendar of the promises to pay. Follow up with those debtors/customers that do not contact you to make sure payment has been mailed.

5. Set up a payment schedule if necessary

If a debtor/customer has a legitimate financial or family problem that is causing them to be delinquent tell them that you are sorry that they are experiencing difficulty and offer a payment schedule. However, do not allow the problem to become yours. Explain that despite the problem the balance still needs to be paid and you will be happy to set up a payment schedule.

6. Address disputes

If your debtor/customer claims they have not paid due to a dispute with the billing, problems with the service, insurance problems, etc., address their dispute immediately. Be sure to get back to them quickly with a resolution or response. Then ask for payment. If you can’t “fix” their problem you could offer a discount to collect the balance quickly and avoid losing the client. If the dispute is ridiculous and appears to be a stall tactic ask if there may be another problem preventing them from paying. If it’s financial then offer a payment plan.

7. Stop service

If your debtor/customer is not working with you to resolve their outstanding balance do not continue to do business with them unless you have a contract that states otherwise or if the law requires that you continue to assist them i.e medical patients.

8. Know when it’s time to place your claim with an agency

Know when you are beating your head against a brick wall. Access the balance due versus how much time you have put into your attempts to collect the balance due. A reasonable time frame to place your claim with a collection agency is 90 to 120 days past due. Early placement could provide greater recovery results.

You have good paying customers to focus on and dealing with your past due receivables takes you away from them and from making money.

About the author: Jan Conte is the President of Your Collection Solution, LLC, a debt collection agency out of Newtown, Pennsylvania. She has over twenty years experience in the debt collection industry. You can find more of her articles at yourcollectionsolution.com/blog/.

Author: Bethellen Keefe

One of the more common problems with collections in the healthcare practices today are:

1. Not having a proper policy in place for collections. Some practices don’t have Policy & Procedures manuals at all, let alone one that contains collection procedures once an account has become delinquent.
2. Having collections policies in place that aren’t followed. This can be due to several reasons such as turn over of employees. The responsibility has been delegated to someone who is not a good candidate for collections. (It takes a special person.) Employees (as well as the business owner) look at the smaller balances rather than the larger picture and don’t realize the amount of money that is slipping through the cracks. Or the employees just don’t care, after all it’s not their money lost. Your patients will react to your billing depending on how you train them to do so. If you’re lax about their debt, why wouldn’t they be? In many cases the debt gets written off if they wait long enough. Or at least they hope so and take their chances.
3. Not knowing when it’s time to send to an outside collection agency. The older an account becomes, the harder the debt becomes to collect and the less it’s worth. Agencies offer a lot of advantages and incentives for your patients to pay their bills that a practice themselves can’t give. In addition to delinquent accounts, collection agencies can help an account from becoming delinquent. They can run credit reports to see if a patient has the ability to pay a long term payment plan or for any credit that’s been extended for healthcare as well as other types of businesses. (Just like the company you leased that x-ray machine from did.) They also have skip trace resources to find your patients after they’ve moved. In many cases getting unpublished and or cell numbers. As we’ve delved further and further into the electronic age, this is an issue that the skip trace industries are addressing more feverishly than ever.

Agencies instill a sense of urgency that a practice who’s allowed a debt to remain delinquent for more than 90 days has failed to do. Especially when they only communication with the practice has been through letters. A good agency always calls. They handle the debtor with a personal and professional manner while all along putting the debtor in the position to act on resolving their debt and being made aware of their options and the consequences they may face if ignored. It’s much harder to for a debtor to ignore an effective collection agent, than it was to throw away the bills. Many debtors fear that once the account has gone to a collection agency that it’s already affected their credit. The debtor gets their first collection agency letter and all of a sudden they’re eager to pay the debt to avoid their credit being affected in a negative manner or as many of the debtors think, to get the credit report cleared. Many agencies, if they report to the credit bureau which most good ones do, don’t do so until their efforts have failed to resolve the account. So until then, the agency is just another department of the client they’re collecting for. But many debtors don’t realize that. Let’s keep it that way. Agencies usually have the ability to report to the main credit bureaus. This may help in the future when that young adult who thought they were bullet proof when they were younger and irresponsible, have to now pay for the consequences of their past. Now that they want to get a mortgage, car or any type of credit extended to them, they may have to resolve your debt to do so. Some debts have been resolved 5yrs down the line in cases such as this. Agencies also have the know how to help assist in recovering NSF payments. Did you know that many state laws allow you to sue for four times the amount of the check and any collection fees incurred, with little effort involved on their part?

There is so much that a good agency can provide your business. A good tool is to get signed up with an agency ahead of time, and to forward the delinquent accounts in a timely manner as they come up. Different agencies have different requirements as far as minimums, sign up fees, if they report to a credit bureau, if they offer different payment options etc. Make sure they follow the FDCPA and are professional and courteous. An agency with a health care background is also a plus. These are all things that should be looked into when choosing an agency that would work best with you and your business. Medical providers are well aware that there are procedures that are best left to a specialist. The same goes for collections. At a certain point it is best to let a company that specializes in debt recovery handle these procedures as it’s what they do best.

About the author: Bethellen Keefe is the owner of Alpine-BAK, Inc. collection agency based in Coral Springs, Florida. Visit her online at www.alpinebak.com.

I always recommend making a copy of each check that you process. The reason is should your customer default at any time you now have their bank account information. Once you take a customer/debtor to court and a judgment is awarded in your favor you have the right to levy on your debtor’s bank account, with the help of a Marshal or Sheriff. This makes collecting your debt quick and easy. There are of course exemptions and differences in the collection law based on the state your judgment is entered so talk with your collection agency or attorney about the process.

No one likes to add a step to their accounting procedures, it’s time consuming enough. However I can assure you this is a very important step should your accounts wind up in collections.

Many clients approach me about collection claims but they have no supporting documentation to prove their claim. Collection agencies need proof that the debt exists. Simply saying they owe you money is not enough. Debtors can request proof of the claim and collection agencies must provide this proof if asked. There is no way around this fact. My suggestion is to use contracts, applications, leases, rental agreements, rental applications etc. Get your debtors information upfront. Don’t do business with a handshake. This form of a “contract” makes it difficult for the collection agency when the debtor defaults. Be sure to use invoices when billing your customers. Invoices can also be used as proof of your claim. If a client approaches me about handling a claim without proof I normally recommend they take the matter to court. A judge will then make a decision based on the testimony of each party. If a judgment is issued to my client then we can pursue the debtor on the client’s behalf as the matter has been decided in a court of law and makes the debt valid.