Accounts Receivable Management 101

Posted on July 15, 2011 by blog-admin

We’ve launched our Accounts Receivable Management Series.  If you’ve been struggling to organize or formalize your accounts receivable management system, now is the time.  It’s tough out there right now.  We all need every edge we can get.  If you want to get paid faster without losing customers, you need to manage your accounts receivable – instead of reacting to your accounts receivable.  We’ll walk you through it step-by-step.

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Collection Prevention

Posted on June 15, 2011 by blog-admin

“An ounce of prevention is worth a pound of cure” Benjamin Franklin - Sayings like this stick around for for 3 or 400 years for a reason.  Losing weight is harder than not gaining, having heart surgery is harder than exercising for 20 minutes a day, and proactively preventing collection issues is easier than collecting bad debt. 

No one likes collection work, if you are one of the rare people who likes making collection calls, I salute you.  But the average person working in a small business avoids making collection calls, avoids writing collection letters, avoids reviewing credit applications or defining credit policy.  All jobs that must be done in order to prevent bad debt and to get paid on time. 

Recent polls from American Express Small Business indicate that accounts receivables is the “top cash flow concern” of small business owners. Translation: if accounts receivable are causing cash flow concerns you aren’t being paid on time. 

If you aren’t being paid on time you probably aren’t doing your collection work. 

If you aren’t doing your collection work it may be that you’ve fallen for the “bad economy wrap”.  Don’t! 

You can impact your cash flow and your DSO with your collection efforts. 

For small business, procrastination and collections seem to go hand in hand.  There always seems to be something more pressing to do.  One of the best ways to overcome procrastination is by developing clarity.  We’ve found over the years that while most small business’s have their core competencies documented and well organized, their accounts receivable department is not. 

Over the next several days and weeks we’ll be posting a series designed to help you organize you accounts receivable department and your collection efforts for best results.  If you’d like to subscribe to this series email me at vienna@cashinusa.com. 

Take a moment now and Like our new Facebook page here http://www.facebook.com/pages/Cash-In-USA-LLC/161703403859198 . 

Vienna Castellaw
Dedicated to Better Bottom Lines for Small Business
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The Law and Your Collection Letters

Posted on May 25, 2011 by blog-admin

The Law and Your Collection Letters“What can I legally say in my collection letters?” is without a doubt the question we’re asked most often, so I want to take a moment to answer it.  The FDCPA or Fair Debt Collection Practices Act was written for 3rd party debt collectors, not for you as a small business owner or credit manager.  Quite frankly as a 1st party collector, or the person that owns the debt, you can say pretty much whatever you want.   (Some states are considering laws to regulate what in-house collectors can say, leave it to California) but for now as an in-house collector your calls and letters are not regulated by the FDCPA.  Nevertheless, you need to ask yourself if “What can I say?” is the right question.  In my opinion it is not.  The 2nd most commonly asked question is much more important.  The right question is “what works?”  

There is no simple set of words that will make someone pay that doesn’t want to, or thinks he can’t.  The answer to the question “what works?” as usual is, it depends.  Is your late paying customer generally a prompt pay?  If he is there may be a problem with either your service, your product or your billing.  Before sending out a dunning letter you probably want to give your customer a call to make certain all is well. 

If on the other hand your customer is a chronic late payer you have an entirely different set of circustances requiring a different solution.   A chronic late payer isn’t likely to be motivated by a standard dunning or collection letter.  We’ll be talking more about chronic late payers and how to deal with them in future posts. 

Small invoices tend sometimes to be skipped over for a number of reasons.  In this case a simple but friendly reminder will probably do the trick.  Be certain to include all the  pertinent information, include a copy of the invoice and don’t forget to ask them to pay it. 

Summing up, don’t worry about the legality of your letter, focus instead on it’s appropriateness to the situation.

Posted in Collection Letters | 2 Comments

Your Customer is Out of Business! Now What?

Posted on April 21, 2011 by blog-admin

So, your customer went out of business owing you a pile of money and you’re wondering what to do next.  If you’re reading this I imagine you’re hoping for some kind of collection agency magic trick to get your money back, and there are a few things you can do to try to track your customer, now debtor, down to try to get some kind of payment plan in place.  But at the risk of ticking you off and having you never read anything I have to say again I’m going to state what I believe to be the reality.  You blew it. 

If you manage your accounts receivable properly in the first place, this should not happen.  Worst case, if a customer does go out of business you should know about it before it happens.  If you’ve been making your collection calls and sending your collection letters and notices, and most importantly paying attention to the warning signs that we discuss frequently in this blog you should already have a payment plan in place and alternate ways of reaching your customer before he closes down.

If you don’t, your best strategy in my opinion (which I get to state because this is my blog) is to give the account to a collection agency and put your time and effort into creating or repairing your accounts receivable management system. 

If you insist on trying to handle this yourself (which I insist is a poor use of your time), here are some steps you can take. 

Move quickly.  Drive by and see if you can speak to your customer, now debtor and get some alternate contact information before he completely disappears.  Years ago I had a customer that was refusing my calls, I drove to his place of business and found my customers employees packing the place up.  The employees I was talking to insisted the owner wasn’t there etc etc.  I stood my ground and kept grilling them (politely but insistently) until the owner took pity on them and emerged from a back room.  I got my money.  If you find your customer, ask for your money, if you can’t get it write up some kind of agreement on the spot.  If you don’t find him, talk to the neighbors, see if anyone has a phone number or address on him. 

Review your old paperwork, look for alternate phone numbers, bank accounts etc.  Talk to everyone in your company that had contact with the customer, especially sales, see what they know.  Search the internet for the owners names and the business name, you might find a home number or an alternate number.

Bottom line, move quickly and decisively.  Do NOT be passive unless you are willing to lose your money.

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In-House Collection Letters

Posted on March 28, 2011 by blog-admin

I noted last month that third-party collection letters, in other words collection letters written and mailed from a collection agency, are more effective than in-house collection letters.  While this is true later in the collection process, in-house collection letters have their place.  In-house collection letters can and should be a component of any complete accounts receivable management system. 

If, for example you’ve made several calls (you leave a message every time, right?) and have not received a return call, a quick letter faxed and then mailed, will often generate a return call.  If your first letter and subsequent phone calls don’t win you a return call, a copy of the first collection letter you sent or a 2nd collection letter should be faxed and mailed to either an accounts payable manager or the controller. 

In the end, if an account goes bad and you need to write it off you’ll  want documentation of your collection efforts, particularly if it’s a large balance.  The IRS could require the documentation to allow the write off. 

The bottom line, energy out equals results in.  Use all of the resources available to you to collect your money on time.  That means make calls, leave messages, fax collection letters, mail collection letters, use third-party resources i.e. collection agencys, do what you have to do and do it on time.  Your company’s bottom line depends on it.

Posted in Collection Letters | 2 Comments

Accounts Receivable Management

Posted on February 15, 2011 by blog-admin

What is Accounts Receivable Management, and Who Cares?  

Any small business owner that checks his bank account and finds he has less money than he thought he had, cares about accounts receivable management.  If you didn’t know what it was before you checked your account, you found out quickly.  Accounts Receivable is the money owed to you by customers that didn’t pay you when you delivered whatever it is you deliver.  

Accounts Receivable Management is the work you have to do to collect from the customers that didn’t pay when you delivered whatever it is that you deliver.

You may wish you didn’t have to think about accounts receivable, and you may even believe you shouldn’t have to think about it.  I’ve listened to countless small business owners fume about what’s ‘supposed to be’.  “They should pay on time.”  “They shouldn’t have bought it if they couldn’t pay for it.”  It sounds good, but it isn’t business reality.  Most customers don’t pay on time.  In fact, statistically only about 30% pay right on time.  Fortunately another 30% pay within a reasonable time frame.  Then you have the hopefully no more than 30% to 35% that take a little work to collect from and then the 5% to 10% that take more than a little work. 

Remember back when you were in school, and you knew 60% of the answers to the test you were taking, really well.  60% is a lot,  that ought to do it.  But it doesn’t, that’s reality.  And collecting 60% of your money on time or close to on time isn’t good enough either.  You’ve got to do the work that will bring the rest of your money in.  If you don’t, your bad debt losses will increase, and not necessarily slowly.  In an economy like this one, bad debt losses can skyrocket within just a few weeks of inattention. 

So, pay attention, and do the work of accounts receivable management.  The health and wealth of your business depends on it.

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Collection Letters: In-House vs. Collection Agency

Posted on January 23, 2011 by blog-admin

I’m not going to mince words, you’ll find I rarely mince words, it’s an occupational hazard.  Collection agency letters outperform in-house collection letters by a factor of 3 to 1.  That’s a fact, and furthermore, if you have an effective in house collection process in place (you have read and implemented my ’Step-by-Step Plan for Effective In-House Collections without Losing Customers’ right?) your need for in-house collection letters should be practically non-existent.  If you’re skeptical, I get it.  You might think ‘she’s selling collection letters, why wouldn’t she say they work better?’  Or, if you knew me, you might think, ‘she’s been doing this for 30 years, she’s pretty good at it, she might know what she’s talking about’.  Either way, if you want to collect your money, at all, let alone fast, don’t spend a lot of time in ‘I’ll just give them one more chance’ mode.  If, after you’ve executed all of your in-house efforts and sent at most two in-house collection letters, your customer hasn’t responded, and by responded I mean sent a payment, try pre-paid collection agency letters.  It used to be, if you couldn’t collect, your only option was to turn you unpaid invoices over to a collection agency for a 20% to 30% commission.  That’s no longer the case, now there are several companies including mine, that will send a series of third party letters for you with no commission at all.  This is a resource, use it! It’s inexpensive and it works.  Continue reading →

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Post 2 – ‘Erin’

Posted on January 13, 2011 by blog-admin

Ok, I admit it, one of Erin’s (see comment 2) customers called me about a collection issue, while I was talking to her (Erin) about it, I asked her to check out our new blog and make a comment.  As soon as I said I wanted to ask her for something she asked me if I wanted her brother’s autograph.  I didn’t know, until that moment, that her brother was autograph worthy, but here he is, Taran Killam on Saturday Night Live. http://www.nbc.com/saturday-night-live/video/amusement-park-ride/1268837 Pretty cool isn’t it.  And if you want to know something about Erin, she cried when she first saw this video.

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My First Blog Post – Why Blog?

Posted on January 11, 2011 by blog-admin

As I write this first post, it seems appropriate if not necessary to address the question “Why Blog.” And more specifically, why blog and how can I possibly blog on the subjects of  accounts receivable management and debt collections?  I don’t want to count the number of times over the last 30 years that I’ve said “there isn’t much to be said in the world of collections”.  There are, in my opinion, two questions and about two dozen answers when collecting a debt.  I’ve even challenged debtors to “think of one I haven’t heard” and promised to pay their debt for them if they could.  I have no winners to date.  Despite all of that, here I am essentially committing to finding something to say about collections and accounts receivable management often and ongoing.

The question begs an answer.  Why put myself through this?  Writing is hard, for me at least.  I’ll start by blaming Christy, she manages my websites.  If you’re having trouble getting your website work done, you ought to give her a call.  Christy does what she says she is going to do, when she says she is going to do it, rare in any small business, but particularly rare in the world of webmasters.  If you want her number give me a call.  In any case, she said I need a blog in order to “optimize my website”.  Anyone with a website knows you want to “optimize” it, i.e. we want people to find us, and we don’t want to pay for it.  Actually, more honestly I don’t mind paying for it, but there seems to be some stigma attached to being in the paid ads at the top of the search engines.  Somehow it only counts if you can get there ‘organically’ i.e. without paying.  I don’t get that but that is another subject for another day.  Today the answer, I’m blogging because I want my website and by association my company to be found.  We, those of us here at Cash In want to be found.  It’s simple, we want to work.  We’re good at what we do (accounts receivable management, getting our customers paid without ticking off their customers), what we do needs doing, and we want to do as much of it as we can.

Towards that end, I’ll do my best to find valuable things to say about accounts receivable, collections and bad debt.  Failing that I’ll try to at least say something interesting, and towards that end, check out what Seth Godin and Tom Peters have to say about “Why Blog” here.  http://www.drjeffcornwall.com/2010/09/why-blog.html .

Posted in Other Stuff | 2 Comments