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Credit/Collections
About This Page
This page will be for Credit and Collections. I will be asking people in the business to send me or write an article so I can post it here to allow creditors as well as debtors get information they may need.
The Following Article was submitted by:
Michelle Dunn
http://www.credit-and-collections.com
To be or not to be – Being a Bill Collector in 2007
Accounts Receivables Outsourcing or a Collection Agency?
By Michelle Dunn
When I had my first Accounts Receivable clerk job and was phasing into being the credit manager, I made debt collection calls for the company I worked for. At one point I was allowed to do some of my work from home which included debt collection calls to customers.
On my website I have an “Ask Michelle” button and people can email me to ask me questions about debt collection or credit. I recently received this question:
“I have about 15yrs in the collection industry. I have collected on car notes, medical accounts.. I’m currently working as a contractor inside a medical facility in North Carolina. The company I work for is based out of South Carolina. I just recently started moon lighting call self-pay accounts for this medical firm after hours. The company that I’m employed in South Carolina is paying me as a independent contractor instead of my regular salary for hours I work during the day. My question is since I’m doing 1st party collections, and I wanted to solicit business calling on self-pay accounts for medical firms in the area could I work for them as a independent contractor instead of referring to myself a collection agency, and not go through all the licensing for the state of North Carolina. Also how can I market myself also to work as a contractor instead of representing myself as a collection agency?”
I thought this was very interesting, and brought it to the attention of the members of my Credit & Collections Association because I knew there would be a lot of interest in this topic. In my opinion this person may need to have some type of licensing because most business owners are savvy enough to know that they should check this persons credentials, licensing and/or bonding otherwise they could be held liable for anything that may go wrong or not be legal. General consensus is that if the state in which this person is collecting requires a license, they should get one. Even if they do not want to be considered a collection agency, they may need licensing or bonding to be a contractor of any kind. A way to get around this would be to work as a sub-contractor for a company who already has this licensing in place and thereby use their licensing. This may not work with the above question since they sound like they want to be an independent contractor in a debt collection capacity for medical accounts. Their customers would not have collection licenses since they are medical facilities.
If this person wants to be an independent contractor as an accounts receivable clerk, something many collection agencies offer under the name of Accounts Receivable Outsourcing, they would still need to register with the state and should contact their states offices about any licensing or regulations. They should also join associations and groups that can help them decide what type of licensing they need. They should also remember that if they are licensed or become a certified collector it will add credibility to their business.
When talking to members of Credit & Collections.com some judgement recovery professionals license themselves as collection agencies even though they are collecting on judgements and do not perform the duties that a traditional collection agency does.
We should note this person works for this medical company and debt collection is part of their job, so there is no license needed. They work in-house and are paid by the medical company. However, once you begin working on your own for any business a permit or license may be required. You would now be soliciting accounts to collect on as an independent contractor for other medical facilities that do not employ you. This might make you an Accounts Receivable Outsourcing firm or a collection agency, depending on your contract, duties and services.
Something to remember is that if you are collecting as an independent contractor for a business other than your own, you are considered a 3rd party collector and would need to research and meet the requirements mandated by the state you are working in.The reality is, why open yourself up to a potential lawsuit? Check out the Fair Debt Collectioin Practices Act guidelines section 807. This covers False of misleading representations: A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:(11) The failure to disclose in the initial written communication with the consumer and, in addition, if the initial communication with the consumer is oral, in that initial oral communication, that the debt collector is attemting to collect a debt and that any information obtained will be used for that purpose, and the failure to disclose in subsequent communications that the communication is from a debt collector, except that this paragraph shall not apply to a formal pleading made in connection with a legal action.(12) The false representation or implication that accounts have been turned over to innocent purchasers for value.(14) The use of any business, company, or organization name other than the true name of the debt collector’s business, company or organization.
It is my understanding of debt collection and the laws that if you are calling anyone on the phone to try and get them to pay a bill and the company you work for is not paying you to do this, you must license yourself as a bill collector if applicable. To try to look for a way to get around being called a Collection Agency when you are trying to collect money, and solicit past due accounts to collect on can only turn out badly.
Michelle Dunn, author of an award winning book has spent the last 18 years stepping into dangerous debt collection potholes. She shares her hard-won expertise on debt collection with the titles in her “Collecting Money Series.” She is the founder and president of Never Dunn Publishing, LLC and her 10 year old Credit & Collections Association with over 1025 members. She is a writer, teacher, and consultant that has a contagious passion for her work. Michelle started and ran M.A.D. Collection Agency for 8 years and has recently been named one of the Top 5 Women in Collections.
Michelle has been featured in Forbes.com, The Wall Street Journal, Smart Money Magazine, Ladies Home Journal, PC World, Home Business Magazine, Home Business Journal, Entrepreneur magazine, Professional Collector, Credit & Collections Risk, the NH Business Review, Smart Money magazine, About.com, Master Cards small business website and in many books including Home Based Business for Dummies. Michelle has been a featured guest on (NPR) National Public Radio and many other radio programs as well as published in many newspapers and magazines nationwide. She has been a repeat guest on television shows such as the CBS Early Show, The Book Authority and Process for Profit. She has many published articles and 7 published books to add to her list of accomplishments. Entrepreneur Press has released “The Ultimate Credit & Collections Handbook, the check IS in the mail” penned by Dunn in 2006.
In addition to writing and marketing her books, Michelle was a member of The American Collectors Association for 9 years and shares valuable credit & debt information with business owners on her blog at www.BizCreditPolicy.com. Visit www.michelledunn.com and www.credit-and-collections.com for more information.
The Following Article was submitted by:
Donna Vestre, South Coast Revenue
Factoring Account Receivables
All too often, small businesses that are just starting out experience cash flow issues that make it difficult for them to meet their financial obligations. Creditors are less lenient with new businesses than they are with businesses that have been established for an extended period of time.
Entrepreneurs that are just embarking into the business emporium are dependent on their account receivables for their business to thrive, it’s crucial to the life of their business. Most creditors or vendors, offer very short payment terms to new businesses, others work strictly on a C.O.D. basis. When account receivables don’t get paid in a timely manner, these small businesses suffer cash flow issues that result in their inability to meet their own financial obligations.
New business owners have few options available to assist them in fulfilling obligations to their creditors, not to mention in house obligations such as payroll, rent, and utilities.
Factoring account receivables is not the most cost effective solution for businesses to resolve their account payable issues, but often times it is the only resource they have. Many small businesses choose factoring as a temporary solution to get them through the rough spots, until they can assess the capital necessary to qualify for financing.
Factoring is a form of financing that businesses utilize. A business can sell it’s invoices to a finance company to expedite cash flow… this is how it works.
A business may turn over unpaid invoices to a finance company.
The finance company will purchase the invoices. The finance company will advance the business monies, (usually in the form of a wire transfer), less their percentage and collateral.
The collateral is put into a restricted account until all invoices are satisfied.When the invoices are satisfied, the finance company releases the collateral in the restricted account to the business.If the invoices are not paid (generally Net 90), the business loses the collateral and is required to repay the finance company their original investment in addition to any finance fees incurred.Although factoring is a risk, many entrepreneurs are willing to take such risks in an effort to sustain the business until their business becomes financially stable. Many businesses overcome these financial obstacles, unfortunately there are many that can not recover, as a result those businesses fail.
So why would a company choose to factor it’s receivables? Businesses can quickly turn their unpaid invoices into cash. All invoices don’t necessarily have to be submitted for factoring. A business may choose to turn over only a portion of their invoices to be factored, generally those they consider slow pay accounts. The down side is that the business usually receive only 80 percent of the face value on each invoice.
Account receivable factoring has become increasingly popular for businesses that experience difficulty in securing a loan in the traditional manner from an bank. This is a vital resource for small businesses in today’s economy. Many of the larger corporations are also utilizing factoring of their account receivables as a resource to generate quick cash.
The Following article was submitted by:
Bethellen Keefe/Owner Alpine-BAK Collections
954-722-6676
DEBT RECOVERY FOR YOUR BUSINESS
How much money a year is falling through the cracks…….and WHY???!!!
Some common problems with collections in any business today are;
Not having a proper policy in place for collections. Some businesses don’t have Policy & Procedures manuals at all, let alone one that contains collection procedures once an account has become delinquent.
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 clients/customers 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.
Not knowing when it’s time to send past due accounts to an outside collection agency. The older an account becomes, the harder the debt becomes to collect. 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 potential client/customer has the ability to pay a long term payment plan or for any terms of credit that you’re considering extending to them. They also have skip trace resources to find your clients/customers if 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 business who’s allowed a debt to remain delinquent for more than 90 days has failed to do. Especially when they only communication with the business has been through an Invoice now and again by mail. A good agency always calls. They handle the debtor on 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 as well as the consequences they may face if ignored. It’s much harder for a debtor to ignore an effective collection agent, than it was to throw away the Invoice. 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. Agencies, if they report to the credit bureau which most 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 Florida laws allow you to sue for four times the amount of the check and any collection fees incurred in most cases?
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. These are all things that should be looked into when choosing an agency that would work best with you and your business.
Just like there are lawyers that specialize in certain types of law, businesses that provide a very specialized service and medical doctors that refer you to a specialist for a certain procedure, 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.
