Ways to Maximize Effective Collections – Tracy L. Spears February 17, 2010 1

Ten Tips for Maximizing Cash Flow

SEABAJune 30, 2011

Presented by: Steven W. Brown

Accounts Receivable Specialist/District Manager

Transworld Systems Inc., provider of

Ways to Maximize Effective Collections – Tracy L. Spears February 17, 2010 2

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Objectives of Presentation

Objectives of Presentation

Develop internal strategies for effectively collecting money

Help you and your staff learn what to say to clients in order to motivate them to pay

Understand what options are available when accounts are overdue

Know when and how to use those options

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Collections Challenges Facing Today’s Businesses

Economic Reality – consumers are spending less Result – lots of providers competing for fewer

dollars Slow paying clients• Understaffed Trying to work all accounts systematically,

including small balances Familiarity with collection laws

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Four Reasons to Collect

1. Accounts depreciate and get harder to collect2. Complaints increase with time3. Further services stop because debtor avoids you4. Stressful for the staff and the client

50% of surveyed small business ownerssaid they are experiencing cash flowproblems… -Discover Small Business Watch, Feb. 2011

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Typical In-House Collection Efforts

Day 30 Day 60 Day 90 Day 120 Day 150 Statement Statement Statement

Letter #1 Phone Calls

Statement Letter #2 Phone Calls

Statement Letter #3 Phone Calls

*According to the Dartnell Institute of Business Research, the average cost of working an account internally over a six month is $31.60 per account.

Day 180

Intensive Telephone Contact and/or Legal Action at a cost of 25-50% of recovered amounts.

-

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Facts About Collections

It costs a business $31.60 to attempt to collect an account after it’s 30 days past due to 180 days*

80% of the collections budget is spent to collect 20% of past due accounts

Delinquent accounts depreciate ½ percent per day past 90 days. **

* Dartnell Institute **U.S. Department of Commerce study of depreciation of accounts held in-house.

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Start Early, Recover More

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Facts About Collections

There are over 6000 collection agencies in the US Average fee/cost for a traditional agency is 33% According to the ACA 2009 figures, the average

recovery rate is 14% * The true cost of collections is the amount of

money that is not recovered

*ACA International 2009 Survey**US Dept of Commerce

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Facts About Collections

Smith’s Practice $50,000 Collection Fee 25% 15% recovery rate Collect $7,500 Agency gets $1,875 Practice gets $5,625

Jones’ Practice $50,000 Collection Fee 40% 30% recovery rate Collect $15,000 Agency gets $6,000 Practice gets $9,000 Additional Net of

$3,375

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Ways to Maximize Cash Flow& Effective Collections

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1- Have a Defined Credit Policy

Policy gives staff a detailed document that they can stand behind

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What Should be Included in Your Policy?

What payment is required at time of service? Allowable forms of payment: cash, check, money

order, and charge cards Broken appointment charge and policy Maximum number of payments allowed? Interest, billing or service charge - rate and when

applied

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2. Make Monthly Statements Effective

Send statements promptly and regularly Do not put aging date at the bottom of the

statement

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Statement with Aging Dates

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Make Monthly Statements Effective

Do put a due date on the statement

2/17/2010

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3 – Use “Address Service Requested”

One of the most difficult A/R problems is tracking down a client who has moved or skipped.

Put address service requested on all correspondence sent to clients

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4 -Contact Overdue Accounts More Frequently

Contact late paying accounts every 10-14 days

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5 - Adhere to State & Federal Collection Laws

The Fair Debt Collection Practices Act (FDCPA), the primary federal law regulating third party collection agencies, which was enacted in 1977 with the support of ACA, is designed to help protect consumers from unfair and abusive collection practices

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6 - Use Your Aging Sheet, Not Your Feelings

Stand by your policy

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7 - Make Sure Your Staff is Well-Trained

Even experienced staff members can get jaded when dealing with past due accounts

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How to Talk to Clients

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How to Talk to Clients: Asking for Payment

What you should not say: “How much can you pay?” “When can you pay?” “Can you pay something?”

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How to Talk to Clients: Asking for Payment

What you should say: “How much are you short?” “Will you be in today or tomorrow?” “Will you be paying by cash, check or credit

card?”

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How to Talk to Clients: Asking for Payment

Empathize with client’s situation Remind them of their obligation to pay Get commitment for payment Convert outstanding balance to a time frame Arrange for bi-monthly payment arrangements

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8 – Knowing the Warning Signs of Troubled Accounts

Account is 45-60 days past due Phone has been disconnected or changed to

“unlisted” Partial payments are smaller and sent with less

regularity Client says he or she won’t pay

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9 – Use a Third Party Sooner

How many times should you ask to be paid? If they have ignored your first 3-6 contacts, what

will they do with the next 3 you make? Focus your internal efforts to the first 60-90 days

when most of your accounts can and should be collected

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What are Your Third-Party Options?

Percentage collection agency Percentage or retainer attorney Flat fee collection agency

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Not All Collection Agencies are the Same

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What to Look for in a Third-Party

Proper Accreditation/Licensed Reputable Experienced Easy to do business with Partners with key professional associations

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Advantages of Using a Third-Party

A third party gets the client’s attention and makes an immediate impact

Implications for client’s credit record Removes you and your staff from position of “bad

guy”

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10 – Remember that Nobody Collects 100%

• Remember your goals

•Have realistic expectations for your AR program

•Even with a good A/R policy, there will always be the few accounts that never get collected

•Implementing a consistent collection process will greatly diminish the slow paying and non paying accounts

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Green Flag 4 Stage Approach

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Useful Resources

• The Association of Credit and Collection Professionals (American Collectors Association) http://www.acainternational.org/default.aspx

• The Fair Debt Collection Practices Act http://www.ftc.gov/os/statutes/fdcpa/fdcpact.htm

• National Better Business Bureau http://bbb.org• Transworld Systems Inc

http://www.transworldsystems.com• Linked In

linkedin.com/in/stevenwalterbrown

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Questions?

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Maximizing Cash Flow

June 30, 2011

Steven W. BrownSteven.Brown@transworldsystems.com

770-937-0157x21Transworld Systems Inc., provider of

Thank You!