Hi,
Many small businesses have the same credit and collection problems as large corporations, only they do not have the staff to address these problems. If a small business owner is experiencing an increasing collection problem, it is important to identify the reasons why. In order to do that here are some suggestions of things to look at:
1) Is there a definitive credit policy for extending credit to individuals or other businesses?
2) When an account is opened, is the time taken to verify the information on the credit application? If there isn't a formal credit application, one might be considered.
3) If NSF checks seem to be a continual problem, investigate obtaining a machine to electronically process checks at point of sale. If that is not an option, make sure all pertinent information about the customer necessary to collect on the check in case it's returned is recorded on the check.
4) Is a maximum limit set on charge accounts? Notify the customer of the maximum limit when the account is opened, and if the limit is exceeded, immediately inform the customer.
Customers of small businesses expect to be paid when they perform services or deliver goods to people and will not be offended when a business owner wants to be paid by them. If they do take offense, they're probably not the type of customer a business ultimately wants. If contacting customers is not a strength, one might consider hiring a part time person to call past due customers on behalf of the business. The final step is to turn delinquent accounts, NSF checks etc., over to a professional for collections. This should be done promptly, because the success of collecting on a past due account diminishes with time.
Tomorrow I'm going to talk about specific types of collection calls.
Until then,
Alan
Showing posts with label NSF checks. Show all posts
Showing posts with label NSF checks. Show all posts
Monday, April 23, 2007
Wednesday, March 21, 2007
NSF Checks
Hi,
NSF checks used to be one of the biggest collection problems for both large and small businesses. This situation has dramatically changed due to the introduction of computer verification technology at point of sale. It has reduced the number of NSF checks by 80%. From a collections standpoint, it is important that each check contains as much information as possible about the customer. There various methods that can be used to collect an NSF check.
1) Notify the customer immediately by phone and or mail that his or her check has been returned by his or her bank and that the matter needs to be immediately resolved.
2) Most banks redeposit checks twice and then return them to the depositor if they are still NSF. The depositor can still present the NSF check at the debtor's bank and get the check processed. This takes care of the people that inadvertently wrote an NSF check and for extraordinary reasons did not have expected funds at the bank. Going to the debtor's bank allows the merchant to resolve the issue without further involving the debtor.
3) Each state has different laws governing the penalty for issuing NSF checks. Merchants need to know the laws applicable in their state. If the debtor has not responded to previous communication, a letter should be sent stating that the merchant will be exercising the rights given under the applicable law to collect on the check. It should be spelled out for the debtor.
4) If no payment has been received after exercising these remedies, the check needs to be turned over to a collection agency.
Following these steps in a timely manner increases the chance of recovery on NSF checks.
Tomorrow I'm going to talk about collecting on car loans and car repossessions.
Until then,
Alan
NSF checks used to be one of the biggest collection problems for both large and small businesses. This situation has dramatically changed due to the introduction of computer verification technology at point of sale. It has reduced the number of NSF checks by 80%. From a collections standpoint, it is important that each check contains as much information as possible about the customer. There various methods that can be used to collect an NSF check.
1) Notify the customer immediately by phone and or mail that his or her check has been returned by his or her bank and that the matter needs to be immediately resolved.
2) Most banks redeposit checks twice and then return them to the depositor if they are still NSF. The depositor can still present the NSF check at the debtor's bank and get the check processed. This takes care of the people that inadvertently wrote an NSF check and for extraordinary reasons did not have expected funds at the bank. Going to the debtor's bank allows the merchant to resolve the issue without further involving the debtor.
3) Each state has different laws governing the penalty for issuing NSF checks. Merchants need to know the laws applicable in their state. If the debtor has not responded to previous communication, a letter should be sent stating that the merchant will be exercising the rights given under the applicable law to collect on the check. It should be spelled out for the debtor.
4) If no payment has been received after exercising these remedies, the check needs to be turned over to a collection agency.
Following these steps in a timely manner increases the chance of recovery on NSF checks.
Tomorrow I'm going to talk about collecting on car loans and car repossessions.
Until then,
Alan
Tuesday, March 20, 2007
Benefits of Collection Agencies for Small Businesses
Hi,
Small businesses have two distinct disadvantages over large corporations in that they usually have no credit or collection departments. This results in accounts receivable with no one available to monitor or resolve them. The business owner is generally busy with other tasks, and his or her small staff is usually strictly clerical. Many times credit is extended due to familiarity with the customer rather than by the approval of pertinent credit information. These factors contribute to small businesses having an higher than average collection problem with their accounts receivable. The business owner fears that customers will be driven away if their delinquent accounts are pursued. It is not uncommon for business owners to have tens of thousands of dollars in very delinquent accounts. Another collection problem for small businesses may still be NSF checks, as they may not have the electronic system in place for point of sale verification. Because small businesses lack the staff to effectively collect on NSF checks, it's imperative that they utilize a third party collection system as soon as possible. In most instances, a collection agency is a perfect fit for a small business. Years ago I had a friend who was a salesman for a collection agency. He told me the story of a small business owner who had a shoe box with dust on it full of NSF checks. It took many, many visits before the salesman was able to convince the owner to give up the shoe box. When he finally did, it contained over 120 NSF checks, some over three years old. Within two weeks, the collection agency had collected over $6,000. of the checks for the business. This is one example of many in which accounts receivable or NSF checks gathering dust are not putting any dollars back into the business. In dealing with NSF checks in particular, the chances of recovery diminish with each passing month. As a small business owner, it is always important to remember that you are entitled to be paid for your goods and services provided to your customers. When you have the need of utilizing outside collection services on your accounts you are exercising your rights as a businessperson. Tomorrow, I'll talk about NSF checks.
Until then,
Alan
Small businesses have two distinct disadvantages over large corporations in that they usually have no credit or collection departments. This results in accounts receivable with no one available to monitor or resolve them. The business owner is generally busy with other tasks, and his or her small staff is usually strictly clerical. Many times credit is extended due to familiarity with the customer rather than by the approval of pertinent credit information. These factors contribute to small businesses having an higher than average collection problem with their accounts receivable. The business owner fears that customers will be driven away if their delinquent accounts are pursued. It is not uncommon for business owners to have tens of thousands of dollars in very delinquent accounts. Another collection problem for small businesses may still be NSF checks, as they may not have the electronic system in place for point of sale verification. Because small businesses lack the staff to effectively collect on NSF checks, it's imperative that they utilize a third party collection system as soon as possible. In most instances, a collection agency is a perfect fit for a small business. Years ago I had a friend who was a salesman for a collection agency. He told me the story of a small business owner who had a shoe box with dust on it full of NSF checks. It took many, many visits before the salesman was able to convince the owner to give up the shoe box. When he finally did, it contained over 120 NSF checks, some over three years old. Within two weeks, the collection agency had collected over $6,000. of the checks for the business. This is one example of many in which accounts receivable or NSF checks gathering dust are not putting any dollars back into the business. In dealing with NSF checks in particular, the chances of recovery diminish with each passing month. As a small business owner, it is always important to remember that you are entitled to be paid for your goods and services provided to your customers. When you have the need of utilizing outside collection services on your accounts you are exercising your rights as a businessperson. Tomorrow, I'll talk about NSF checks.
Until then,
Alan
Thursday, March 15, 2007
The Collection Process Continued
Hi,
The perfect scenario in a collection agency would be to receive an account, turn it over to a collector, and, in one call, resolve the account with payment in full. Unfortunately, this scenario does not happen very often. I'd like to identify some of the reasons which keep accounts from being quickly resolved:
1) The contact information for the debtor is obsolete. This requires the account to go through the skip tracing department to try to locate the debtor. In many instances, this is a lengthy process that may involve contacting previous next door neighbors, other creditors, past employers, and any personal referrals listed on the credit application. If these avenues fail, written communication to last known addresses may be used in the hopes of getting a forwarding address.
2) Phone calls to the debtor are ignored and initial notification letters are thrown away by the debtor. In these cases, if there is no other known way to contact the debtor, and follow up letters are ignored, these accounts may be turned over to the collection agency attorneys. Many times collection agency letters are ignored, but legal demand letters from a law firm bring debtors out of the woodwork.
3) Payment arrangements are reached and are broken by the debtor after one or two payments. This requires additional communication with the debtor to usually inform the debtor that the full balance is now due.
4) In some cases a debtor may request a call back from the collector after the initial call to give the debtor time to make a settlement proposal or suitable payment arrangement. This may require the collector to make numerous phone calls before the collector makes contact with the debtor again.
5) Collection agencies receive a much higher than average number of NSF checks. As a result, collectors have to make follow up phone calls to try to collect on the checks.
6) If a debtor proposes a settlement offer to a creditor, it is necessary for the collector to get the approval from the creditor and then get back in touch with the debtor. This can be a time consuming process.
These are some of the reasons why collections can be a long difficult ordeal. Tomorrow I will finish my discussion about the collection process.
Until then,
Alan
The perfect scenario in a collection agency would be to receive an account, turn it over to a collector, and, in one call, resolve the account with payment in full. Unfortunately, this scenario does not happen very often. I'd like to identify some of the reasons which keep accounts from being quickly resolved:
1) The contact information for the debtor is obsolete. This requires the account to go through the skip tracing department to try to locate the debtor. In many instances, this is a lengthy process that may involve contacting previous next door neighbors, other creditors, past employers, and any personal referrals listed on the credit application. If these avenues fail, written communication to last known addresses may be used in the hopes of getting a forwarding address.
2) Phone calls to the debtor are ignored and initial notification letters are thrown away by the debtor. In these cases, if there is no other known way to contact the debtor, and follow up letters are ignored, these accounts may be turned over to the collection agency attorneys. Many times collection agency letters are ignored, but legal demand letters from a law firm bring debtors out of the woodwork.
3) Payment arrangements are reached and are broken by the debtor after one or two payments. This requires additional communication with the debtor to usually inform the debtor that the full balance is now due.
4) In some cases a debtor may request a call back from the collector after the initial call to give the debtor time to make a settlement proposal or suitable payment arrangement. This may require the collector to make numerous phone calls before the collector makes contact with the debtor again.
5) Collection agencies receive a much higher than average number of NSF checks. As a result, collectors have to make follow up phone calls to try to collect on the checks.
6) If a debtor proposes a settlement offer to a creditor, it is necessary for the collector to get the approval from the creditor and then get back in touch with the debtor. This can be a time consuming process.
These are some of the reasons why collections can be a long difficult ordeal. Tomorrow I will finish my discussion about the collection process.
Until then,
Alan
Friday, March 9, 2007
The Evolution of the Collection Department: Part 2
Hi:
In the past few blogs, I have identified some of the problems which developed when computers were introduced into collections departments over the last thirty years. Some of the advantages of computerization are as follows:
1) It allows credit and collections departments to compile statistical data identifying problems and enables the departments to quickly deal with them.
2) Computers allow instantaneous communication among credit, sales and collection departments, transferring documents, pictures etc., throughout the departments.
3) Computers have virtually eliminated one huge problem of the past for retailers in dealing with NSF checks through point of sale terminals.
4) Advanced computerized phone systems have allowed companies to reduce their staff by having many questions electronically answered.
In a well run company the sales, credit and collection departments work in concert. Each department needs the help of the other and can utilize the experiences of each other. Unfortunately, many companies have done away with 75% of their experienced credit and collection people, thereby making it harder for the consumer to be dealt with in a personal manner. The only remedy for this situation is generally to talk with supervisors and sometimes even the bosses of supervisors. One needs to go up the ladder to find a professional with the authority to deal with a particular situation. Monday I will talk about collection agencies.
Have a good weekend.
Until then,
Alan
In the past few blogs, I have identified some of the problems which developed when computers were introduced into collections departments over the last thirty years. Some of the advantages of computerization are as follows:
1) It allows credit and collections departments to compile statistical data identifying problems and enables the departments to quickly deal with them.
2) Computers allow instantaneous communication among credit, sales and collection departments, transferring documents, pictures etc., throughout the departments.
3) Computers have virtually eliminated one huge problem of the past for retailers in dealing with NSF checks through point of sale terminals.
4) Advanced computerized phone systems have allowed companies to reduce their staff by having many questions electronically answered.
In a well run company the sales, credit and collection departments work in concert. Each department needs the help of the other and can utilize the experiences of each other. Unfortunately, many companies have done away with 75% of their experienced credit and collection people, thereby making it harder for the consumer to be dealt with in a personal manner. The only remedy for this situation is generally to talk with supervisors and sometimes even the bosses of supervisors. One needs to go up the ladder to find a professional with the authority to deal with a particular situation. Monday I will talk about collection agencies.
Have a good weekend.
Until then,
Alan
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