© 2009-2012 American Agencies. All Rights Reserved.® 1

VOLUME 6, ISSUE 2 February 2012

NEWSLETTERFive Consecutive Years

Top TenWays to

Improve Cash FlowBy American Agencies

When a company provides a product or service, it has a right to expect to be paid on a timely basis. However, anyone who’s been in business a month or more has learned that prompt payment is not always the case. Often, accounts get seriously past due, or when payments are made, there are insufficient funds in the customer’s account to cover a check. Accounts not paid within terms can have a dramatically negative impact on the cash flow of a business.

1 Have a Defined Credit Collection Policy

One of the major causes of overdue receivables is that the business has not defined to its customers and staff when accounts are to be paid. If customers are not educated that accounts are to be paid on time, then chances are they’ll pay late or sometimes not at all. Make sure that your company’s terms of payment are clearly stated in writing to each customer.

2 Invoice Promptly and Send Statements Regularly

If you don’t have a systematic invoicing and billing system, get one. Many times the customer hasn’t paid simply because they haven’t been billed or reminded to pay in a timely manner. This situation usually occurs in smaller or newer businesses where they’re short on staff to invoice and bill.

3 Use “Address Service Requested”

One of the most difficult collection problems is tracking down a customer who has “skipped”. All businesses should be aware of a special service offered by the Post Office. Any statement or correspondence sent out from a business or professional office should have the words “Address Service Requested” printed or stamped on the envelope, just below your return address in the top left corner. If a statement or invoice is sent to a customer who has moved without informing you of their new address, and the words “Address Service Requested” appear on the envelope, the Post Office will research this information and return the envelope to you on a yellow sticker that gives the new address or other updated information. If the customer has placed a “forwarding order” with the Post Office, the Post Office is required to forward the envelope to the customer and give you a form #3547 with the new address and charge you approx. 50 cents. This will keep your address files up to date.

4 Contact Overdue Accounts More Frequently

No law says you can contact a customer only once a month. The old adage “The squeaky wheel gets the grease” has a great deal of merit when it comes to collecting past due accounts. It’s an excellent idea to contact late payers every 10-14 days. Doing so will enable you to diplomatically remind the customer of your terms of payment.

5 Use Your Aging Sheet, Not your Feelings

Many businesses (or well-meaning people on their staff) have let an account age beyond the point of ever being collected because he or she “felt” the customer would pay eventually. While there are a few isolated cases of unusual

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American Agencies News

© 2009-2012 American Agencies. All Rights Reserved.®

situations, the truth is that if you aren’t being paid, someone else is. So stick to your systematic plan of follow up. You’ll soon know who intends to really pay and who doesn’t. You can then take appropriate action once you know where you stand.

6 Make Sure Your Staff is Trained

Even “experienced” staff members can sometimes become jaded when dealing with past due customers. This usually occurs when they have made and broken promises for payment. Make sure the staff is firm, yet courteous when dealing with them. Your collection staff could benefit from customer service training because, in effect, they must “sell” your customers on the idea that you expect to be paid. Make sure that your collection staff is trained to not only bring the account current, but to also maintain good will with them.

7 Admit and Correct any Mistakes on Your Part

Sometimes customers don’t pay because they feel you’ve made a mistake. If you have, quickly admit it and correct it. Your customer realizes that mistakes can happen in business. Unfortunately, many customers believe that “the owner/president doesn’t need the money”. Denying an obvious error only fans the fire of resentment your customer may already feel.

8 Follow the Collection Laws in Your State

In many states, businesses are governed by the same collection laws as are collection agencies. For example, calling customers at an odd hour or disclosing to a third party that they owe you money are just a couple of the numerous collection practices that can cause serious repercussions. If you’re not sure, call your state’s department of finance which governs and monitors collection agencies.

9 Use a Third Party Sooner

If you’ve systematically pursued your past due accounts for 60 to 90 days from the due date, (and they still haven’t paid) you’re being delivered a message by your client. More

than likely, you’ve requested payment four to six times in the form of phone calls, letters and statements. Statistics show that after 90 days, the effect of in-house collection efforts wears off 80%. That means that the time and financial resources budgeted for collection efforts should be focused within the first 90 days where the bulk of your accounts can and should be collected.From that point on, a third party can motivate a customer to pay in ways you cannot, simply because the demand for payment is coming from someone other than you. Before paying a percentage to a collection agency, or using small claims court or an attorney, check into using a fixed flat fee collection service such as American Agencies has licensed offices nationwide, has the highest recovery rate in the industry, and charges a fixed fee of around $10 per account, regardless of the amount owed, or where the debtor is located.

10 Remember that Nobody Collects Every Account

Even by setting up and adhering to a specific collection plan, there are a few accounts that will never be collected. By identifying these accounts early, you will save yourself and your company a great deal of time and money. Even though a few may slip by, you’ll find that overall the number of slow pay and nonpaying accounts will greatly diminish, and that’s a victory in itself!

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Inside this issue:

Top 10 Ways to Improve Cash Flow P.1

The Magic of 3rd Party Collections P.3

Warning Signs P.4

Pass It On P.4

Tip of the Month P.4

The Magic of 3rd Party Collections THE PRIVACY OF MAIL IS LESS EMBARRASSING THAN A PERSONAL PHONE CALL. Although many businesses believe that personal contact is more comfortable, for a debtor the opposite is true. The only reason personal contact would be preferred by a debtor is when it is viewed as an opportunity to delay payment.

FIRST PARTY OUTGOING PHONE CALLS PRODUCE EXCUSES AND PROMISES. Phone calls are often viewed as less critical to debtors who feel they can “wait for the next call” to make a payment. When debtors realize a creditor is willing to make multiple calls before they are placed with a collection agency they will use that perceived “grace period” to stall payment (conditioning you) as long as they can. PERSONAL CONTACT RESULTS IN REPEATED DELINQUENCIES. Debtors remember your collection process. When they know you make several calls before placement with a collection agency they will take advantage of you. Using third party impact early will condition and train them to expect added costs and collection agency activity – which will lower the number of repetitive delinquencies. THIRD PARTY WRITTEN DEMANDS PRODUCE HIGHER RECOVERY RATES. When debtors realize they must take action to avoid legal implications and/or additional costs, a debt moves up their payment priority list. Collection agency demands have a greater impact providing higher results than first party internal efforts. THIRD PARTY DEMANDS ARE PAID BEFORE FIRST PARTY REQUESTS. The majority of the time debtors owe more than one entity (or they would be paying you). When they receive demands from a third party the written ones are seen as more urgent and most often are the first ones paid. WRITTEN DEMANDS PROVIDE A LASTING VISIBLE IMPACT (REMINDER). Phone conversations lose their impact and are usually forgotten. THIRD PARTY INVOLVEMENT TURNS THE TABLE. Causing the debtor to initiate contact with you in order to negotiate payment puts you in a better position. When they call you they are in a different frame of mind (calling to negotiate) than when you are chasing them. Because business initiated phone contact is seen as more dignified and comfortable (though it is not), your tendency is to be more lenient when you hear the many excuses they can use to stall payment -- extending payment arrangements instead of securing payment. TODAY’S TECHNOLOGY IS WORKING AGAINST YOU. With the prolific use of caller ID, voice mail, and answering machines it’s too easy for debtors to avoid your calls, causing repeated call backs and wasting your time. Studies show that the “get through” rate to debtors by phone is about 30% versus the dependability of the U.S. Post Office at over 99%. AMERICAN COLLECTORS ASSOCIATION RESEARCH. Studies by the ACA reveal that, after 2 or 3 personal contacts, “Internal Effectiveness” drops off significantly. After “Internal Effectiveness” drops off, third party involvement is the only effective solution.

“I have worked with American Agencies for the past 15 years. They have provided our organization with great collection services.”

“One area in which American Agencies performs above average is in their customer service. I rate their skills as excellent.”

For more information, contact us at:

(866) 961-9600

Or visit our website at:

www.americanagencies.com

American Agencies News

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February 2012 Volume 6 Issue 2

American Agencies News

© 2009-2012 American Agencies. All Rights Reserved.®

> > > WARNING SIGNS < < <WHEN TO PLACE AN ACCOUNT WITH A

3rd party collection service

1. DISCONNECTED PHONE OR CHANGED TO “UNLISTED”

2. BROKEN PROMISES - “THE CHECK’S IN THE MAIL”

3. YOU GET VOICE MAIL, ANSWERING SERVICE OR MACHINE

4. NOT AVAILABLE TO TAKE YOUR CALLS …… “IN A MEETING”

5. YOUR CERTIFIED MAIL RETURNED “UNCLAIMED”

6. NET 10 OR NET 30 TERMS, AND ACCOUNT IS 45-60 DAYS PAST DUE

7. PARTIAL PAYMENTS GETTING SMALLER8. MISSES PAYMENTS, REQUEST FOR

SMALLER PAYMENTS9. BAD CHECK NOT MADE GOOD WITHIN 3

DAYS. BANK HAS ALREADY 10. NOTIFIED THEM OF THEIR RETURNED

CHECK.11. MISSES 2 OR MORE PAYMENTS ON

REVOLVING ACCOUNT12. ADMISSION OF INABILITY TO PAY.13. SERVICE WASN’T PERFORMED

CORRECTLY…....DEBT DISPUTED

Many businesses will unknowingly set a trend with some new and old customers to become a possible problem in the future. This is done by overlooking smaller balance accounts to focus on the larger balances. If you are doing this, you are skimming your own accounts and allowing a negative payment pattern to develop, thus inviting these once smaller accounts to make bigger purchases with the intent of keeping the same terms as before . . . their terms instead of yours. Every account should be worked systematically and be billed on time regardless of the amount due.

PASS IT ONDo you know someone who would like to receive the American Agencies Newsletter? Call us at (866) 961-9600 with the individual’s name, company and company address.

The articles and opinions in this publication are for general information only and are not intended to provide specific advice or recommendations for any individual or business. We suggest that you consult your attorney, accountant, financial and/or tax advisor with regard to your individual situation.

All rights reserved, American Agencies Newsletter is published monthly for our clients and prospective clients. We welcome your comments and contributions.

TIP OF THE MONTH

Have a Well Defined Credit Granting Policy

Large corporations have well defined credit-granting policies. This alone reduces their losses from un-recoverable accounts receivable up to 50%. Most small to medium businesses do not have any policy other than using a check verification service. Following are policies, which most businesses should have:

• Invoice at point of sale• Signed credit application• Net 30 terms• Interest and/or collection fees added at 30 days past

due• Monthly statements• Phone call at 30 days past due• Turn over to collection agency at 60 – 90 days past

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