Is Hiring Debt Collectors a Superior Choice For Small Business?
Small and home-based businesses cannot escape the probability of dealing with unpaid receivables. Whether an uncollected debt is the result of authentic scarcity of funds at the customer’s end or her being a habitual defaulter, debts need to be collected on priority to avert loss to business. Business heads should have a sensible action plan to manage this problem effectively. Collection agencies are a viable option for small and home businesses without the required bandwidth and resources to collect outstanding invoices proficiently.
While a sporadic unpaid receivable can be adjusted in the business operating expenses, too many of such debts put pressure on the cash flow. If the total cost of the unpaid invoices is substantial enough to justify the cost of contracting out a collection agency, it is your best shot at getting your money from defaulting customers.
Strategies for choosing a collection agency
A debt collector will be working for you and it should respect your policies and customer service standards. The way clients see it, the collection agency is an extension of your business and any impressions they form will impact your customer relationships. Therefore, you should evaluate a few important points while picking out a collection agency, such as:
* Familiarity working for similar business size and type: Look for a collection agency that has worked with small and home-owned businesses and how they operate.
* Experience with collecting from similar businesses: A collection agency that has handled customers often seen by businesses of your size and type has a better probability of succeeding. Individual defaulters and business debtors are completely different and need dedicated handling.
* Skip tracing: Sometimes, customers shift houses without leaving a forwarding address or get their phone lines disconnected. Collection agencies include professional skip tracing services – accessing numerous databases – to pin down the whereabouts of evasive customers and remind them of what they owe.
* Collection tactics followed: Verify the collection agency’s collection tactics. If the agency has a good success rate from sending out letters to debtors, peruse them yourself to ensure it complies with the Fair Debt Collection Practices Act. In doing so, you safeguard your client relationships. Respectfully yet resolutely worded letter can get customers to pay the debt and also carry on doing business with you.
* Errors and omission coverage: Collection agencies and hiring businesses are insured from liability by the Errors and Omission insurance if disgruntled debtors go to court over the tactics employed to collect the debt.
* Licensing issues: The collection agency should have the legal right to collect debts in locations occupied by the debtors. Or the agency and your business may have to face charges of unlawful collection without a license.
* Collection agency charges: Debt collection agencies offer two pricing options – fixed fees or contingency rates. The contingency rate is a percentage of the total debts collected. It is recommended that you do some math with the collection agency’s success rate and contingency rate before picking the pricing option. Calculate the charges in both scenarios – fixed versus contingency, and select the one that falls more economical.
Bad debts weigh down every business but they can cause more damage to home and small businesses that do not have the necessary resources to keep them going when strapped for cash. Collection agencies are a rational choice as even after deducting their fees, you end up getting a sizable percentage of the collected amount.
Daljeet Sidhu. Read Collection Agencies advice. Compare Commercial collections quotes. Buy leads.
Invoice Factoring In Atlanta Is An Alternative To Business Loans
Invoice factoring in Atlanta has gone mainstream.
Once thought of as untraditional, tighter lending standards have forced businesses to take a closer look at how factoring — the process of selling a discounted invoice to a third-party — can provide operating capital with no loans, no banks and no debt.
Increasingly, it is thought of as a viable
alternative. Small, medium and large businesses use it every day.
Still, there is lots of mystery and confusion about it. Factoring has been used for centuries and is one of the oldest forms of financing.
There are many advantages, but for businesses that need quick cash, there is one main benefit: Factoring provides immediate cash to companies that can’t wait 30, 60 or 90 days for clients to pay their invoices.
Many businesses can’t wait, and need the cash immediately. That’s where factoring comes in. You get advance payment for the invoice. And now you have the operating funds you need to expand your business, meet payroll and cover other business expenses.
There are many reasons businesses use it:
*Get working capital
*Relieve stress from no-pay and slow-pay clients
*Fill more orders
*Increase sales with flexible funding
*Take advantage of vendor discounts
*Fund payroll and taxes
*Extend credit to customers on large orders
*Buy equipment or inventory on demand
The Differences Between A Factor And A Business Loan
It’s important to point out that this is nothing like a business loan. You don’t have to qualify; generally, there isn’t a concern about your credit, but rather the financial health of the customer paying the invoice.
That’s what makes this so ideal for small businesses. There is no debt, and the process is usually quicker at just 24 to 48 hours than a bank loan.
How Factoring Works
You produce two invoices; one invoice is sent to send the customer and the other is sent to a factor. The factor will pay you the pre-arranged advance amount on your invoice.
The customer pays your invoice and the balance of the payment is paid directly to you, minus a pre-arranged fee.
Is Factoring Right For Me?
To find out if it’s for you, answer these questions:
Would more working capital offset operating expenses?
Do you need cash to grow your business?
Has your business exhausted traditional financing?
Would better cash flow strengthen your balance sheet?
If you answered yes to any of these questions, factoring may be a viable solution to fund your business with no debt, no loans and no banks.
Michael Moss is president and CEO of MDS Funding LLC, which provides invoice factoring in Atlanta that helps businesses improve their cash flow.
For more information about how invoice factoring can provide your business with quick cash in as little as 24-48 hours with NO debt, NO banks and NO loans, visit http://www.MDSFunding.com, email [email protected] or call 866-394-4637.
Collection Agencies – Is Bad Debt Accumulating in Accounts Receivables? You Have Three Options
The current economic slowdown is compelling increasing number of businesses to hold on to payables as long as possible. Companies are delaying making payments to preserve funds for their own business operations. Studies have shown that payments delayed for long periods often go uncollected. Consequently, companies awaiting payments are becoming more vigilant in collecting payments from customers. If you have piled up bad debt on your books, you have three options.
1. Assign bill collection to in-house Accounts Receivables
If a payment is being delayed, the in-house Accounts Receivable (AR) department is assigned the job of collecting dues from the customer. It is in the interest of both customers and your business to share a good relationship. Customers want products and services from trusted companies and companies want continued sales to customers.
The AR personnel work out a payment plan with customers who are unable to pay on time for any reason. The AR personnel can take informed decisions on these accounts, as they know the customer and understand the business need. They also have the authority to withhold pending orders of these customers, to refuse new orders, and to warn them about possible legal action.
If the delinquent customers are still unresponsive, AR personnel can decide to call in professional collection agencies to collect the debt.
2. Hire a professional collection agency
The chance of a debt being recovered reduces with time. Non-payment or delay in payment of dues is costly to your business as it reduces your revenue. When it becomes apparent that a customer is not responding to invoices and payment reminders, it is time to consider using the services of a commercial collection agency.
Collection agencies offer professional services for collecting debt. They charge 15% to 50% of the collected debt based on the age of the debt and the effort put in to retrieve it. However, the actual amount of debt they will recover from the debtor cannot be ascertained in advance. The point of time at which you decide to pass the customer account to the collection agency is very crucial. The earlier, the better. Timely intervention of collection agencies results in higher collection at a lower cost.
It is not easy to decide when to call in a collection agency. You need to assess the best time for recovery of debt. Sometimes, a collection agency is called in when continued contact by the AR personnel is going to adversely affect the relationship with the customer.
3. Sell your debt to debt purchasers
Selling the debt to a debt purchasing agency is an option when your business is low in capital and needs funds urgently, or you do not have adequate staff to pursue bad debt collection. The upside of this is that you get your money immediately irrespective of the amount recovered by the debt purchaser at a later date. The downside is that the debts are priced very low in the market. However, if you had written off the bad debt, it is better to get some of your money than nothing at all.
Deal with those unpaid bills with a sense of urgency. If you ignore them for long, you may have to write them off. But if you take timely action and hire a collection service, the possibility of collection is reasonably high.
Daljeet Sidhu is at TradeSeam. Guide to call center services. Compare customer service call center quotes. Sellers JOIN for sales leads.
Outsourced Medical Billing – Do You Know the Key Performance Metrics for Effective Management?
A good Medical Billing Service has the remarkable potential to increase your collection rates by 40% or more. However, how do they do it? Good metrics are the key to effectiveness of a medical billing service. Like any high performing business, they measure their performance with dependable metrics.
Collecting medical bills is an onerous task. The billing rules are extremely complex, terminology difficult and the deadlines very strict. There is no single billing procedure that could be applied throughout the billing process. Additionally, the medical insurance companies are notorious for trying to avoid paying the bills. Due to such complexity, reliable metrics become even more important to optimize the medical bill collections
If you are considering hiring a medical billing service provider, carefully evaluate their performance measurement system, and the process used to respond to any payment issues or holdups that may arise for collecting the bills.
Following are some of the most important performance measurement metrics that an effective medical billing service should track and report to you.
* Gross and Net Collection Ratio
Gross collection ratio is the amount paid to the practice divided by the total charges billed. This does not include any write-offs. This ratio depends on the practice and the payer mix. A higher payer mix consisting of Medicaid and Medicare may result in lower gross collection ratio. It is best to compare this ratio to practices that are similar to yours. Net collections is the ratio of payments to charges after the adjustments due to write offs. For a high performing service, this ratio is typically over 90%.
* Days in Accounts Receivable
Time elapsed between billing and collection is an important metric to evaluate efficiency of a billing service. Number of days it takes to collect a bill depends on the medical specialties but a billing service can affect it by timely follow up with the payer and quick rectification of any issues that may arise.
* Percent of Bills Past Due
It is important to track past due bills. Billing service should report this as number and percent of accounts that are 60, 90, 120 days past due. It should have effective analysis process to troubleshoot the reasons for accounts falling in past due status. A good billing service would constantly improve upon its processes to shrink the accounts getting past due.
* Patient Liability
Percent of Patient Liability is the ratio of patient responsibility to total billed charges. This is roughly equal to the patient deductibles. This metric is important to track the effectiveness of the front office function since the co-pay is generally collected by the doctor’s office before the service is rendered.
* First pass pay rate
This indicates the percentage of filed claims that are paid without any need of follow up. Obviously, higher the percentage, more efficient is the medical billing service. This metric should steadily show improvement. Any dip in first pass pay rate is a red flag and should be properly investigated.
* Denial Rate
Denial rates tell you about the claims that required a follow up during a given period. Billing service should regularly monitor this metric and troubleshoot the causes of denial to keep the denial rate as low as possible.
Medical billing is just too complex, a convoluted process that makes it almost impossible to measure efficiency unless there are good tracking metrics in place. Additionally, it is important to respond quickly to any inefficiency or deterioration in performance. Therefore, in this digital age a monthly paper statement listing the performance metrics is not an acceptable means of reporting. An efficient medical billing service provides means to track these performance metrics via a web portal and promises continuous improvement in performance. Hire an effective and transparent billing service and you would definitely see an improvement in collections.
Daljeet Sidhu is at TradeSeam. Please see our guide to medical billing service. Compare medical billing services quotes. Sellers JOIN for qualified leads.
Debt Collection Service – Do You Know When and How to Hire
All organizations have some customers who delay payments or even avoid them. Unpaid dues or bad debt is an unavoidable problem for all organizations. However, for small businesses, bad debts can take on a nightmarish quality by reducing cash flow drastically. Restricted cash flow hampers the growth of the business. Collection agencies are an asset for all businesses as they are experts in the collection of unpaid dues from delinquent customers. They save you valuable time and money that can be used for business growth.
What Does the Collection Agency Do For You?
When you engage a collection agency, you have an agreement with them wherein they take on the responsibility of tracing the debtors and collecting the debt in accordance with the Fair Debt Collection Practices Act. Collection agencies have trained professionals who work for your business to recover debts at the earliest. You will pay a pre-determined fee to the agency for its services.
Timely Collection of Debts is Vital
Collection agencies follow a business model that motivates them to collect sooner rather than later. Time is of the highest priority in collecting debts. Ignore bad debts long enough, and the debt may never be recovered. A study a few years ago illustrated that the probability of collecting a debt decreases with time. Statistics from the survey show that the chances of the debt being paid are 73% after 3 months, 57% after 6 months, and only 29% after 1 year.
The When and How of Collecting Debts
Small businesses are hesitant to ask for unpaid dues too strongly. This is because they are not familiar with the rules and regulations of collecting debts. They are not clear on how and when to ask for payment that is overdue. Another reason for their hesitancy is the fear of losing future business with the customer. Here is what you could do. For small debts less than $100 send collection letters about five times and then hand over the account to a collection agency or write off as bad debt. For debts over $100, try collecting yourself about three times by writing a letter or making a phone call and then pass the account to a collection agency.
If all attempts fail, you can take legal action. However, it would be a good idea to conduct an asset assessment of the debtor to verify if sufficient funds can be recovered from them. You can also report the debtor to a credit rating agency.
How to Select The Right Collection Agency
The collection agency is conducts a service that has a huge impact on your customer relationships. It is very important to check out the performance record of the agency. The method used to collect debts should be professional, respectful to customers, and within legal bounds. Consider the following before making a hiring decision.
Industry Specialization: Collection agencies with experience working with small businesses are already familiar with the associated difficulties. If they are also familiar with collecting from businesses in your customers’ industry then it is a decided plus.
Collection Methods: It is important to verify the methods used by the agency to collect debts. The methods must conform to federal regulations. Besides keeping you safe from legal issues, this also ensures you maintain a cordial relationship with your customers.
Mode of payment: A collection agency can charge either a fixed fee or one on a contingency basis. It would be a good idea to do a fee survey across agencies as fees vary widely. Never compromise on the quality of the collection services to get a cheaper rate. The quality of the agency’s services will affect your customer relationships forever.
Collecting debts is arduous and time-consuming. Collection agencies offer professional services to handle this task efficiently. By reducing bad debts and enjoying good customer relationships, your business is bound to do well.
Daljeet Sidhu is Co-founder at TradeSeam. Guide to hiring a collection agency. Compare collection services quotes. Sellers JOIN for sales leads.