Collections

Senior Living communities are under tremendous pressure to improve cash flow and collect money from unpaid invoices from patients or their guarantors. Covid-19 pandemic snow-balled the problem since many patients/signers experienced a loss of income and could not make payments on time. Additionally, senior living communities, in particular, were forced to follow one of the highest standards of Covid-19 compliance since many seniors lost their lives in nursing homes and senior living centers.

Due to the industry’s very nature, the staff of senior living centers can apply only so much pressure, beyond which they risk the reputation of the center. Forwarding accounts to a collection agency after 90 days of delinquency is a great way to collect unpaid bills.

Collection agencies specializing in senior living debt collection know the very nature of business and use a friendly yet diplomatic approach to recover money cleverly.

Even though collection agency charges a percentage of what they collect, however without their intervention, the entire amount will have to be written off. As the account ages, the probability of successful recovery goes down; therefore it is highly advisable to transfer accounts to a collection agency before 180 days.

No matter what type of business an organization is and what it does, the most important part of the business is getting paid for the work done.

For small businesses, this is even more important. Small businesses usually operate on razor-thin margins and depend on their cash flow in order not just to grow but to survive. A bill that has not been paid within 2 months despite multiple reminders will likely go unpaid without professional help. There is a 90% chance that you will see a complete loss on these accounts. This is because your in-house employees cannot beat the recovery rate that can be achieved by professional debt collectors. A collection agency will systematically collect your outstanding AR using “Written Demands”, “Verbal Demands” or “Filing a Lawsuit”, or a combination of all these services.

If your business is being hurt by past due accounts receivables, here is what you need to know. Depending on how old your unpaid bills are, here is a simple chart that suggests which collection agency service should be used.

Service Options & Our Fees

Depending on how old your accounts are, we recommend one of the following two options.

Option 1: (Contingency only collections)
Most popular – A professional debt collector calls your debtor multiple times

There is no upfront fee. We do not make anything until we collect. You keep 60% of the amount collected, we keep 40%. This service is recommended for accounts that are between 120 days and 3 years past due, regardless of the balance.

Option 2: (Flat-fee collections) Written Demands

This service requires you to buy a batch of accounts in advance. We send 5 attorney-approved written demands to your debtors under our name every 10 days. This service is most effective when your bills are less than 180 days past due.

Unpaid Bills and Small Business

Debt and unpaid bills are a major problem in America that not only affects consumers but businesses as well. About a third of all Americans have a debt that is has gone so far past due it is currently in collections. This represents over 75 million people. These unpaid bills range from as little as $25 to as much as $100,000 or more. The average amount that is delinquent / past due is around $5,000.

Obviously, the amount of past-due debt varies by company and industry but overall, the average small business has over $80,000 in unpaid invoices and a whopping 81% of those are at last 30 days past due. When this happens, small business owners face several challenges. These include not being able to hire more employees, buy new equipment, or do the marketing they need to grow. In more dire circumstances it can mean not being able to buy inventory, the owner and/or the employees taking a pay cut, job cuts, and ultimately, business failure.

Avoiding Unpaid Bills

Before it gets to a point where crucial functions, salaries, or jobs need to be cut, there are a few things that small businesses can to help avoid unpaid bills. While these methods aren’t foolproof they can help minimize your risk.

• Have a policy in writing

One problem many small businesses face in many aspects of their business is not having a defined, written policy on things. This is as true for credit and debt collection as any other function of the business. Having a written policy about how you offer credit and how your business goes about collecting past-due bills will help enormously.

• Have Tighter Credit Policies

Depending on the type of company and the industry, many businesses have no choice but to offer goods or services on credit. What you do have a choice in though is how much you offer and what kind of investigation you do into a client before offering credit. If you struggle with unpaid invoices, making it harder for everyone to receive credit from your company should help minimize past due accounts.

• Hire a Debt Collection Agency

Once an account goes 30 – 120 days past due, it may be time to hand that bill over to a professional. As good diligent as you and your company might be about trying to collect, you will never have the time, systems, or expertise that a professional debt collection agency has. They will have a much better chance of recovering what you are owed than you will.

Hiring a Small Business Debt Collection Agency

When hiring a debt collection agency for your small business, there are a few things you want to look for. Here are the main things to consider.

• Reviews and Reputation

The first thing you want to find out is if the debt collection company is reputable and ethical Remember, the collection agency you use will be a reflection of your business. Using one that is overly aggressive or unprofessional will come back on your business.

• Licensing, Insurance, and Compliance

The rules and laws governing debt collection agencies can vary slightly state by state but in general, you want to make sure that the company you use has the appropriate licenses and insurance and is compliant with all local and federal debt collection practices.

• Fees

Check out exactly how the company gets paid. There are a few different ways this happens and while none is inherently better than the other, one way might make more sense for you and your business than another. The main ways these companies get paid are by flat fee, by taking a percentage of the money collected, or by buying the debt outright at a discount.

A business is defined as an entity that provides goods or services to another entity in exchange for money. While the definition is simple, there are so many different types of businesses. There are huge corporations with millions of employees and sole proprietorships that are made up of a single person. Some businesses have tons of customers located all over the world while others may have just one or two clients. There are businesses that sell easily definable products while others get paid for providing many harder-to-define services.

Written by Todd Hines – todd.hines@kinum.com
(Regional Business Development Partner, Kinum)

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 may be 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 explained to its customers and staff when accounts are to be paid. If customers are not educated that their 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 may be short-handed on staff needed for timely invoicing and billing.

(CONNECT STEP 1, our 1st Party REMINDER service, done in your name, can help with this!)

3. “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 that the US Postal Service offers. 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,” we suggest that you check with your local Post Office to see what additional options you may have for follow-up. This will help you keep your address files up to date.

4. Contact Overdue Accounts More Frequently

There is no law that says that you may only contact a customer 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 Summary Report, Not your Feelings

Many well-meaning businesses owners (or staff members) have let an account age beyond the point of ever being collected because of the “feeling” that the customer would pay eventually. While there are isolated cases of unusual situations, the truth is that if you aren’t being paid, someone else is. Stick to your systematic follow-up plan. You’ll soon identify who really intends to pay and who doesn’t. You can then take appropriate actions.

6. Make Sure Your Staff is Well-Trained

Even “experienced” staff members can sometimes become jaded when dealing with past due customers. This usually happens when debtors have broken promises for payment that have been made previously. Make sure the staff is firm, yet courteous when dealing with them. Your entire 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 both, bring the account to current status, while also maintaining “good will” with the client base.

7. Admit any Mistakes on Your Part and correct them ASAP

Sometimes customers don’t pay because they feel that 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 or president “doesn’t need the money.” Denying an obvious error only fans the fire of resentment that your customer may already feel.

8. Follow all Federal and State Collection Laws

In many states, businesses are governed by the same collection laws that regulate collection agencies. For example, calling customers at an odd hour or disclosing to a third party that the debtor owes 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, in-house collection effort loses up to 80% of its effectiveness. That means that the time and financial resources budgeted for collection efforts should be focused within the 1st

60-90 days, when the bulk of your accounts can and should be collected. From that point on, a 3rd party can motivate your client to pay you in ways that you cannot, simply because the demand for payment is coming from someone other than you. Before paying a contingency collection agency, an attorney or using small claims court, why not explore using a fixed flat-fee collection services.

KINUM offers CONNECT STEP 1 (our 1st Party Reminder Service) & CONNECT STEP 2 (our 3rd Party Service) for a Fixed Flat-fee of about $15 per account, regardless of the amount owed, or where the debtor is located in the U.S.!

COLLECT STEP 3 is our contingency service.

10. Remember that Nobody Collects Every Account

Even by setting up and adhering to a specific collection plan, there will still be 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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About the author:
Todd Hines, Regional Business Development Partner is available to answer your CASH FLOW questions. He has MORE tips on how to increase cash flow by making the best payment arrangements with your customers, along with providing your team with a special “script” to follow to get you paid faster! He will also give suggestions on what to look for when choosing a collection agency and what choices you have for recovering your delinquent accounts.

Todd is available for workshops for Rotary Clubs, Business groups, Chambers of Commerce and Trade Associations. There is NO FEE. He will also be happy to offer an accounts receivable analysis for business owners & medical practices ~ FREE of CHARGE!

Please call: 440-823-0074
todd.hines@KINUM.com
http://kinum.com/todd-hines/