Debt Recovery

Collecting debts is one of the most difficult parts of running a business, especially a small business. Cash flow is important for a company’s vitality. When customers don’t pay, the negative drain on a business’s finances can spill over into other areas, restricting growth and potentially delivering a fatal blow to a struggling company. One of the scariest parts of collecting debts is navigating the bankruptcy process once a business is notified about a debtor’s bankruptcy filing. Part of this process involves understanding the difference between Chapter 7 and Chapter 11 — two of the three main bankruptcy proceedings that can come into play in debt collection.

Understanding how bankruptcy works

Bankruptcy is a legal proceeding to eliminate, modify, and manage debt. In most cases, a debtor (someone who owes money to another) voluntarily files bankruptcy to obtain protection in the debt collection process. Bankruptcy filings can also be involuntary where creditors request that a person or business enter a bankruptcy proceeding, but this is relatively rare. This component, however, illustrates how bankruptcy is not necessarily a bad thing for creditors, as a bankruptcy proceeding can provide the structure for repayment of debts in many cases. The key to understanding how the bankruptcy of a debtor affects your business is knowing the purpose of different bankruptcy chapters.

Chapter 7: Liquidation

Chapter 7 bankruptcies are liquidations. That means that the purpose is to get a fresh start for the debtor. Chapter 7 involves selling all of a debtor’s non-exempt property (things that a debtor is allowed to keep during insolvency). The sales proceeds go towards paying off debts, following a priority system established in a combination of federal and state laws. If the debtor is an individual (and not a business), there is a system of qualification for filing that must be completed. This “means testing” is intended to weed out individuals who might not understand the bankruptcy process or those who have sufficient assets to pay some or all of their debts.

For individual debtors, it’s common to see filings under either Chapter 7 or 13 of the Bankruptcy Code. Unlike Chapter 7, which is intended to zero-out all “dischargeable” debt, a chapter 13 filing anticipates a repayment plan. Sometimes chapter 13 filings are referred to as “wage-earner” bankruptcies, with the idea that a debtor has gotten in over their head in debt, but need assistance restructuring the debt to allow for the repayment of some or all of the obligations.

If a debtor is a business, chapter 7 is a path for dissolving the business entity and discharging obligations. But, sometimes a business debtor, or an individual who operates a business, might want to keep the business going while restructuring debt. Another chapter of the bankruptcy code permits this course of action.

Chapter 11 Bankruptcy: Reorganization of Business Debt

Chapter 11 is generally the path for business debtors to obtain relief from certain debts, while continuing to operate their business. Chapter 11 often involves a corporation, partnership, or other business entity as the debtor, but an individual can also use this chapter to propose a plan of reorganization to keep a business alive while paying creditors over time. Under chapter 7, certain non-exempt property becomes the property of a trustee for liquidation purposes. For example, if an individual files for protection under chapter 7 while having a large sum of cash reserves in the bank, such as $10,000, the bankruptcy trustee will take control of the cash and distribute it to creditors. Under chapter 11, the debtor becomes a “debtor in possession” and owns and manages assets of the business, much as a trustee would.

How Creditors Should Proceed

If your business received notification that a customer or other party that owes your business money is the subject of a bankruptcy proceeding under chapters 7 or 11, there are a few key steps for ensuring that you are protected to the fullest extent of the law. The notification will usually be in the form of a notice of filing received in the mail. It is crucial to know that bankruptcy filing creates an “automatic stay.” This is a legal concept that halts collection most collection activities directed at a debtor. It will stop, at least temporarily, your ability to collect. If you are suing a debtor in state court, your lawsuit will be halted. The automatic stay happens immediately upon filing, so even if you don’t yet know about the filing, it may affect your activities regarding the debt.

Because of the automatic stay and potential liabilities for violating it, businesses should consult with legal counsel about how to proceed in the bankruptcy action. There are methods for lifting the stay, such as in the case of enforcing certain liens, such as a mortgage lien.

It is important for a business to make sure it can substantiate the amount owed, as documentation and payment records may be scrutinized in bankruptcy court. Creditors are also allowed to obtain information directly from the debtor in a meeting, called the meeting of creditors, where the debtor must appear. While many creditors skip attending these meetings, it can be a source of information on how to best get paid.

In addition, creditors should obtain a full copy of the bankruptcy petition. There may be information contained in the filing that is inaccurate and contradictory to your records. As a creditor, you have the ability to object to the discharge of debts under certain circumstances.

While bankruptcy may seem like a scary topic for business owners, it can light a clear path to repayment. With some understanding about the process, business creditors can quickly determine the effect of the bankruptcy filing and protect their rights.  

If you are looking for a debt Collection Agency: Contact us

Receiving payments from clients is a crucial part of creating and maintaining positive cash flow in any business. However, a business income stream can quickly get out of balance when clients – whom you’ve delivered top-notch work in a timely and professional manner – decide not to pay their invoices.

When clients cannot settle their accounts, the business makes less profit, incurs losses and may even have to raise prices to break even. If there are too many delinquent accounts, reaching your break-even point might become a struggle.

Unfortunately, when most clients are having financial trouble they most likely will not disclose this fact to the companies they are doing business with. Instead, they just refrain from paying their invoices. In this article, I’ve put together a list of 12 telltale signs that your client is under financial distress.

1. There’s no contract in place.

It is pertinent to have a contract in place when working with clients. A contract is a binding agreement that holds the client liable to pay all funds they owe a business. Furthermore, a contract is advantageous should you decide to take legal action against non-paying clients.

2. The Client wants to use checks as its sole payment method.

For a business, accepting multiple types of payments is beneficial and aids in getting paid faster. Companies should, therefore, be wary of clients who demand to use checks as their sole means of payment. Paper checks give clients who had no intention of settling their account leeway to be fraudulent since paper checks allow clients to establish their grace period or keep writing bad checks. This means that you will probably never receive your money.

3. Inconsistent payments and deadline extensions.

One of the most obvious signs that your client is having financial trouble is that their payments become inconsistent and they are constantly asking for deadline extensions. You may find that you are starting to receive only part of the payment of your invoices on one date and the remaining parts on another date. This is usually a clear sign that your client is having financial trouble.

4. The company is becoming contentious.

Healthy cash flow is what keeps every company afloat. Clients who are experiencing financial stress will do anything to survive, including becoming contentious. They might look for any excuse to not pay up or complain about your service for no reason at all. In actuality what they’re trying to do is delaying payment or even completely avoid payment to ease their financial stress.

5. Fishy contact information or becomes unreachable.

Perhaps the worst type of non-paying clients is the crooks whose intentions were to not pay you from the start. These are the types with unprofessional or spammy looking email addresses or are constantly changing numbers to become unreachable to people they owe. 

6. The checks keep bouncing and changing banks.

One surefire red flag is when clients keep changing banks, and their checks keep bouncing. It is not unheard of that a check sent by a client bounced or that they switched bank once in a while, however, if that keeps occurring it is a good indication that they are in financial trouble and cannot settle the account.

7. No accounts payable contact person or department.

If your client is a solopreneur or small business, they probably don’t have an accounts payable department. This can be a concern since your bill can become a low priority to them. It is therefore always best to make sure you’re dealing with a real company that will not sway from paying their bills on time by having an ironclad contract on hand.

8. Profits are plummeting or layoffs.

For a company to survive long term, it needs to be profitable, thus you need to keep a watchful eye on your client’s profit margin. This can be difficult to spot, but one surefire way to tell is if the company is constantly laying off staff. You can also look for other evidence such as the profit-margin ratios of what might be happening to profits to get a glimpse of your client’s profit margin.

9. Declining reputation or a bad news/scandal in the company.

How many big names and long-established businesses have we’ve seen fall because of a bad reputation, continuing bad press or a damning scandal in the company. Nowadays people no longer share their displeasure with a customer service department; they vent on social media for thousands to see. Bad press and scandals will tremendously affect a company’s reputation. As a result market shares can decline, which will lead to financial difficulties and the increased risk that they won’t be able to pay invoices on time.

10. Making repeated and inconsistent excuses

If you have a client that repeatedly makes excuses and is constantly asking to extend the deadline, then there’s a good chance that they’re experiencing financial troubles. It is best to stop working with this client immediately.

Key points to keep in mind to ensure that your invoices are paid

To ensure that your invoices are paid, there are three key points you should keep in mind at all times:

1. Be selective about your clients: before you start working with a client, it is always best to do a background check to spare yourself the unnecessary headache if it turns out that the client is experiencing financial distress.
2. Always request a percentage upfront: One way to vet your clients is by requesting to receive a percentage of the payment upfront. Most companies that are financially stable won’t object to this request.
3. Take legal action: If all else fails and your client still turns out to dodge what they owe you, You can always take legal action.

Conclusion:

When working with clients, your priority is to get paid as much as you can as quickly as possible. Check the above-mentioned list to find out if a company is experiencing financial trouble or not. Remember, sometimes, taking a reduced amount now could be a better option than hanging on for full payment later, which never arrives.

Accounts receivables (AR) are the lifeblood of your company. They are the positive end of the cash flow cycle and are necessary for paying bills, salaries, and your own creditors.  It also tends to be one of the largest assets a company owns.

Managing your AR effectively can help smooth out your finances and keep your company healthy and growing. However, there are a number of issues that can prevent your accounting department from collecting outstanding receivables properly.

The overarching problem that all AR teams face is accounts that don’t pay on time or don’t pay at all. But this is frequently a symptom of more specific, underlying problems in the management of your accounts receivables. Fixing these common problems will often lead to more consistent payments.

When attempting to fix any of the problems below, it’s important to remember that any solution must be applied consistently in order to be effective. Selectively applying policies or only following best practices when it’s convenient is a surefire way to fail.

Collecting On Invoices Takes Too Much Time

If your AR management team finds they spend too much time chasing down customers and helping them make payments, you may have a couple of issues that can be improved.

For one, it’s possible that you aren’t offering enough ways for your customers to pay you. If the limited payment methods you accept don’t align with the ways your customers want to pay, you’re certain to encounter problems.

So make sure you offer the full complement of payment methods available today, including credit cards, checks, direct bank account debits, digital services like PayPal, and mobile payment apps like Venmo.

You also want to collect payments digitally, and automatically, so that your AR teams don’t need to be involved. Embedding payment options directly inside of a digital invoice is the best way to handle this. Additionally, this makes things simple for your customers, which increases the speed with which they’ll pay.

Customers Complain They Aren’t Given Enough Time

Many companies pay their invoices at specific times each month. If they pay twice a month, they might choose the 15th and the end of the month. Payments made once a month could fall at the beginning, middle or end, and this date can be different from customer to customer.

The problem faced here is that your invoice releases may not align well with their schedule. Your terms might be Net 30, but if you send an invoice on the 20th and the customer pays at the end of the month, they may feel they only have ten days to pay you. If they opt to pay you at the end of the next month, they’ll wind up paying late. You may even decide to impose a late fee.

While it’s unreasonable for customers to think you can sync your invoices to their preferred payment window, you can help them by sending out invoices as soon as possible. Accounting software will generally help you automate the creation and sending of invoices, but you can also create an internal process that generates the invoice immediately upon delivery of the product or service.

Sending invoices digitally helps this situation by making invoices quicker and easier to submit and it saves them time, rather than waiting for the postal mail to arrive.

Getting Payments and Invoices to Match is Time Consuming

If you’re still manually matching payments to invoices, you’re wasting a lot of effort. Most advanced accounting packages can handle this labor-intensive task for you

Particularly when you invoice digitally and include direct access to a payment portal, you can control the flow of information between the payment source and your accounting software. This can help assure that each payment that’s made is tied to a specific invoice number for easy matching.

If you aren’t ready to automate your process digitally, there are still steps you can take. Make certain that every customer has a unique customer ID and tie that ID into your invoicing system, creating an invoice number for each invoice you send. Your invoice number might include the year, the client ID, and then a string of numbers that increments by one with each invoice. For example, the first invoice for your customer ABC Tech might read, 19ABC0001.

Make sure that clients include that invoice number with any payments they make. You’ll be able to immediately identify the account the payment belongs to and track down the matching invoice.

Invoices Missing Information

Some large companies require specific pieces of information on the invoices they receive, and when it’s missing or misformatted, payment delays can result.

For small businesses, it can be extremely challenging to generate custom invoices this way. Not only is it difficult to remember the specifics for each invoice version, but it’s also hard to keep multiple versions of your invoices on hand.

Invoicing software is the best way to solve this problem. You can create invoice templates that are specific to each customer that requires custom invoices. This way you do the work once and then rely on the software to keep everything straight for you.

Invoices Aren’t Getting to the Right People

Employees come and go. Businesses move locations. Departments shift between offices. Over time, the people, places and email addresses you’re sending your invoices to may change, and invoices that once got paid quickly might stop getting paid at all.

Using a CRM package to keep track of all of your customers can be a good way to make certain your contact information is kept up to date. These have tools built-in to help you keep up with the right decision-makers and billing contacts for each company you do business with.

Delinquent Accounts

No matter how good your invoicing practices are, some customers will always pay late. It’s likely that they’re exercising cash flow management on their end. But they might also be serious defaulters. The best way to deal with these customers is to build reminder automation into your collections process.

Either schedule reminder letters to be sent for each invoice you send, or better, create rules in your accounting software to send these letters at regular intervals for you. You can sculpt the language of the letters ahead of time. Just make certain that the reminders start out friendly and get progressively more demanding with each iteration. At some point, you need to decide whether severing the relationship with your client is better than the loss that they are causing. Always involve a debt collection agency if your bills are 90 days past due and recover money in a legal complaint way.

Phone calls are certainly warranted if an invoice becomes significantly overdue, but the more that you can leave your collections to your software, the more time you’ll have to solve other AR problems you’re facing.

If you need a Collection Agency to help you recover money from overdue accounts: Contact us

 

Patients requiring emergency treatment or ambulance services often see their financial condition deteriorate very quickly because of large medical bills that follow after things settle.

The biggest mistake which most ambulance services make is relying on their own accounting staff to send reminder invoices or make calls to patients, which are quite ineffective if a patient does not settle his bill within two months. Such patients are likely piling up additional medical bills. Not transferring such accounts within 2-3 months to a professional medical debt collection agency can be a huge mistake that many emergency care service providers make.

Need a Collection Agency for unpaid Ambulance Service bills? Serving Nationwide: Contact us

Sending low-cost Collection Demands through a collection agency once an ambulance bill has been due for over 60-90 days can tremendously reduce delinquencies and improve cash flow. Shifting to more intensive collection efforts like “Collection Calls” and “Legal Action” is recommended after a patient has not paid for more than 180 days. In most cases, patients will clear bills during the Collection Letters service itself because they very well know that Collection Agencies will soon start making calls or sue the debtor in court if bills are not paid quickly. It is never too late to hire a collection agency that has expert debt collectors specifically for the healthcare industry.

Every year, about 240 million people call 9-1-1 in the U.S. For most of these calls, an ambulance is dispatched to the scene in order to provide immediate medical attention. Patients and medical professionals alike are indebted to these services, which means that they should be paid appropriately and on time. But do you know how ambulance services collect patient payments?

Yes, the billing company has a right to send the case over to a collection agency. If the patient is unable to pay at once then it’s better to carve out a payment plan with him.

The process is relatively simple and strategic, and the job is usually assigned to an EMS bill company. However, not all billing companies are concerned about timelines. Neglecting to send out billing information for services rendered by EMS professionals hurts the response team, the hospital, the patient, and even the taxpayers. That’s why it’s vital to ensure that your billing or collection agency is following these three steps for collecting patient payments for ambulance services.

Step 1. Double Check The Bill

Ensuring that your patients are receiving the appropriate bill is going to save time and hassle on everyone’s end. For this to happen, your billing company needs to check and double-check the status of the remaining bill after it’s been through the initial steps.

Insurance Payment

A reliable company will do some background checks to make sure that the insurance company has paid out the proper amount. If the numbers are wrong, it’s your patient who is going to get frustrated, and it’s you who they will be calling to demand an explanation. A hands-on billing company will make sure that the distressed patient is at least getting the correct billing information.

Spelling, Contact, and Coding

Another thing that should be checked is for any typing errors within the bill. A seemingly minor error can lead to denials or claims, meaning that the 911 provider will be delayed in receiving payment (if they get it at all). Your billing company should be diligent in making sure all information is correct before sending it out to the patient.

Step 2. Five Day Bill Day

Speaking of sending out the bill, ambulance services can collect patient payments at any time. Ideally, however, your billing company should have the bill squared away with the proper information within five days. If you’re working with a company that is continuously sending out patient bills for ambulance services weeks or months after the event, you should consider switching agencies.

Step 3. Follow-Up

Once the bill has been sent out to the patient, it’s up to your EMS billing to follow up on payments. Most patients aren’t likely to pay this bill as soon as they receive it. However, your company’s standard procedure should include follow-ups. This shouldn’t be a problem if they have a fully-geared accounts receivable report (that they update regularly).

Here is a list of follow-up procedures your company should be providing:

Bill Received: Confirmation and date that bill was sent out and date patient should have received it.

Follow-Up Communication: Every call, email, or reminder bill that your company has issued to the patients as a reminder for payment (AR report).

Claims and Denial Listings: Any claim or denials in the process that has caused a delay in payment of the ambulance services.

Days To Payment: Medicare reimbursement should take no longer than 14 days, while commercial insurance companies should take less than 45 days. If their estimated time of payment from insurance providers exceeds those numbers, it’s likely that their follow-up process needs some work.

When deciding to work with an EMS billing company, you need to set strict expectations. Ask to see an example of the AR reports, asking about payment estimates, and also be sure to enquire about their collection percentages. And remember, if their services seem too good to be true, it probably is.

Still no luck recovering your money?

When a patient has failed to pay for 90 days despite all your efforts, hire a Debt Collection Agency without wasting more time.

Collection Letters Service of Collection Agency

Upfront cost for 5 Collection Letters is about $15 per account. Debtors pay directly to you, no other fees. Low-cost option. Good for accounts less than 120 days past due.

Collection Calls Service of Collection Agency

Contingency fee only. No upfront or other fees. Agency gets paid a portion of money they recover.  No recovery-No fees. Best for accounts over 120 days. A debt collector calls debtor many times. If everything fails, a possible Legal Suit is recommended by the attorney.

If you need a Collection Agency with experience in your area: Contact us

For manufacturers, proper management of accounts receivable is a vital part of their business.

Manufacturers often sell their products to retailers or other businesses on credit. If these businesses delay payments or default on their debts, it can cause significant cash flow problems for the manufacturer. When customers fail to pay their debts entirely, manufacturers may need to write off these debts as losses. This can have a significant impact on the manufacturer’s financial performance. Therfore forwarding accounts to a collection agency is extremely important.

Need Collection Agency for manufacturing companies? Contact Us.  

Without a clear receivables management strategy, they will be stuck with too many unpaid bills and if this continues, they won’t be able to pay suppliers or employees on time. Receivables not paid on time can create severe cash flow issues for any manufacturer.

Small business owners and even large factory owners are often forced to take a bank loan and pay interest on it, just because their customers aren’t paying on time. Slow-paying customers are more likely to become delinquent. It is important to get your money back promptly before they completely stop making payments or file for bankruptcy.

Collection Agencies have been helping manufacturers to recover money from past-due accounts for decades. Good collection agencies can handle both Consumer Debts (B2C debts) and Commercial Debts (B2B debts). It is crucial to select a cost-efficient collection agency with nationwide coverage and employs well-trained debt collectors who recover money diplomatically, amicably, yet firmly.

Debt Collectors and Attorneys especially dealing with Commercial accounts, take great care to ensure that business relationships between the manufacturer-customer are not broken. Of course, any customer would not be too happy when he comes to know that their account has been transferred to a collection agency because he knows that Collection Agencies will take all legally acceptable measures to ensure that the debt is recovered. All those excuses they have been giving to the original creditor (manufacturer) will not work anymore.

While manufacturers work on expanding their business and perform core business activities, Collection Agencies work as an extension to recover money from accounts that would have gone red otherwise.