Is your cash flow stuck in reverse?
Does your bank statement remind you of the days you used a piggy bank? Do you need a pile of cash? If so, you might consider using an agency to collect your outstanding receivables.
1. Cash Flow: A sale is not complete until the money is in the bank.
2. Cost: Fees are contingent. There is no charge unless we collect.
3. Opportunity Cost: Think of what you can do and the money you can make rather than chasing your delinquent customers.
4. Third Party Effect: Now your customer knows you mean business!
5. Trained Collectors: Commercial collection agencies know how to collect your money.
6. Motivated Collectors: Collection agencies don't get paid until they collect!
7. Litigation: Our attorneys can sue almost anywhere.
8. Credit Reporting: Many commercial collection agencies report placements to a credit bureau.
9. Assurances: Some commercial collection agencies are certified and have an A+ rating with the Better Business Bureau.
10. Client Relations: Collection agencies can approach your customers diplomatically at first and then turn on the heat as needed.
If your receivables are a problem, you need help from a professional, and the sooner the better:
The actions of your business collection agency reflect upon your firm. How can you be sure your agency will represent your firm ethically and legally?
If you are searching for a business collection agency, you have many factors to consider.
- How can you tell if an agency is qualified to handle your collections?
- Can the agency be trusted with your funds?
- Is the agency certified by the CCAA?
The Commercial Collection Agency Association (CCAA) is the largest of the two self governing bodies of the US commercial collection industry. The compliance officer of the CCAA, Emil Hartleb, recently wrote an article about a call he received from a disgruntled credit manager. The caller had a problem with a business collection agency his firm was using. At the very least the firm was misrepresenting itself. According to Mr. Hartleb, “There seems to be a rash of these conversations lately, perhaps because of the state of the economy.” Unscrupulous agencies will say and do anything to get your business. Unfortunately, the CCAA has no jurisdiction over non-member agencies.
You can protect your firm by using certified member agencies of the CCAA. Read the full article and learn more about what it means to be a certified member of the CCAA.
At what age should you place an account with a commercial debt recovery agency?
Have you ever heard the expression “low hanging fruit”? It refers to the ease of picking the fruit from the lower branches of a tree rather than thos
e in the upper branches. A comparison can be drawn between collecting money on an account that has aged less than 60 days past its due date and the “low hanging fruit”. You have a much better chance of collecting your accounts while they are still “low hanging fruit”.
We encourage our clients to focus their efforts on collecting their accounts within the first 60 days of aging. Once it reaches 60 days past due, place the account for collection with your favorite collection agency. Placing you accounts earlier will:
The Commercial Collection Agency Association (http://www.ccaacollect.com/index.html) has done studies that illustrate how much more difficult it is to collect an account as it gets older. Download the Age vs Value Calculator and your will find a $20,000.00 invoice is 81.3% collectible once it has aged 60 days. That means it is worth $16,260.00. That is bad enough, but the same account that is 6 months past due has a collectability of only 52.1%, or a value of $10,420.00. The value/collectability of the account is reduced by nearly 30% in just four months. Clearly, an older account is more difficult to collect and more likely to be returned by your collection agency as uncollectible. If you have past due accounts older than 60 days, I urge you to place those accounts now.
Don’t be afraid to demand payment from your customers when the account first becomes past due. What good is a customer if they don’t pay your invoice?
“A sale is not complete until the money is in the bank”
Thinking about filing a lawsuit against a business to recover a bad debt? Here's a quick look at the advantages and disadvantages to litigation.
Among the advantages:
• It brings the matter to a head. Your debtor must decide to contact you to resolve the issue or allow judgment to be entered.
• You can begin post judgment remedies such as garnishing a bank account.
• The judgment becomes a matter of public record adversely affecting your customer's credit.
Among the disadvantages:
• It can be costly and can include court costs, commissions, suit fees or even hourly fees.
• You might have to defend a countersuit, although that very rarely happens.
• It can be confusing. The process of filing the suit, getting judgment, and executing on that judgment requires expertise and must be managed properly.
So, when deciding whether or not to sue, many factors play into your decision.
• The amount of the account – suing smaller balances may be emotionally satisfying, but your time is better spent elsewhere.
• Where to sue? Can I sue locally or must I sue in my customer’s jurisdiction?
• Do I need an attorney, and if so, which attorney?
• Is the customer still in business, and if so, what is their corporate status?
• Have they recently filed bankruptcy?
• Do they have attachable assets?
• Are there outstanding judgments or UCC filings?
To sue or not to sue requires a lot of thought, research and direction. I highly recommend you seek the assistance of an experienced business to business collection agency certified by the Commercial Collection Agency Association of the CLLA. The agency may be able to collect your account without going to the added expense of hiring an attorney. They can give you the necessary guidance to make the right decision.
Commercial Collection Agency Association
We recently responded to a question posed in a credit and collections group in LinkedIn. The question was how can you execute on a judgment without specific knowledge of attachable assets? She asked if we could somehow attach the debtor’s receivables. The answer is yes, you can. But it requires an expert. She had used an attorney that does not specialize in commercial law to obtain a judgment. He had little or no experience in executing on a judgment. What good is a judgment if you can't turn it into cash?
You need an agency that specializes in commercial collections to manage the process. A good agency can help you decide if suit is worth the time and money before you litigate. If we sue, do we have a reasonable chance of success? Can we expect the debtor to file an answer or countersuit? Should you sue where the debtor is located or where you are located? If we obtain a judgment, how do we recover our funds? What are the real costs of suit and are any of them refundable? A good commercial collection agency will partner with you to collect the account without the added expense of legal action first. If they are unsuccessful, they will forward the account to an attorney in the area where you should litigate the matter, help you decide if suit has a reasonable chance of success, and assist in locating attachable assets.
All too often we encounter credit/collection managers insisting an account is collectable because they have a personal guaranty signed by the principal of a defunct corporation. What they fail to realize is the guaranty has no value if the person(s) signing the guaranty has no attachable assets. We can sue the individual, obtain a judgment, file a lien, etc., but if we cannot locate attachable assets, the guaranty is virtually worthless. 
If your firm uses personal guarantees, or is considering using them, we suggest the following:
1. Use a form that clearly states the terms and conditions and requires a signature right below the guaranty.
2. If the guarantor is married, have the spouse sign the guaranty. Their assets are probably jointly held, so without both signatures, you cannot attach their assets.
3. Use a good credit application to identify current bank accounts, etc. Garnishing a bank account is the most efficient means to executing on a judgment. Your guaranty has more value if you know how to execute on their assets.
4. If they miss a payment, or something leads you to believe their circumstances have changed, demand that they complete an updated credit application. If they are not willing to do so, or they take too long to complete the form, place the account with a certified commercial collection agency for immediate action.
Remember a personal guaranty is only as good as the assets of the person(s) signing it. If your customer refuses to sign the guaranty, have his/her spouse sign it, or does not properly complete a credit application, make them pay cash in advance.