Tag Archives: debt collection

The Impact of Bad Debt on Sales

28 Oct
business vision concept and man standing on money

Companies may sometimes become accustomed to thinking of bad debt as a cost of doing business. After all, every accounting department has to write off bad debt every once in a while, right?

That’s not necessarily the healthiest way to view any bad debt you may have out there. Instead of worrying about your write offs, you want to be able to focus on new sales, revenue growth, profitability, and brand awareness. And as we all know, reducing bad debt can, and will, have a direct impact on your bottom line.

By the Numbers

When you have to write off large portions of bad debt, you simultaneously must increase the pressure on your sales team and marketing staff to recoup the revenue you lost in those write-offs. Ultimately, you want your sales to drive growth, improve cash flow, and create new opportunities for your business.

A cash-positive business can hire more employees, expand into new locations, and upgrade equipment. When you’re drowning in bad debt, however, you’re too busy making up for losses.

If you’re using your sales to cover write-offs you’re reducing your business’s accounts receivable management efficiency and leaving money on the table. Worse, your sales, advertising, and marketing employees are faced with enormous stress as they scramble to improve customer acquisition and retention rates.

To understand how bad debt impacts sales, you need to know two metrics:

  1. Your net profit, and
  2. The amount of money you’ve written off.

Let’s say that you’ve written off $100,000 in bad debt and your profit margin is 5 percent. In this scenario, you’ll need to generate $2 million in profit to offset that loss.

Check your DSO numbers to determine whether you’re operating efficiently. Companies with a DSO of fewer than 45 days (and ideally 30 days) typically enjoy better cash flow and fewer write-offs. If your DSO has extended to 60 or 75 days, however, your bad debt could have an increasingly negative impact on your sales.

The solution is two-fold.

First, create a solid debt-collection strategy. Don’t wait until the 90-day mark to start calling customers and asking about unpaid invoices. Take a more active approach.

Consider working with a professional, third-party debt collection company. Some businesses don’t have the resources to mount a full-scale debt collection strategy cost up-front. Working with experienced experts should increase the amount of unpaid debt you collect, which automatically reduces potential write-offs – and offsets the relatively modest cost compared to in-house efforts.

Second, stop thinking about bad-debt write-offs as a cost of doing business. Profitable companies focus on revenue growth and stability. They don’t like to feel hampered by bad debt. “Fire” clients who don’t pay their bills, vet potential customers carefully and urge your sales team to take a full-funnel approach to acquiring and retaining clients.

Yes, bad debt can impact sales. Fortunately, there are available solutions to help avoid this trap. We encourage you to learn more about how to optimize your revenue so you don’t get stuck in the bad-debt trap.

Contact Me Directly

Call me at 770-224-8504 or 888-780-1333
Email me by clicking here
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3 Debt Collection Strategies That Work

19 Oct

Ever wonder why some business have better luck collecting debts than others? Let’s find out. Hint: Luck has nothing to do with it.

When your customers owe money, you send an invoice and expect to receive a check in return. However, history tells us that you won’t hear anything but crickets chirping from some customers. About one in every 20 Americans has defaulted on some type of non-mortgage credit. You don’t have to resign yourself to writing off bad debt, though. You might just need a better strategy.

Shift Your Mindset

Your current strategy doesn’t work, so why keep using it?

Effective debt collection starts with a paradigm shift. Instead of thinking about unpaid accounts in terms of “collections” and “bad debt,” start thinking about your entire accounts receivable cycle. Just as preventive medicine can keep patients from getting sick, a holistic approach to finance can improve cash flow and help you predict future obstacles.

That’s why we use analytics to score our customers’ accounts receivables and to help them avoid unnecessary risks. If you have an effective accounts receivable management strategy in play, you won’t have to face collections as often.

Does this mean that you’ll never have to send an overdue payment notice? Probably not. However, you won’t have to worry about bad debt crippling your business because you’ll make smart, holistic financial decisions for your business.

Change Your Approach

Fear and panic won’t help your customers pay their bills faster.

Research shows that financial troubles can cause depression, anxiety, and other mood disorders in consumers. Some people use unhealthy coping mechanisms to handle stress, often denying that a problem exists. In other words, your overdue payment notice gets shredded with the other collection letters. The customer just can’t face the problem.

A compassionate debt collection strategy might help you collect cash faster. Instead of intimidating, threatening, or berating your customers, show them that you understand their predicaments and that you’re willing to work with them.

We’ve discovered that customers pay faster and more reliably with our empathetic approach to collections. We start with gentle reminders and continue collections even when accounts move from unpaid to dormant.

Work With Accurate Data

A customer moves and doesn’t give a forwarding address. Now what do you do?

When you don’t have accurate information for your customers, you can’t collect their debts. Account scrubbing technology proves invaluable when you need to correct errors in your master files so you don’t waste time and effort on bad information.

We have a database that contains more than 450 million records. We use that database to update your information so that collection practices can continue without obstacles.

If you’re struggling to collect bad debts, you might need a change of strategy — or you might need an experienced partner. We’re experts in the accounts receivable management field, and we help our customers remain financially solvent every day. Learn more about how to optimize your revenue, then get in touch. We’re excited to help you turn ineffective collection strategies into cash.

Contact Me Directly

Call me at 770-224-8504 or 888-780-1333
Email me by clicking here
Visit my website by clicking here
Visit my Youtube channel by clicking here

6 Little-Known Facts about Debt Collection Compliance

13 May

Debt collection is one of the most heavily regulated activities you will ever undertake.

The debt collection industry is one of the most heavily regulated in the United States. That is precisely why it’s risky to undertake debt collections on your own; there are rules for when and how past due clients can be contacted, what mediums you can use to reach out, what you can say, and how often you can say it.

There are federal rules and industry-specific rules, rules for how data is collected and stored, and even rules for what you should do if a consumer or past due client asks you to stop contacting them. These rules can shift quickly, but failing to stay compliant can promptly get a business into hot water.

We’ve compiled half a dozen rules currently governing the debt collection industry. These rules also apply and those businesses seeking a more DIY approach.

Following the Rules for Debt Collection

First, let’s start with the rules under the Fair Debt Collection Practices Act (FDCPA), the federal law that protects consumers from overzealous debt collection agents.

  1. The FDCPA usually does not cover a business debt. If your business is trying to collect a past due mortgage, credit card, medical bill, or personal or household-type debts, your debt collection practices are covered by FDCPA.
  2. The FDCPA regulates time and place of debt collection. For example, your debt collection efforts cannot occur before 8:00 a.m. or after 9:00 p.m. If you attempt debt collection in the workplace and the consumer or client asks you to stop, you may not continue your efforts.
  3. If you’ve been informed that an attorney is representing the client, debt collection must go through them and not the customer.
  4. If the past due client writes to tell you to stop contacting them, you cannot contact them. The exception is that you may tell them there will be no further contact or inform them that other legal action will be taken. It doesn’t mean you can’t pursue other avenues of debt collection, just that you cannot contact them to collect the debt.
  5. A debt collection agent is required to tell you certain things about the debt, specifically who the money is owed to, how much, and how the client can dispute the debt. If this information isn’t provided on initial contact, you have five days to send these details in writing.
  6. If the past due account holder disputes the past due debt within 30-days of receipt of the initial communication, you must stop all collection activityuntil you have verified the past due debt.

There are also rules under the Fair Credit Reporting Act governing how debt collection and past due balances can be documented in credit reports. There are even state laws governing fair practices by anyone conducting debt collection. Keeping compliant with all of these rules is a full-time job. That’s exactly why businesses turn to TSI. Our track record of compliance with all debt collection laws, along with decades of experience in most industries make us the top company in the nation to partner with companies seeking a better bottom line.

The TSI data-driven approach is designed to boost debt recovery while enhancing the relationship with your valuable customers. Contact me directly at 770-224-8504 for more information.

Best Practices for Collecting Debt from Millennials in 2019

29 Apr

Millennials, those youthful consumers born after 1980, are about to overtake Baby Boomers as the largest living adult population in the U.S., with more than 74 million of them working and accruing debt. Speaking of debt, there is a lot of it; CNBC says the average student loan debt is around $33,000  – and yet that isn’t even the main source of debt for the older millennial.

That’s why the chances are good that your business will often be conducting debt collection from the millennial population. What are some special considerations related to this age group? Are there any communication best practices to follow?

Facts About Millennials and The Debt They Accrue

According to CNBC, Millennials between the ages of 25 and 34 have around $42,000 in debt. The highest level of debt is from credit cards. But CNBC says these young professionals also have other stressors that prior generations didn’t have, such as higher education expenses and student loans as well as the high cost of housing. Almost one-half of Millennials are 90-days past due on at least one bill. In fact, Americans owe more than $1 trillion in debt from student loans. It’s possible that other debts will suffer as these people spend more money on college debt.

While debt is increasing across all age brackets in the United States, these trends are particularly troubling for an age group that is just getting started on a career path. CNBC says that Generation Z, the age bracket that comes behind the Millennials is following in their footsteps with an average debt of $4,343.

Given the high debt ratio for these young people, are there any considerations for handling collecting debt that might be different from older populations?

Best Practices for Collecting Debt from Millennials

Collecting debt from Millennials is actually different from GenX or the Baby Boomers. First, it might be more difficult to reach these young consumers, because most of them have given up a landline for a personal smartphone.

Pursuing debt collection from this youthful population requires a few tricks in order to accommodate their personal preferences and styles:

  • Use technology to reach Millennials. They are one of the first generations to grow up with the immediacy of the internet and a host of software tools. Debt collection must mine this tech-familiarity to reach these consumers.
    Tip: Try setting up a web portal so these customers can explore easy online payment.
  • Make connections with Millennials and use the power of relationships to pursue debt collections.
    Tip: A compassionate and diplomatic approach to debt collection can go a long way when it comes to collecting what’s owed.

Debt collection for the Millennial population requires some flexibility to handle the special needs of this population. Contact me today at 770-224-8504 for more information.

3 Debt Collection Agency Myths

8 Oct

mythsvsfacts

The facts show third-party debt collections provide a needed service for businesses of any size.

How much do you really know about collection agencies and how they work? Unless you’ve partnered with a debt collection agency, there’s a good chance that you’ve been misled about how the debt collection process works and the impact it will have on your business.

Here are some common myths about the debt collection industry:

  1. Debt collection agents are a rough-around-the-edges crew that bullies people. TSI’s interactions with customers are always diplomatic. We work WITH your customers to get them back on track.
  1. Debt collectors will try anything to get money. Debt collection is a strictly regulated industry. Professional debt collection agencies stay current with all applicable laws. TSI’s commitment to compliance means customers are always treated with the utmost respect, while your brand is protected from costly compliance violations.
  1. It’s better to take the tax write-off; hiring a debt collection agency is too expensive, even for large companies. Partnering with a professional debt recovery company is an affordable option. Writing off an unpaid invoice may be helpful, but collecting on the debt is even better. Although collection agencies charge for their services, the amount collected and returned to you will likely be more than the taxes saved if you write-off the debt. TSI offers affordable fixed-fee pricing on early-stage delinquent accounts and contingency-based fees for your more challenging or older accounts.

Debt Collection: Take a Closer Look

If your company has been handling collections in-house, you already know that debt collection is governed by a variety of local, state, and federal rules that prohibit and regulate how customers are approached for past due balances. In fact, debt collection is one of the most regulated industries in the United States. These rules prohibit collectors from behaving aggressively or inappropriately with consumers; they even govern when a debt collection agency can contact the past due client.

According to Inside ARM, the debt collection agency industry is a valuable asset to improve the bottom line for businesses in any industry. Their report shows that the industry regularly returns around $39 billion annually to companies that offer consumer credit.

Debt collections activities help replenish the bottom line of businesses that struggle with a high volume of bad debt. Quite simply, the collections industry reduces the risk for businesses offering consumer credit, something that is imperative for keeping the economy going. Companies that seek a healthier bottom line use debt collection companies to recover some of the most difficult past due balances, which frees up internal teams to focus on the job at hand.

The types of debt collected impacts companies of all sizes in the following industry sectors:

  • Healthcare
  • Financial services
  • Student loans
  • Government
  • Retail
  • Telecom
  • Utility
  • Auto
  • Small- to mid-sized business

When debt is collected businesses can keep a positive cash flow which not only means they can keep prices low, it also helps ensure the overall success of the organization.

How Could a Debt Collection Agency Help your Business?

A reputable debt collection agency like TSI can deliver outstanding results. Our sophisticated collection activities use a data-driven, client-centric approach. Beyond a basic debt collection agency, TSI can also provide end-to-end strategic accounts receivable management.

TSI can maximize recoveries and boost cash flow, streamline your accounts receivable management processes, and reduce internal expenses and administrative responsibilities. And because TSI keeps a focus on the customer experience, our services will not damage your organization’s reputation.

A quality debt collection service like TSI helps improve the bottom line of the businesses we serve. TSI clients recognize this impact, and we’re proud of these partnerships that are a win/win. Contact TSI today to learn more about our services and the value they can offer your business. For more information, contact me today!  Always ready to help!

DIY Collections – Don’t Risk It!

11 Sep

There are very clear rules about what can and can’t be said during debt collections.

The debt collection industry is governed by so many rules and regulations it could make your head spin. That’s why do-it-yourself debt collections can quickly get a company into hot water with state and federal regulators.

What are the rules that govern debt collections? What are debt collection agents never allowed to say and do? This article explores common mistakes businesses make when attempting DIY debt collections.

Bill Collector

Debt Collections No No’s

Three things you can never say when attempting debt collection:

  • Threaten to tell a boss, coworkers, or family about a past due balance. While you can contact work to try to find the customer, never share details about the debt to any third party.
  • Threaten to arrest the past due customer.
  • Don’t say, “I’ll just keep calling you.” Legally, you can’t call the person before 8:00 am or after 9:00 pm. If you call the customer at work and they ask you to stop calling there, you have to comply, however, the request must be in writing.

Understanding the rules means following federal legislation called the Fair Debt Collection Practices Act and the guidelines set by the Consumer Financial Protection Bureau.

Understanding debt collection rules is important for avoiding federal and state penalties.

If all this seems like a lot of rules for you to keep track of, you would be right. Debt collections are a highly regulated activity that makes it risky to take a DIY approach.

The good news is that there are services like TSI to help ensure debt recovery that complies with all rules and regulations. Our proven system is compliant, effective, and guaranteed.

Bonus Tip:

Various government agencies provide guidelines that help ensure that consumer rights are protected. There are specific practices that collectors must always avoid.  

Debt collectors cannot use unfair practices to collect a debt. This means debt collection practice can never include the following [Do not]:

  • Attempt to collect charges in addition to the debt. That is, unless they are allowed by contract or specific state law.
  • Deposit a post-dated check early.
  • Communicate by postcard.
  • Use language or a symbol on the envelope of a letter that indicates the correspondence is from a debt collector.

Consumers have rights that must be honored, which is why strict guidelines and regulations govern debt recovery practices. Not only is it essential that debt collectors treat consumers with respect, in addition, there are specific practices that collectors must always avoid. For instance, did you know that an individual can send a “cease and desist” correspondence to a debt collector – which means the debt collector is required to stop contacting the customer. The problem stems from an overly aggressive debt collector that goes after the customer over and over again in a short amount of time. Under federal law, this is considered harassment and if the activity continues after the cease and desist letter is received, the customer can report the debt collector to governing agencies.

Want higher recovery of past due accounts? Don’t put your business at risk by using a DIY approach; instead, put TSI’s simple system to work for your business. It’s convenient and designed with small- and mid-sized businesses in mind, AND interfaces directly with most accounting and practice management software.

Contact me for more information on how to:
  • Collect more of your A/R
  • Collect your A/R faster
  • Stay 100% compliant while collecting your A/R
  • Save both staff time and money

5 Things to Avoid When Collecting Debt From Customers

22 Aug

Before conducting debt collections, make sure you understand the do’s and don’ts of the industry.

The do’s and don’ts of collecting debt are a sticky wicket. If you do it wrong, you can alienate potential customers, ruin your reputation, and maybe even pick up a hefty fine from regulators. Playing by the rules means compliance with all laws, certainly, but also collecting debt in a way that treats every customer with dignity and respect.

Here are five things to avoid when collecting debt from customers.

Do Not Try This at Home – or at the Office

We’ve heard all the horror stories from collections gone awry. Industry publications such as Inside ARM often report on companies fined by regulators for breaking collection regulations. Our biggest complaint, beyond the fact that these techniques are generally not effective, is that conducting yourself in this manner gives the collections industry a bad reputation. Not good!

The best course of action is to partner with a professional collection agency like TSI. But just in case you plan to give debt recovery on your own a try, here are some things that should never be part of your DIY debt collection strategy:

  1. Don’t stalk your customers. Really! This means you (or the debt collector for that matter) cannot show up at someone’s workplace and demand they pay you. The law also prohibits you from publicizing the debt, too, so even though you want to go on Facebook call out someone that owes you money – don’t. Here is the caveat: You may, respectfully, call the customer at work but you cannot let the other workers know that you’re trying to collect on a debt. Plus, if the customer asks you to not call them at work, you legally must comply.
  2. Don’t harass your customers. See #1. But actions such as repeated calls, threats of violence, and extreme language are not only bad form, they’re illegal too. For a small business owner, it feels personal when someone doesn’t pay. But conducting yourself in a professional way will pay off in the long run.

There are rules about pursuing debt collections – make sure you follow them.

  1. You can’t arrest the debtor. Sorry, we know this may not feel fair, but if a customer is 90-days past due, you cannot call 911 for help. However, there may be legal actions you can take in certain circumstances.
  2. You cannot pursue the debtor for things they don’t owe. This happens a lot when the data you have on the customer is inaccurate. So many times we see that the person already paid the debt but the information wasn’t logged properly. A simple mistake can land you in hot water, so use caution and double-check the facts before pursuing a debt.
  3. You cannot call at odd hours of the day and night. Did you know there are rules that state you can only call a past-due customer between 8:00 am and 9:00 pm? For small business owners that work hard all day, this means just because you’re up at 7:30 am you can’t squeeze in a few collections calls.

If you’re worried about running afoul of the rules of collecting debt, you don’t need to.

Contact me today at 888-780-1333, and I’ll show you how to collect more money, cut costs, and stay 100% compliant with all of the many laws and regulations that relate to debt collection.

After all…it’s your money!  Keep more of it!!

How Debt Collection Affects Revenue Cycle in Healthcare

2 Apr

medical-debt

Debt collection is a hot topic in healthcare revenue cycle circles. That’s because hospitals are facing higher costs, declining reimbursement, along with high-deductible insurance policies and patients that simply cannot afford to pay.

This article looks at how debt collection best practices could improve the revenue cycle in healthcare. What are the issues affecting debt in healthcare?

Debt Collection and Medical Billing 

Medical billing serves at the core of healthcare revenue cycle. But Rev Cycle Intelligence points out the elephant in the room: Medical billing is often riddled with errors.

Simple mistakes in the patient billing record are a challenge in the revenue cycle. Collecting patient information at the front desk lays the reimbursement framework that every revenue cycle is built upon.

When you cull out simple human mistakes, providers are still left with the complexities inherent in billing practices that are unique to every payer. That alone creates glitches in clinical cash flow when reimbursements are submitted and rejected by the payer.

Another problem with medical billing is tied to the healthcare paradigm itself. It is a patchwork of disparate providers – even within a single health system. If the steps to getting paid hinge upon a previous interaction, but documentation are peppered with missing pieces, the likelihood of that provider being reimbursed by a payer drops with every missed checkbox.

A frequent issue that occurs well before the bill is generated is the issue of collecting a patient’s co-pay. Even when the co-pay is $20, the medical practitioner at the front desk may fail to collect it. For clinical administrators, it can be difficult to ask for payment from a sick patient. Now imagine the struggles when a patient has a $2,000 deductible. But failing to collect this revenue up front does nothing to alleviate patient responsibility for their bill. In fact, it almost certainly guarantees the need for debt collection later. Rev Cycle Intelligence states that 90% of the 12.7 million Americans participating in 2016’s open enrollment had high deductible insurance.

InsideARM has been waving a red flag around this issue, citing statistics that say, “The percentage of consumers not paying their total hospital bills will increase to 95 percent by 2020.” Even worse news for hospital revenue cycle, the volume of patients who are only paying a part of their overall hospital bill has declined from around 90 percent in 2015 to 77 percent in 2016.

As bad debt rises, healthcare providers are turning to debt collection agencies to help save their revenue cycle.

Debt Collection Improves Healthcare Revenue Cycle

TSI specializes in debt collection in the healthcare space. With over 45+ years of healthcare collection experience, we use an empathetic approach to collections to protect the patient relationships you’ve worked hard to cultivate. We understand the delicacy inherent in keeping patient satisfaction scores high while still collecting on an unpaid medical debt. That’s why we’ve invested in technology that can help us collect on all bad debt in ways that acknowledge and respond to patient payment preferences across multiple digital venues as well as through more traditional formats.

In addition, our proprietary data analytics platform, CollectX boosts your results by identifying the most liquid accounts and ensuring they receive the appropriate collections activity. Since implementation of CollectX, our clients have seen on average a 22% lift to their liquidation rates. Maintain your patient relationships, while improving your revenue cycle, with TSI.

To learn more about how to optimize your revenue, contact me today at 888-780-1333 or at david.wiener@cashflowstrategies.us.

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