Tuesday, March 3, 2009

It Is Not What You Bill, But What You Collect That Counts

This article is a good reminder that the reality of business is not what you bill that really matters, but what you collect. Make sure that you make wise decisions on who to extend credit to, and cut people off before they become too extended. When it doubt, trust your gut. Jeff

A record $14.3 billion in business accounts nationwide was placed in collection in 2008, a 23.2 percent increase from $11.6 billion in 2007, according to the Commercial Collection Agency Association.

That’s up 6.2 percent from the previous record of $13.5 billion for the 12-month period ending September 2008, clear evidence of the worsening economy.

The number of accounts in collection rose to almost 9.2 million in 2008, from almost 8.9 million in 2007, a 2.1 percent increase for the year.

While the number of accounts and amounts continue to climb, the sour economy and increase bankruptcy filings are making it very difficult to recoup the money, collection firms say.

“(Association) members are negotiating a greater number of payment plans for the liquidation of delinquent debt as business debtors are facing a cash flow crunch,” association executive director Emil Hartleb said in a news release. Members expect more accounts and more difficultly making collections through the second quarter.

“Eighty percent of the members report receipts are down — and we’re in that group,” said Larry Cassidy, president of Northern California Collection Service Inc. in Sacramento. New listings are up but collections are down about 30 percent, he said.

Asked what business owners can do to improve collections, Hartleb suggested:
• Be prepared to negotiate longer payment plans with delinquent and slow-paying customers
• Keep payments on a weekly or biweekly basis so you are in more frequent contact with the delinquent customer and on top of the situation
• Get the payment plan in writing. Be sure that any agreement confirms the amount owed and that there are no offsets against the account to avoid any controversy should litigation become necessary, and
• If the customer defaults and won’t take steps or cannot take steps to resume payments, don’t delay review of the account for placement with a collection agency.

“The important thing is early intervention,” Cassidy said “Some businesses wait four, five, six or seven months. Nowadays, it you’re doing that, you’re not going to get paid.”
(source: Sacramento Business Journal, 3/2/09)

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