Debt collection is the act of obtaining payment from customers for credit-made purchases. It is a thoroughly cumbersome process for most businesses, thus an efficient and effective system of overdue accounts collection must be a major priority - especially by small businesses.

For many small business operators, debt collection is the most unpleasant task of all - keeping tabs on overdue accounts can be very complicated, and pressing people over financial matters is not particularly enjoyable. But more than the large businesses, it is the small ones that must establish appropriate collection systems - else, the company itself is endangered financially.

Simply out of ignorance, small businesses write off great losses because they do not realize that collection agencies can be economical in the long run. Hiring collection agencies - instead of simply relying on the accounts receivable clerk to act as a collector - will not only save time but finances also. Bad debts - money owed that appear impossible to collect - are a collection agencies target.

Small businesses have also this mindset that only large businesses can afford collection agencies. A business must have growth in mind, and taking steps the way your larger competitors do is one of the first steps for that. Plus, most of today's collection agencies are small business friendly. The mere fact that you have employed the services of a collection agency improves your company bottom line significantly.

Search for a collection agency offering various collection amount levels. One reason why small businesses do not employ collection agencies is because of the notion that the debt owed to the business is trivial to large collection agencies. No debt is too trivial, especially when it is a bad debt.

Make sure that a particular collection agency works within the law.

The debtor must not be unduly harassed with late night or early morning phone calls, or your business will be assaulted with lawsuits. Collection agencies must comply with strict laws, and must be one to use brains more than brawn. Four strategies are mostly used in debt collection - letters, direct contact through telephone, notification to credit reporting bureaus, and litigation.

Collection begins with a series of three notification letters sent to the debtor, most often called demand letters. The third letter is a warning to the debtor - if the outstanding debt remains unpaid on a certain day, the debtor's name or company will be reported to one or all of the big credit-reporting bureaus.

This warning often prompts immediate action, as unpaid debts on a credit report are a blemish on one's financial reputation. Reports of unpaid debts may, after all, lead to a denial of credit in the future. When all else has failed, litigation is employed as the last resort.

Small businesses operate on a much tighter budget, and a delinquent account or two can halt the growth of the business. Collection agencies are more needed to ensure the growth of the company. Tracking down debtors is frustrating and tedious - for the collection agencies, it is what they do best.

If that fails to solve the problem, there are professional bill collectors you can hire to take over the process.

Be aware, however, that federal and state laws govern the steps that third-party collectors can take.

The U.S. Fair Debt Collection Practices Act deals specifically with what debt collectors can and cannot do to try and get your money back.

It is legal for a collector to contact a debtor in person, by mail, telephone, telegram or fax.

Collectors can contact a debtor at home, but they must identify themselves and the reason for their call. They cannot call a debtor during odd hours (generally late at night or early in the morning) or when they are at work. Collectors can call a debt dodger´s relatives and friends to inquire about a debtor´s whereabouts, but collectors cannot bother relatives or friends to pay the money owed by the debtor.

If you or your company is being pursued for unpaid bills, you may stop a collector from contacting you simply by asking them to stop or by writing a letter to the collection agency telling them to stop. Collectors are forbidden from contacting you again except to say there will be no further contact or that the creditor intends to take some specific action against you (such as filing a lawsuit).

A few other rules of the collection game:

· If the debtor is being represented by an attorney, all calls and letters to the debtor must go to the attorney. No postcards are allowed.

· The days of the leg-breaking collector are over. Those making collection calls cannot use violence or a threat of violence, and they may not use profane or obscene language.

· No collector can make a list of debtors for publication or for advertisement to coerce payment. Collectors also cannot represent themselves or the creditor as a court or government entity.

· Collectors cannot misrepresent the debt or misrepresent themselves as an attorney

The first two articles in this series dealt with ways that the small business owner can collect their accounts on their own.  However, even the most bulletproof systems and follow-ups will not prevent people from not paying all the time.  There comes a point, after the incentives to pay and after the notices to pay, in which you as the small business owner must act affirmatively to get paid.  This is the point in time when you must get legal counsel involved.

            This is the point in time where most small business owners are hesitant to act, however, if you have followed up numerous times and have given the debtor every opportunity to pay, odds are you have taken it as far as you could on your own.  Most attorneys who do collection work have a streamlined approach to collections.  Many practice in bulk, and want to collect your money as quickly as possible with the least amount of time and money spent.  Make sure that when you retain counsel, you are informed of their fee schedules as well as their procedures in dealing with your particular type of case.

            That being said, now that you have turned over this account to your attorney, who is considered a third party to the transaction, certain laws now come into play.  The first thing your attorney should inform you of is the implications of Fair Debt Collections Act (FDCA).  The FDCA is the main body of law which governs the collection of debt.  Your attorney will be required to comply with the Act, which includes the Act’s notice provisions.  The Act requires a thirty day notice be sent to the debtor informing them of the debt as well as including statutory language to comply with the act.  After the notice has expired, the next step is a Court hearing.  Your attorney will file a complaint on your behalf with the Court of competent jurisdiction to recover your debt.  You will have a hearing on the merits of the case, and the Court will render a decision in the form of a judgment.  Should the Court decide in your favor, you will receive a judgment against the debtor in the amount the Court deems just.  At this point there seems to be some confusion with a lot of clients.  Many clients think this is the end of the game, that the judgment is the last step.  Unfortunately this is not the case.  The judgment, once it becomes final and properly entered with the Court, merely gives you the authority to collect on the amount listed therein.  You must execute on the judgment to receive your money.

            Assuming now that you have a perfected judgment, how can you collect?  There are numerous avenues that your attorney can exercise in order to collect your money.  The first, and the one most commonly known, is the Sheriff’s Sale.  You can file the appropriate paperwork and have the Sheriff levy the personal property of the debtor for sale.  A public auction style sale is then scheduled on the debtor’s belongings.  Sheriff’s Sales sound great, but in practice they are usually unsuccessful.  Unless you have a debtor with either expensive assets or a personal vehicle that has equity in it, sales do not usually generate a lot of money.  Ask yourself the question of how much you think a stranger’s used sofa is worth, not a lot.  The real leverage you gain with a Sheriff’s Sale is fear.  Prior to the sale, the Sheriff will enter the Debtor’s property and make a list of their belongings.  He will also post a notice on their door, visible to the public, scheduling the sale.  Many times, the debtor will not want the public embarrassment or to have strangers walking through their home bidding on their belongings.  This threat alone leads to many debtors either paying the amount or entering into a payment plan with the creditor.

            Other avenues open to execution are bank garnishments.  Assuming you know where they have an account, you can freeze the debtor’s bank account and unilaterally remove the funds from the account, minus some statutory exceptions.  Again, in addition to this being a means of recovery of the debt, many times the mere action alone has the coercive effect of making the debtor pay.

            As you can see, while the legal system can be very effective, it can also be time consuming as well.  The key to executing on the bad debts is two fold, first is to find a qualified attorney to represent your interests, and second, provide that attorney with as much information as possible to effectively represent you.  The final article in this series will deal with formulating information systems prior to engaging in work for the client which will greatly aid you and your attorney in legally pursuing bad debt.

Winding up (or compulsory liquidation) is the closest thing to bankruptcy for a limited company. Normally the process is initiated by one or more of a company's creditors who feel that the company should be closed and cease trading. The creditor will present a petition to wind up the company at the court (a Winding Up Petition). The company may then be ordered by the court to be liquidated or wound up.

Once a winding up petition is ordered, a liquidator will be appointed who will be responsible for closing the business. They will :

make any employees redundant sell company assets to raise cash to pay company crditors investigate and report on the company directors (did they continue to trade when they knew it was insolvent).

Traditionally, winding up was initiated by a creditor because they believed that a company was not in a position to pay its current outstanding debts. As such, they wanted to protect both themselves and other potential creditors from trading with the business which in the future may not be able to afford to pay them. The company itself would be protected from misunderstandings by the court. The court will review the creditor grievance and any defense put forward by the company and then grant or reject the winding up petition.

Despite the traditional use of winding up, over the past 12 to 18 months I have seen an increase in creditors using winding up petitions to force creditors to pay outstanding debt. One of the significant downsides for a company which has a winding up petition issued against it is that any petition must be advertised in the London Gazette. This advertisement will be picked up by all banking institutions whose standard action will be to freeze the bank account of the company in question. This action will prevent payments being made either in or out of the account. If a company is already suffering financial difficulties, a frozen bank account will result in significant operational problems. As such, the directors of the company often have no practical alternative except to pay the outstanding debt (and associated legal costs) in full to insure the petition is lifted by the petitioning creditors.

Whether this is a legitimate debt collection method is subject to debate. Ultimately if a creditor has used all other reasonable methods to try and collect debts owed to them and payment is still not forthcoming then I believe they should be allowed to pursue a winding up order. However, clearly the purpose of the action is to force the company to pay its debt, rather than actually stop it trading. If the winding up order was actually granted by the court, all of the company's unsecured creditors will be treated equally and be eligible for a fair share of any available cash. However, if, in order to avoid a winding up order, a company is pressured into paying off one creditor in full, I believe that this could be seen as creditors almost making themselves preferred by the back door and thus to the detriment of all others.

Why Choose a Collection Agency

Every business or medical practice sooner or later encounters customers, patients, patrons or clients who don't pay their bills on time. There is a modern way for business's to improve their debt collections. That is to outsource a portion of their accounts receivable to a collection agency also known as collection agency outsourcing.

What key factors should be taken into consideration when considering hiring a Collection Agency?

First, you want to be sure that your customers are going to be treated in a very respectful manner.  After all, these are still your customers.  Many of them could potentially be retainable business and you want them to feel like the matter of debt collection is handled in a very considerate and professional matter.

Often times, when people are contacted regarding their debt, they get angry or want to dispute the debt. They also will attempt to negotiate the debt and get very upset and angry when their terms are unacceptable. When excellent customer service is provided, these circumstances can be minimized substantially.

Debt Collection Laws:

All collection agencies that do business in the United States of America are regulated by certain collections laws. It is vital to make sure that the collection agency that you select to collect your money abides by these debt collection laws.

Fair Debt Collection Practices Act (FDCPA)

The Fair Debt Collection Practices Act is mother of all collections laws. It is the Federal law that regulates collection activities for collection agencies, collection attorneys

and business attempting to collect a debt "in-house". The Fair Debt Collection Practices Act generally applies to personal, family, and household debts. This might include money owed for the purchase of a car, for personal charge accounts, or for medical treatment.

The Fair Credit Reporting Act

(FCRA)

The Fair Credit Reporting Act is another of the major debt collection laws. This is the Federal law that restricts who has access to people's sensitive credit information and what uses can be made of it.

Types of Collection Agencies:

Financial Debt collection

This type of agency collects money owed to banks and other types of financial institutions. These debts may include mortgages, car loans and credit cards. The way these agencies work is they buy the account from the bank or financial institution for a small amount and then proceed to collect the bigger amount of the debt.

Health Care Credit collection

These agencies specialize in collecting medical debt. They include doctor's and dentist's payments that are overdue. Health care providers give clients the best care possible and charge for that care. At many times, the patients don't pay for services and the medical professional may be too busy to spend time trying to collect money.

Advantages of Collection Agencies:

They save both time and money involved in debt collection They work within legal boundaries They assure fair chances of debt recovery as they are specialists in negotiating with debtors

For more information visit:

http://www.logontoyourmoney.com

Maybe your company doesn't have the skills in collecting debt. The debt collector now becomes the professional representative of the creditor and the company's account department. The added skills and professionalism of the debt collector can resolve the friction between the two parties, the creditor and the debtor. In general, as based on practice, a debt collector can bring about a satisfactory conclusion of collecting the debt for the lender. In today's recession, many companies are concerned if employing a debt collector will require be the best for their business's future. Fortunately, most collection agencies are contracted in a pay for results basis making them more cost effective. Thus, the agency is always result-oriented in their transactions, targeting maximum customer satisfaction and good performance. In some instances there are some additional legal fees involved though.

This kind of service a company receives from a debt collector is really worth the effort to spend the money on such a service. The biggest advantage of hiring these agencies is to save the time and the frustration of handling such stress of collection. It reduces the wasted effort and time while the company concentrates on the real work in one's operations for the improvement of one's potential and growth. This is a huge advantage for the big businesses around where those executives at the helm of the decision making are too occupied to even devote some time on the debt collection issues.

There are some occasions however when a professional debt collector will fail to collect the debt from an individual. Certain causes of error are the following: old information, inaccurate details, and the actual bankruptcy of the debtor. Eventually, a professional debt collector can still provide some great tips to handle this situation.

In hiring the services of the debt collector, your business should fully understand that you only resort to collection agencies when your debtor is actually refusing to pay even if he has the capacity to pay (as verified before lending the amount) and the debt is already overdue. The company should also prove that the debtor has the obligation to pay the amount presented. Nevertheless, it is always preferred to attempt collection first through your follow up system before approaching the debt collector. Only when situation seems these debts seem to affect the company's cash flow will it be necessary to require professional debt collection help.

Medical Collections apropos Tales: Confessions of a Dental Debt Deadbeat

Medical collections are costing doctors millions. Visit here http://cleardebtshelp.blogspot.com

Here are the secrets of why patients don't always pay their bills, from a real-life deadbeat.With medical collections costing doctors millions upon millions of dollars in unpaid bills and collection fees, many people have fitting one question: Who are these folks who are trying to stiff the doctors who delivered them from celebrated embodied pain (or the flu, hypochondria, not-so-white-teeth, or a nose that didn't gun enough dig Brad Pitt's)?

Well, I'm here to tell you who these kin are, or at maiden some of them.They're me.Yes, I admit it: I left a dentist's bill unpaid for three months.OK, so dentistry isn't technically witting "medical," but it's the uninterrupted situation: a doctor isolated ropes the lurch.Why did I do matching a horrible thing, especially when I, a insignificant businessperson myself, know how trying unpaid debts can make cash flow, besides how it could very easily make me persona non grata in that office?

Why Medical Collections Happen

Or, Possible Reasons for Me Being a Deadbeat

Here are reasons commonly advanced for why people like me faculty not pay a doctor's bill.---They don't have enough money, hackneyed and simple. succeeding all, if they couldn't sustain insurance, they homely are dash to have worry with the bill.

They don't care about the played out doctors again either don't fathom about or don't blame about the potential due to damage to their confess idea ratings.

They are chronically lazy, stupid, or just don't perceive what they're doing. OK, the terms used aren't quite that specific, but that's the general idea.All of these possible reasons why a discerning might not green stuff could emblematize pretty discouraging whereas a place looking to get the money it's owed. adjacent all, there's not much even the best doctor can see through about a patient's poverty, venality, or fecklessness.

But is well-qualified positively so simple conjecture as collecting on medical debt?---Why Medical Collection Isn't Necessarily inasmuch as Hopeless

Or, The legit Reason I Didn't Pay My Dentist's Bill

I well-timed signed and mailed a check for my outstanding dentist's bill. That just goes to show the situation isn't therefore unsuitable after all, doesn't irrefutable? Here's at head one position of a healthcare ensconce getting its money back., and after three months at that

No, my financial situation did not improve dramatically, nor did my indolent ways apropos themselves.Wondering what the dentist did to make me sugar? approve? Cajole? Shame? Threaten to root the tartar back?

Actually, the dentist didn't win anything, again that's the problem.

Here's what happened: I remembered I had the account to pay.

I had forgotten exceedingly owing the dentist cash. whereas I wasn't expecting the dentist's bill, mismatched undivided the bills that develop every month, it got lost in a pile of credit card offers, appeals to aid save trees being cut down to get going paper, and pipeline about really great products being writers. The follow-up letter reminding me to greenback met a similar fate. It bourgeois didn't help when I took a agility to Las Vegas and forasmuch as threw away the junk mail en masse when I got back.

I finally remembered the tally when someone asked me to write an article about medical collections. Sure enough, the follow-up memorandum (though not the especial bill) was there connections the pile of newsletters and friendly reminders from various businesses to schedule this or that appointment.The moral of the Story

If you are a patient, make affirmative to sign your mail for letters from the doctor's office. If you're distant a healthcare practice, materialize increasing camouflage your patients who have outstanding invoices-a phone call is preferable, since it's less ulterior to get lost at the underside of a pile of correspondence.Don't conclude time for that? Worried about the recognized issues of company sentence compliance? Don't let that stop you. Go to a camper that specializes in medical collections also accounts receivables management for healthcare practices.Visit here http://cleardebtshelp.blogspot.com

Every business should ensure that they have a debt recovery plan. This usually involves scheduling in a series of letters, then phone calls and eventually taking legal action or handing an outstanding debt over to a recovery agency. The longer a debt remains unpaid, the greater the chance that it will never be paid.

Every business should ensure that they have a debt recovery plan. This usually involves scheduling in a series of letters, then phone calls and eventually taking legal action or handing an outstanding debt over to a recovery agency. However this step should be seen as a last resort as a debt collection agency typically charges 10/15% percent of the debt as their fee. But then again 85/90% is far better than zero - and these agencies mostly operate on a no recovery, no fee basis.

1) Customer satisfaction phone call - before dispatching invoice

An unhappy customer is more likely to become a late payer or bad debtor. So before dispatching your invoice, think about calling the customer to enquire if they were happy with the service they received. Then forewarn them that the invoice is on its way and reinforce the payment terms eg. 30 days. For regular customers, you don't need to call after every order, but an occasional call will let them know that you are thinking about them and their needs.

If you think an item may get queried, then phone and explain what the charge is going to be and get your customer's agreement to you billing that amount. Confirm the conversation in an e-mail or letter.

Another valuable tip is to split items onto different invoices. If all your charges are on one bill then the whole amount is going to get held up over one small query, seriously hurting your cashflow. On the other hand if the queried item is on a separate bill, only that much smaller amount will be delayed.

2) First overdue letter - 7 days after due date

At this stage, sending a friendly reminder that the due date has passed is the best thing that you can do. If an invoice is less than a fortnight overdue, you must give the customer the benefit of the doubt that the cheque is in the post or that they simply forgot. You should send out a duplicate invoice with your reminder letter, with the past due date clearly highlighted. This then avoids the frequently used and abused 'Oh but I've lost the invoice', excuse.

3) Second overdue letter '7 days after the first letter (2 weeks after due date)

Again, this is more of a nudge than a demand. Keep the tone similar to your first letter, but point out that this is now the second time that you have written. Again, enclose a duplicate invoice. It might also help to nudge the tardy customer's attention towards the Late Payment of Commercial Debts (Interest) Act (see below).

4) First collection phone call - 7 days after second letter (3 weeks after due date)

The invoice is now one month overdue and it is time to pick up the phone and speak directly to the customer. Be prepared for a barrage of excuses like 'the cheque's in the post' and 'we're just waiting for a big customer to pay and then we'll pay you next'. Be courteous and let the customer speak, but don't end the phone call without getting a firm commitment as to when the debt will be settled.

5) First collection letter - on the day you make the first call (3 weeks after due date)

On the same day that you make the collection call, post out a letter first class which reiterates the payment date which has just been agreed.

6) Second collection phone call - 7 days after the first collection letter ( one month after due date)

If you have still had no response, it is time to make a second phone call. The account is now a month overdue and the longer a debt remains unpaid, the more likely it is never to be settled. Be polite, yet increasingly firm and ask for immediate payment. If the debtor insists that they cannot pay right away, make another commitment to a payment date.

7) Second collection letter - 7 days after new payment date has passed (40 days + after initial due date)

At this point, you need a change in the tone of your communication. The customer must now be made aware of the seriousness of the situation - and immediate payment demanded. Put the customer on 'stop' and warn the customer that further credit will not be available unless the matter is resolved within the next seven days. Send this letter, and all future communication via recorded delivery. This will let you know for sure that the customer has received your letter - and will communicate to them the increasing severity of the situation.

Third collection phone call - two weeks after second collection letter (54 days + after initial due date)

You are now telephoning the customer to let them know that this is their final chance to settle their debt. Warn them that the debt is about to be passed over a collection agency, which will not just incur them further costs, but could also potentially put them on a credit blacklist. Get the customer to promise to pay within 7 days to stop this procedure.

9) Hand over to collection agency - two weeks after final letter (68 days + after initial due date)

The account is now three months overdue and requires professional help. Once a debt is over 90 days there is relatively little hope, statistically, of recovering it.......

10) Devise your own system

The outline procedure I've shown here may or may not be ideal for your business. Use it as an outline to devise your own system with more or less steps and longer or shorter time intervals.

Above all once you've decided on a debt collection procedure make it totally automatic process that is religiously adhered to.

One of the big problems that UK businesses have is that they invoice late and then don't chase the cash in aggressively. It's not something we feel comfortable with. And it's been the death of thousands of businesses - so be more aggressive and make sure you stay on top of your cashflow.

The Late Payment of Commercial Debts (Interest) Act The Late Payment of Commercial Debts (Interest) Act was introduced on 1 November 1998. It automatically gives businesses with 50 or fewer employees the right to claim interest if another business pays its bills late. Previously, businesses were only able to claim interest on debts if it was specifically included in the contract or if the debt was being pursued through the courts. On 7 August 2002, the rule was amended to come in line with European legislation on late payment and now applies to businesses of all sizes. The introduction of late payment interest is not just meant to act as a deterrent, but as a way to maintain your profitability when your cash flow is not earning interest in the bank. For contracts dated on or after 7th August 2002 the late payment interest rate is 8% plus the reference rate. The current reference rate for the period 1st July 2009 to 31st December 2009 is 0.5% - S0 that's currently 8.5%