1. Ways to Maximize Effective Collections – Tracy L. SpearsFebruary 17, 2010 1 Ten Tips for Maximizing Cash Flow SEABA June 30, 2011 Presented by: Steven W. Brown Accounts Receivable Specialist/ District Manager Transworld Systems Inc., provider of

2. Ways to Maximize Effective Collections – Tracy L. SpearsFebruary 17, 2010 2

3. Ways to Maximize Effective Collections – Tracy L. SpearsFebruary 17, 2010 3 Objectives of Presentation  Develop internal strategies for effectively collecting money  Help you and your staff learn what to say to clients in order to motivate them to pay  Understand what options are available when accounts are overdue  Know when and how to use those options

4. Ways to Maximize Effective Collections – Tracy L. SpearsFebruary 17, 2010 4 Collections Challenges Facing Today’s Businesses  Economic Reality – consumers are spending less  Result – lots of providers competing for fewer dollars  Slow paying clients Understaffed  Trying to work all accounts systematically, including small balances  Familiarity with collection laws

5. Ways to Maximize Effective Collections – Tracy L. SpearsFebruary 17, 2010 5 Four Reasons to Collect  Accounts depreciate and get harder to collect  Complaints increase with time  Further services stop because debtor avoids you  Stressful for the staff and the client 50% of surveyed small business owners said they are experiencing cash flow problems… -Discover Small Business Watch, Feb. 2011

6. Ways to Maximize Effective Collections – Tracy L. SpearsFebruary 17, 2010 6 Typical In-House Collection Efforts Day 30 Day 60 Day 90 Day 120 Day 150 Statement Letter #1 Phone Calls Statement Letter #2 Phone Calls Statement Letter #3 Phone Calls *According to the Dartnell Institute of Business Research, the average cost of working an account internally over a six month is $31.60 per account. Day 180 Intensive Telephone Contact and/or Legal Action at a cost of 25-50% of recovered amounts. -

7. Ways to Maximize Effective Collections – Tracy L. SpearsFebruary 17, 2010 7 Facts About Collections  It costs a business $31.60 to attempt to collect an account after it’s 30 days past due to 180 days*  80% of the collections budget is spent to collect 20% of past due accounts  Delinquent accounts depreciate ½ percent per day past 90 days. ** * Dartnell Institute **U.S. Department of Commerce study of depreciation of accounts held in-house.

8. Ways to Maximize Effective Collections – Tracy L. SpearsFebruary 17, 2010 8 Start Early, Recover More

9. Ways to Maximize Effective Collections – Tracy L. SpearsFebruary 17, 2010 9 Facts About Collections  There are over 6000 collection agencies in the US  Average fee/cost for a traditional agency is 33%  According to the ACA 2009 figures, the average recovery rate is 14% *  The true cost of collections is the amount of money that is not recovered *ACA International 2009 Survey **US Dept of Commerce

10. Ways to Maximize Effective Collections – Tracy L. SpearsFebruary 17, 2010 10 Facts About Collections Smith’s Practice  $50,000  Collection Fee 25%  15% recovery rate  Collect $7,500  Agency gets $1,875  Practice gets $5,625 Jones’ Practice  $50,000  Collection Fee 40%  30% recovery rate  Collect $15,000  Agency gets $6,000  Practice gets $9,000  Additional Net of $3,375

11. Ways to Maximize Effective Collections – Tracy L. SpearsFebruary 17, 2010 11 Ways to Maximize Cash Flow & Effective Collections

12. Ways to Maximize Effective Collections – Tracy L. SpearsFebruary 17, 2010 12 1- Have a Defined Credit Policy  Policy gives staff a detailed document that they can stand behind

13. Ways to Maximize Effective Collections – Tracy L. SpearsFebruary 17, 2010 13 What Should be Included in Your Policy?  What payment is required at time of service?  Allowable forms of payment: cash, check, money order, and charge cards  Broken appointment charge and policy  Maximum number of payments allowed?  Interest, billing or service charge - rate and when applied

14. Ways to Maximize Effective Collections – Tracy L. SpearsFebruary 17, 2010 14 2. Make Monthly Statements Effective  Send statements promptly and regularly  Do not put aging date at the bottom of the statement

15. Ways to Maximize Effective Collections – Tracy L. SpearsFebruary 17, 2010 15 Statement with Aging Dates

16. Ways to Maximize Effective Collections – Tracy L. SpearsFebruary 17, 2010 16 Make Monthly Statements Effective  Do put a due date on the statement 2/17/2010

17. Ways to Maximize Effective Collections – Tracy L. SpearsFebruary 17, 2010 17 3 – Use “Address Service Requested”  One of the most difficult A/R problems is tracking down a client who has moved or skipped.  Put address service requested on all correspondence sent to clients

18. Ways to Maximize Effective Collections – Tracy L. SpearsFebruary 17, 2010 18 4 -Contact Overdue Accounts More Frequently  Contact late paying accounts every 10-14 days

19. Ways to Maximize Effective Collections – Tracy L. SpearsFebruary 17, 2010 19 5 - Adhere to State & Federal Collection Laws  The Fair Debt Collection Practices Act (FDCPA), the primary federal law regulating third party collection agencies, which was enacted in 1977 with the support of ACA, is designed to help protect consumers from unfair and abusive collection practices

20. Ways to Maximize Effective Collections – Tracy L. SpearsFebruary 17, 2010 20 6 - Use Your Aging Sheet, Not Your Feelings  Stand by your policy

21. Ways to Maximize Effective Collections – Tracy L. SpearsFebruary 17, 2010 21 7 - Make Sure Your Staff is Well-Trained  Even experienced staff members can get jaded when dealing with past due accounts

22. Ways to Maximize Effective Collections – Tracy L. SpearsFebruary 17, 2010 22 How to Talk to Clients

23. Ways to Maximize Effective Collections – Tracy L. SpearsFebruary 17, 2010 23 How to Talk to Clients: Asking for Payment What you should not say:  “How much can you pay?”  “When can you pay?”  “Can you pay something?”

24. Ways to Maximize Effective Collections – Tracy L. SpearsFebruary 17, 2010 24 How to Talk to Clients: Asking for Payment What you should say:  “How much are you short?”  “Will you be in today or tomorrow?”  “Will you be paying by cash, check or credit card?”

25. Ways to Maximize Effective Collections – Tracy L. SpearsFebruary 17, 2010 25 How to Talk to Clients: Asking for Payment  Empathize with client’s situation  Remind them of their obligation to pay  Get commitment for payment  Convert outstanding balance to a time frame  Arrange for bi-monthly payment arrangements

26. Ways to Maximize Effective Collections – Tracy L. SpearsFebruary 17, 2010 26 8 – Knowing the Warning Signs of Troubled Accounts  Account is 45-60 days past due  Phone has been disconnected or changed to “unlisted”  Partial payments are smaller and sent with less regularity  Client says he or she won’t pay

27. Ways to Maximize Effective Collections – Tracy L. SpearsFebruary 17, 2010 27 9 – Use a Third Party Sooner  How many times should you ask to be paid?  If they have ignored your first 3-6 contacts, what will they do with the next 3 you make?  Focus your internal efforts to the first 60-90 days when most of your accounts can and should be collected

28. Ways to Maximize Effective Collections – Tracy L. SpearsFebruary 17, 2010 28 What are Your Third-Party Options?  Percentage collection agency  Percentage or retainer attorney  Flat fee collection agency

29. Ways to Maximize Effective Collections – Tracy L. SpearsFebruary 17, 2010 29 Not All Collection Agencies are the Same

30. Ways to Maximize Effective Collections – Tracy L. SpearsFebruary 17, 2010 30 What to Look for in a Third-Party  Proper Accreditation/Licensed  Reputable  Experienced  Easy to do business with  Partners with key professional associations

31. Ways to Maximize Effective Collections – Tracy L. SpearsFebruary 17, 2010 31 Advantages of Using a Third-Party  A third party gets the client’s attention and makes an immediate impact  Implications for client’s credit record  Removes you and your staff from position of “bad guy”

32. Ways to Maximize Effective Collections – Tracy L. SpearsFebruary 17, 2010 32 10 – Remember that Nobody Collects 100% Remember your goals Have realistic expectations for your AR program Even with a good A/R policy, there will always be the few accounts that never get collected Implementing a consistent collection process will greatly diminish the slow paying and non paying accounts

33. Ways to Maximize Effective Collections – Tracy L. SpearsFebruary 17, 2010 33 Green Flag 4 Stage Approach

34. Ways to Maximize Effective Collections – Tracy L. SpearsFebruary 17, 2010 34 Useful Resources The Association of Credit and Collection Professionals (American Collectors Association) http://www.acainternational.org/default.aspx http://www.acainternational.org/default.aspx The Fair Debt Collection Practices Act http://www.ftc.gov/os/statutes/fdcpa/fdcpact.htm http://www.ftc.gov/os/statutes/fdcpa/fdcpact.htm National Better Business Bureau http://bbb.org Transworld Systems Inc http://www.transworldsystems.com Linked In linkedin.com/in/stevenwalterbrown

35. Ways to Maximize Effective Collections – Tracy L. SpearsFebruary 17, 2010 35 Questions?

36. Ways to Maximize Effective Collections – Tracy L. SpearsFebruary 17, 2010 36 Maximizing Cash Flow June 30, 2011 Steven W. Brown Steven.Brown@transworldsystems.com 770-937-0157x21 Transworld Systems Inc., provider of Thank You!