1. Protect Your Bottom Line:
Effective Strategies for Getting Paid
Presented by:
Jocelyn Ruth Nager, Esquire
Jackelyn Florez, CLA
Frank Frank Goldstein & Nager, PC
1430 Broadway Suite 1615
New York, New York 10018
Tel 212-686-0100 Fax 212-686-6726
www.ffgnesqs.com
A Certified Woman-owned Business
2. Collection Trends
Source: Commercial Collection Agency Association
100% 94.9%
90%
89.9%
81.3%
80%
69.6%
70%
60% 52.1%
50%
39.1%
40%
30% 22.8%
20%
9.3%
10%
0%
Due Date 30 Days 60 Days 90 Days Six Nine One Year Two
Months Months Years
This chart illustrates the decrease in collectability over time.
As time passes, the probability of collection decreases.
3. Impact of Bad Debt Write-off
on Sales
Your And Your
Write off Net Profit is
2% 3% 4% 5% 6%
You will need the following amount of
additional sales to offset the loss
$5,000 $250,000 $166,666 $125,000 $100,000 $83,333
$10,000 $500,,000 $333,333 $250,000 $200,000 $166,666
$25,000 $1,250,000 $833,333 $625,000 $500,000 $416,666
$50,000 $2,500,000 $1,666,666 $1,250,000 $1,000.000 $833,333
4. Interview Your Client
• Take time and get to know your client’s business
• Who buys your client’s services?
• Check references
• Trade References
• Bank References
• Know your client’s pay cycle
• Establish a rapport with the accounts payable
person who will process your invoice
5. Client’s Credit File
• Signed written agreements with clear payment terms,
conditions, indemnification, and credit and collection
policies. Also, a copy of a credit application if you wish to
use one. Credit applications should be renewed every 2-3
years
• Updated Statement of Account – make sure it matches the
name on the contract
• Copies of all invoices that correspond to the statement of
account (make sure the name on the invoices match the
statement of account as well as the name of the company
on the contract)
• Copies of payments made by client (banking
information/verification)
6. Client’s Credit File (continued)
• Copies of correspondence received from the client or
to the customer. This should include disputes or
incidents reported by the client as well as your
response to them
• Copy of client’s business card
• Notes, news regarding new business locations or
ventures— news items—negative or positive
regarding your customer
• Copies of corporate records, business name filings,
bankruptcy filings, court judgments and tax liens
7. Client’s Credit File (continued)
• Copy of personal guarantees, if any
• Tax ID numbers, Social Security numbers
• Trade References—verification and notes
• Credit Report
• List of authorized personnel
8. Personal Guarantee
• The personal guarantee will insure that if the
corporation should go out of business you can pursue
the individual for the corporate debt
• The personal guarantee should be on a separate page
from the contract or credit application
• The individual should sign in a personal capacity not as
a corporate officer. It is important that no title is listed
for the individual. If the individual signs and indicates
his title by his name, he is signing as a corporate officer
and not individually. Have the client sign the guarantee
again without the title. All documents should be dated
• You must also obtain the individual’s social security
number, addresses, and personal banking information
9. Handling Clients with Bad Credit
or No Credit
• Don’t expect a business with a history of bouncing
checks or paying their bills late to change when dealing
with your company
• If you must do business with the chronically late, lay
down your credit rules early and firmly. Start the
relationship slow
• Keep the amount of services to a minimum until they
have proven themselves
• Do not do business without having signed contracts
clearly stating and agreeing to the payment terms
10. Document Retention and
Red Flags
• Copies of Checks – Look out for changes in the company
name on the check. Is it different than the client name
you have? If so, call the client and inquire why? This
could be a red flag of financial difficulty. By keeping a
copy of the payments, it provides banking information and
also helps you spot trouble before it gets out of hand
• Credit Application – make sure to verify the information
given. Many times, certain information is falsified. (i.e.
social security numbers, trade names, tax id numbers and
corporation information
11. Document Retention and
Red Flags (continued)
• Obtain a credit report on new clients prior to doing work.
It shows historical payment data, bankruptcy records,
lawsuits, liens and court judgments and a risk rating that
predicts how like a client is to pay its bills. It also reveals
relevant data including fictitious business name filings and
tax liens
• The idea is to get as much information about your
client’s assets and business relationships upfront
• Get a personal guarantee whenever possible—especially
if the company is a startup
12. Strategies for Collecting
Your Receivables
• A good client is a paying client. Anything else is a
hallucination
• Don’t be afraid
• Act quickly—Call, call, call
• The owner or financial person should call
• By offering an extension or a payment plan, it
maintains your good relationship and keeps your
reputation intact
• Payment delays can be avoided by developing a
rapport with the client
13. When To Consider Additional
Help
• You must get paid
• The invoice has aged 60 days
• Broken promises
• Partial payment
• No response
• Move forward, do not delay
14. Preventive Measures
• Obtain information • Develop a relationship
with someone in the
• Keep an updated accounts payable
credit file on all your department
clients
• Consider calling on days
• Monitor accounts 20-28 before invoice is
receivable carefully due to make sure all
documentation received
• Establish a credit by Accounts Payable
policy
• Contact your client
for non-payment
15. Case Study #1
• Existing client has strict credit policies in place
• Requires fully completed credit application as well as
a personal guarantee
• Pursues with suit quickly for full amount owed plus
costs of collection/litigation, interest and attorney’s
fees as specified clearly in their credit application
• Successfully collects its receivables. Very few go to
litigation.
16. Case Study #2
• Existing Client maintains proper credit file with all
documents substantiating any balances owed
• A claim was submitted for litigation
• Documentation provided to defendants and
demand made for full amount or suit
• Claim was paid in full within 60 days
18. Collection Process
Claim is forwarded to attorney for collection.
Acknowledgment is sent to the client and demand
in writing and by phone
Debtor will either make payment arrangements,
dispute or ignore
Ask for disputes in writing
19. Collection Process (continued)
Debtor’s dispute is sent to the client with attorney’s
recommendations
Suit or no suit—based on severity of the allegations
Client’s decision to sue or write-off
If no dispute, recommendations made based on the
collectability to sue or write-off
20. Legal Process
Suit is recommended if not disputed, costs (advanced only),
fee contingent upon collection. If disputed, small non-
contingent retainer plus costs and the balance of the
contingency fee
Costs received – Summons and Complaint prepared and filed
with Court
Defendant served with papers
If an answer is filed by the defendant, discovery period begins
and we await trial date
21. Legal Process (continued)
If there is a counterclaim, then an hourly fee is charged to
handle if client wishes to have representation
If no answer, petition submitted to Court for entry of default
judgment
Judgment
Post Judgment Collections
Property or income execution
Bank subpoenas with restraining notices to freeze bank
accounts
Sell commercial property
Restrain monies due from third parties
22. Costs of Litigation
Out of pocket expenditures
FilingFees
Service Fees
Motion Fees
Execution Fees
Marshal Fees
Time
Expectations
23. Conclusions
Your receivables are the lifeblood of your
business, protect them by taking these steps
and following through with your credit and
collection policies.
It is a smart business practice to maintain a
credit file on your clients, monitor your accounts
closely, and take necessary action when
problems arise.
When you are unsure of what to do, seek
professional help.
Editor's Notes
Start by introducing you name, title, Center/IBSP (using NYC Business Solutions branding). NYC Business Solutions Center, share your Center address and state that you help all entrepreneurs and operating businesses in borough . IBSP, share your address and state that you have an expertise in providing services to industrial and manufacturing businesses.
Information is your friend. Ask specific questions about their business (i.e. industry, what do they sell, who do they do business with, how long have they been in business, locations. Ask for a credit check, banking information and two trade references. Verify those references and keep notes in the credit file. Ask for a personal guarantee if the company is unknown or a startup. KNOW YOUR CLIENT WELL. Ask questions, make sure your client’s pay cycle will enable you to get paid and operate profitably. Develop a relationship with the accounts payable person who processes payment on your invoices. The more information you know about your client, the better your chances of collecting your past due receivables.
Information in your client’s credit file is essential and should be updated annually. These are key documentation which should be part of the client’s credit file. The signed written agreement memorializes the terms and conditions of your agreement with your client. Credit applications give you information regarding assets like bank accounts, trade references, and other assets. Updated statement of accounts are necessary in order to maintain a detailed accounting Copies of all invoices that corresponds to the statement of accounts -- The documents along with the statement of account will be needed if you end up litigating. Keep copies of payments made by your client. If the name on the check does not match the name on the signed agreement and the statement of account, call your client and find out why you are getting a third party check and who they are. Sometimes, the client change names or ownership. If this is the case, you will need to get a new written agreement, credit application and corresponding information. Copies of the payments give you banking information. It is important that this be kept up to date. Keep copies of disputes and/or incidents from your client and your response as well. Keep a record of what was done to resolve it. Keep a copy of the client’s business card. Sometimes, the corporate name is different than the business name. (DBA) Notes and news -- it is important to keep track of your client’s whereabouts. New locations, new products, new ventures, mergers, etc. You also need to keep copies of corporate records, business name filings, bankruptcy filings, court judgments and tax liens. Keep a copy of the personal guarantee as well as all the personal financial information. Confirm Tax Id and social security numbers. Trade references are important as these are the people your client does business with. Verify the references and keep notes. Get credit reports on your client. You don’t want to have a client who has a poor payment history. Finally, a list of authorized personnel who can request your services and pay your invoices.
Information in your client’s credit file is essential and should be updated annually. These are key documentation which should be part of the client’s credit file. The signed written agreement memorializes the terms and conditions of your agreement with your client. Credit applications give you information regarding assets like bank accounts, trade references, and other assets. Updated statement of accounts are necessary in order to maintain a detailed accounting Copies of all invoices that corresponds to the statement of accounts -- The documents along with the statement of account will be needed if you end up litigating. Keep copies of payments made by your client. If the name on the check does not match the name on the signed agreement and the statement of account, call your client and find out why you are getting a third party check and who they are. Sometimes, the client change names or ownership. If this is the case, you will need to get a new written agreement, credit application and corresponding information. Copies of the payments give you banking information. It is important that this be kept up to date. Keep copies of disputes and/or incidents from your client and your response as well. Keep a record of what was done to resolve it. Keep a copy of the client’s business card. Sometimes, the corporate name is different than the business name. (DBA) Notes and news -- it is important to keep track of your client’s whereabouts. New locations, new products, new ventures, mergers, etc. You also need to keep copies of corporate records, business name filings, bankruptcy filings, court judgments and tax liens. Keep a copy of the personal guarantee as well as all the personal financial information. Confirm Tax Id and social security numbers. Trade references are important as these are the people your client does business with. Verify the references and keep notes. Get credit reports on your client. You don’t want to have a client who has a poor payment history. Finally, a list of authorized personnel who can request your services and pay your invoices.
Information in your client’s credit file is essential and should be updated annually. These are key documentation which should be part of the client’s credit file. The signed written agreement memorializes the terms and conditions of your agreement with your client. Credit applications give you information regarding assets like bank accounts, trade references, and other assets. Updated statement of accounts are necessary in order to maintain a detailed accounting Copies of all invoices that corresponds to the statement of accounts -- The documents along with the statement of account will be needed if you end up litigating. Keep copies of payments made by your client. If the name on the check does not match the name on the signed agreement and the statement of account, call your client and find out why you are getting a third party check and who they are. Sometimes, the client change names or ownership. If this is the case, you will need to get a new written agreement, credit application and corresponding information. Copies of the payments give you banking information. It is important that this be kept up to date. Keep copies of disputes and/or incidents from your client and your response as well. Keep a record of what was done to resolve it. Keep a copy of the client’s business card. Sometimes, the corporate name is different than the business name. (DBA) Notes and news -- it is important to keep track of your client’s whereabouts. New locations, new products, new ventures, mergers, etc. You also need to keep copies of corporate records, business name filings, bankruptcy filings, court judgments and tax liens. Keep a copy of the personal guarantee as well as all the personal financial information. Confirm Tax Id and social security numbers. Trade references are important as these are the people your client does business with. Verify the references and keep notes. Get credit reports on your client. You don’t want to have a client who has a poor payment history. Finally, a list of authorized personnel who can request your services and pay your invoices.
For those of you would like a sample personal guarantee, please email either Jackie or myself and we will forward one to you.
If your potential client has a history of bouncing checks, don’t expect them to change because they are doing business with you. Make sure you lay down the credit rules. Start the relationship slow. Keep the amount of services to a minimum until you feel comfortable that they will continue to pay on time. Most importantly is not to do business without having signed contracts with clear payment terms.
If your potential client has a history of bouncing checks, don’t expect them to change because they are doing business with you. Make sure you lay down the credit rules. Start the relationship slow. Keep the amount of services to a minimum until you feel comfortable that they will continue to pay on time. Most importantly is not to do business without having signed contracts with clear payment terms.
If your potential client has a history of bouncing checks, don’t expect them to change because they are doing business with you. Make sure you lay down the credit rules. Start the relationship slow. Keep the amount of services to a minimum until you feel comfortable that they will continue to pay on time. Most importantly is not to do business without having signed contracts with clear payment terms.
Remember that there is no greater priority than collecting the money due to you. The only good clients are the ones who pay their bills on time. Long standing customers are important to your business, especially those who have always paid on time. As soon as you a good standing account becomes delinquent, get on the phone and find out what happened. If they are having problems offer assistance if appropriate. A COLLECTION CALL IS MORE EFFECTIVE THAN WRITING OR EMAILING. The person who set up the account needs to call. Do not delegate the task to a collector or receptionist. It is important that those bringing in the business or owner gets involved in this process. There needs to be a connection between your company and your client. Sometimes it is better to contact the client and make arrangements than to proceed with collections.
The process of collecting money can be handled in a variety of ways without alienating the client. You must come to grips with the fact that you are entitled to be paid for your services. If the tables were turned, your client would want to be paid. What are your terms of sale? Has your client responded to your requests for payment? Have you been in contact with the accounts payable person or your buyer? Always maintain contact with your client. Long-time clients may have always paid on time but suddenly is paying late. Call to find out why and see how you can help them to make payments. Enforce the credit policies you have established. Do not let your emotions take over. You must get paid to continue to operate profitably.