Revenue Collections Seminar Revenue: It’s Yours for the Taking
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Transcript of Revenue Collections Seminar Revenue: It’s Yours for the Taking
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Revenue Collections SeminarRevenue: Its Yours for the Taking
Association of Public Treasurers (www.aptusc.org)
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Collection Goals
Fair and timely collections80% Collection rateReduced costs Efficient staff useSecurityReduced floatAutomation when possibleAccurate record keepingComplete approach to collections
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Reaching your goals...
UtilizeImprovisePoliticizeCentralizePrivatize
Focus on all revenue not just delinquent revenue
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Getting Started
Identify your sources of revenueTaxes, utilities, fees, fines, etc.
Assign responsibilities
Assess needs of departments
Find and clarify existing policies
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Getting Started
Determine WhoHow Where all revenues are received
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Centralize
Centralizing collections especially delinquent collections Centralization may improve efficiencies Centralizing utilizes resources Centralizing focuses $$ impact
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Centralized Collections
A centralized collection department can increase the collection of revenues
Eliminates duplicationUtilizes staff Builds departmental supportCreates centralized information Strengthens settlement authority
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Centralize Processes Not PeopleStandardizeCashiering in outlying departmentsReceipting proceduresDeposit procedures
CentralizeCombination delinquent billingUtilize combination billingCentralize receivablesCombine department information
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Getting Started
To get started
Create a plan how to manage collectionshow to administer collections
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Strategies
Generate support from elected officials communicate your goals/purposes
Tolerate short term seasonal delinquenciesfocus attention elsewhere
Prior year delinquents are one-time revenue
Focus on big-ticket and attainable collections
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Getting Started
Create a Mission Statement
To collect all revenue promptly and maintain the goodwill of the customer
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Getting Staff Started
Assign Responsibility
Assign Tasks
Set Objectives
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Utilize New Technology
LockboxMICR EncodingGeneric BillsCredit CardsRemote DepositACH Positive Pay Specialty MailersCross Referencing
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Lockbox
Lockbox for high volume itemsUtilities and taxes
Lockbox is more than paymentsCapture and transmission of Images and DataExpediting Information ProcessingUseful for all high volume paymentsAvoids Capital ExpensesKeeps You Up-to-Date In Technology
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Lockbox
The goal is reduction of float
Mail floatUnique post office box and multiple pickupAutomated postage direction Processing float24/7 operationsDirect deposit to bankDirect transmission of data to youClearing floatMultiple deposits
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Lockbox Processing
LOCKBOX -opens mail -sorts -verifies payment -captures image -deposits funds -transmits
Same day deposit to your accountSame day transfer of data and images to City
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JUST GET STARTED !!
Determine revenue sourcesDevelop a collection planIdentify ObstaclesWrite a Mission StatementDevelop proceduresAssign ResponsibilityGet Started!
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Developing a Collection Plan
Develop well defined procedures Script telephone calls Write model letters Evaluate collection agencies Evaluate credit card use
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Obstacles to Effective Collections
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Obstacles
Political Considerations
Internal PoliticsExternal Politics
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Obstacles
Political ConsiderationsUnderstanding the Art of Collections
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The Art of Collection
Understanding human natureTurning objections to opportunitiesEffective communicationsSuccessful negotiations
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The Seven Axioms of Collections
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The Seven Axioms - #1
Collect before you send the bill.Government is not in the business to extend credit.
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Minimize your credit risks
Obtain all needed information at time of serviceEstablish relationships with clientsRefuse service if appropriateRequire deposits where possibleObtain collateral LOCCDs
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Identify individuals credit risk
The Four Cs of Credit:
CHARACTER- willingness to payCAPACITY- ability to payCAPITAL- financial conditionCONDITIONS- current credit
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The Seven Axioms - #2
Collect before you send the bill
The best technique is simply to ASKAsk By Telephone
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The Collection Phone Call
Collection telephone calls should be:
PERSONAL - know your client
IMMEDIATE - dont delay contact
INFORMATIVE - to both parties
FLEXIBLE - adjustable
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The Collection Phone Call Pre-Call Planning:
Use records concerning the account
Use all sources in the organization
Contact the right person: the decision maker
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The Collection Phone Call
Develop an Opening Statement
Ask for the right party
Identify yourself and your entity
State the reason for the call
Wait for responses Pause
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The Collection Phone Call
Plan the approach:
Be clear with planned questions:
Give specific amounts, dates, reasons
Avoid negative phrases
Anticipate excuses
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Ask for the money
State the facts
Ask for the balance in full
Negotiate through objections
Settle on mutually agreeable terms
Be sure of their intentions
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The Collection Phone Call
Ask for the money!
Be ready for excuses
Involve the customer in the options
Be prepared with payment plans
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Reasons and Excuses
Already paid(get details)In dispute(mediate)No money(situation and plan)Bankruptcy(info and file)Not scheduled(late fees)Carry over?(payment plan)
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The Collection Phone Call
Closing the deal!
Reiterate the commitment
Get a commitment from the customer
Agree on dates and amounts due
Confirm it in writing
Calendar for follow-up
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The Collection Phone CallLeaving MessagesConfirm the name of person responsible Determine the best time to reach the personLeave your name, organization,telephone and request to call backGet the name of person taking messageALWAYS be courteousDo not make a demand for payment
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Record Keeping -Collection Call PlannerCustomer__________ Tel.______ Date______
Opening Statement:_____________________If not, payment plan will be:______________Benefits to the payment plan:_____________Excuses expected:______________________
Especially useful for new employees.
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Record Keeping -Customer Contact FormsDate:Customer:________________Tel:_____Individual:________________________Invoices Due: #____________________Contact Response:__________________Action:____________________________
Create a database of all contacts.
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Record Keeping - Call LogMONTH: _______________
Date Customer Invoice/Amt Phone
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The Seven Axioms - #2
Simply Ask!By TelephoneBy Letter
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The Collection Letter
Creativity increases collections
Creativity gets noticed
Creativity generates support
Creativity motivates staff
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The Collection Letter
Motivate them to payDont threaten without follow-throughUse accurate informationBrevity is bestWrite on a six-grade levelCheck to avoid unintended inferences
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The Collection Letter
State the factsState the proposalState the reason State the Action
Review letters periodicallyPersonalizeAvoid humorBe Creative
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The Seven Axioms - #3
Collecting even before your send the bill Simply Ask!
Do not treat everyone the same
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Customer are not equal
Size and type of account
Level of risk
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The Seven Axioms
Collecting even before your send the billSimply Ask!Do not treat everyone the same
Late fees are the best INCENTIVEUse as much as possible
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The Seven Axioms - #5
Collecting even before your send the billSimply Ask!Do not treat everyone the same Late fees are the best incentives
The earlier the effort -the better the return
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Warning Signals
Returned mail, no forwarding addressBroken promises of paymentMessages ignoredChanges in payment habitsCustomer changes banksPartial Payments or post dated checksCustomers key personnel are leaving
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Early Bird Success
Initiate billing immediately
Establish monthly cycles
Contact delinquents a.s.a.p.
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The Seven Axioms - #6
Collect before you send the bill Simply ASK! Do not treat everyone the same Late fees are the best incentives The earlier the effort, the better the return
Be CREATIVEMake your request stand out in the stack!
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Creativity pays...
Return envelopesCoupon booksNews articlesDifferent approaches TechnologyDepartmental assistance
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The Seven Axioms - #7
Collecting before you send the bill. Simply ASK! Do not treat everyone the same Late fees are the best incentives The earlier the effort, the better the return Be creative You have to find them to make them pay!
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Information Sources
Be creative - be Columbo
Who has the information?Relatives?colleges?Landlords?professional groups?Employers?trade groups?Roommates?other creditors?
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Choose your weapon and focusFree or inexpensive sources
Cross-cross directoriesInternet directoriesPublic records
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Outside sources of information
Informational databasesCredit reportsSocial searches Search disksProfessional skip-trace companies
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Collecting Your Money
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Collecting Your Money
Successful Collection Telephone CallsSuccessful Collection Letters
Collecting Returned Checks
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Returned Checks
Require repayment be in cash, cashiers check, certified check or money order. DO NOT accept a second bad check.Add a service charge - if legally allowedPost warning signs clearly stating feesKeep a history of returned checks
Consider NSF collection by ACH
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NSF and ACH
New bank serviceNSF checks are not re-deposited immediatelyCheck data changed to an ACHACH targets likely payment dateFirst of the month?Appears to increase collections 20%May be lower bank cost also
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Collecting Your Money
Successful Collection Telephone Calls Successful Collection Letters Collecting Returned Checks
Other Collection Techniques
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Other Collection Techniques
Promissory notesDiscontinuation of serviceAmnestyWithhold or deduct paymentsDeny contracts, Loans or Grants (database)Legal Action
Guido?????
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Other Legal Remedies
Wage garnishment
Property lien
Levy
Property seizure
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Making It Easier To Pay
Accepting Credit Card Payments
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Accepting Credit Cards
Advantages to customers More choices for the customer(especially in-transit clients)Ease of payment May enable earlier payments May produce better records
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Accepting Credit Cards
Advantages to your organization Faster access to receivables Reduces mistakes Reduces cash handling Eliminates check losses Reduces billing and collection efforts(shifts collection burden to credit company)
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Accepting Credit Cards
DisadvantagesCost to the governmental unitCheck percentage charge versus flat rateCredit rate costs to customersMay add extra steps administrativelyPossible legal hurdles
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Making It Easier To Pay
Accepting Credit Cards
Electronic Payments
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What are Electronic Payments?
ACH and EDIThe banking world is going to EDIExchange of electronic payment and backup information through standard formats via financial institutionsEDI uses on payments and receivablesVariable trailer information availableTrailer length is critical on internal information flowElectronic withdraws of monthly payments from customers account through direct debits
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Electronic Payments
Advantages Customers save processing costs Eliminates late payments On-time collections and cash flow Security Minimal excuses re lost, stolen checks
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Electronic Payments
DisadvantagesProcedural controls
Pre-notification cautionsNSF collections by ACH requires disclosure
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Making It Easier To Pay
Accepting Credit CardsElectronic PaymentsDirect Payment
Accepting off-site payments
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Using Technology
Payments by phone, fax, or internet
Front end payment acceptanceVerisignRemote deposit
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Collecting Your Money
Successful Collection Telephone CallsSuccessful Collection LettersCollecting Returned ChecksOther Collection Techniques
Write Offs
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Write-offs
When to give up?
Discharged bankruptciesWrong responsible partyDeceased accountsInvalid referralsCourt denials of claims/judgmentsAmount or age doesnt warrant efforts
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Write Offs: When?
When cost benefit of further action is not justifiedTo accurately present your financial position
Guidelines: after one year write off a) most accounts without legal problems; b) small amounts (under $25.00) c) problem accounts
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Using Contracted Services
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Using Contracted Services
Using a Collection Agency
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Considering a Collection Agency?
Stability and Reputation Location and Coverage
Procedures and Capabilities
Compliance / Client Service
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Using a Collection Agency
Advantages Contingency fee basis Collection focus only
Pressure of collection agency
Possible credit report impairment
More productive staff usage
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Using a Collection Agency
Disadvantages
Loss of contingency incomeCustomer reaction Unsupervised collection activitiesNeed for repetitive quality reviews
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Using Contracted Services
Using a Collection AgencyUsing a Collection Attorney
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Collection Attorney Considerations
Cost
Letterhead Effect
Oversight
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Using Contracted Services Using a Collection Agency Using a Collection Attorney Using Credit Bureaus
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Credit Bureaus
Payment information available to subscribersJudging a credit reportUnspoken fear of credit impairmentBureaus:Equifax, Atlanta, GA.Transunion, Chicago, ILExperian, Cleveland, OH
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Credit Bureau ReportDebtor Information
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Credit Bureau ReportPublic Records
****** PUBLIC RECORDS OR OTHER INFORMATION ******
04 07/99*COLL 01/99 772YC854 UNTD COMPU FOR CIRCLE K
AMT:$55 BAL:$55 UNPAID DLA:12/98, I,2457231
RETURNED CHECK
05 10/98*COLL 12/96 200YC91 ERM-ALBHE2 FOR COLORADO STUDEN AMT:$3169 BAL:$3220 UNPAID DLA:06/94, I,189978
06 08/98*COLL 08/98 118YC364 ACTION COL FOR JAMES E PFOST AMT:$497 BAL:$497 UNPAID DLA:10/97, I,1145920
07 11/97*CGLL 02/94 605YC53225 RMA FOR ST ALPHONSUS RM AMT:$1294 BAL:$1294 UNPAID DLA:08/93, I,11484688
08 09/97*COLL 09/97 118YC1784 INT CR SRV FOR VIDEO MEMORIES AMT:$138 BAL:$138 UNPAID DLA:02/97, 1,971100263
09 03/94*COLL 01/94 605YC53225 RMA FOR INTERMOUNTAIN G AMT:$197 BAL:$197 UNPAID DLA:09/93, I,11482651
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Credit Bureau Report
Creditor Inquiries
*INQS-ERM-ALBHE2 200YC91 03/27/00
ERM-ALBHE2 200YC91 08/24/99
ERM-ALBHE2 200YC91 05/27/99
USBANK 613BB26109 01/11/99
ERM-ALBHE2 200YC91 12/03/98
US WEST 91OUT13468 08/11/98
ERM-BOIARS 200YC570 05/12/98
FK 124YCO0051 STU LOA 04/02/98
ERM-ALBHE2 200YC91 01/18/00
ACTION 118YC2295 08/06/99
ERM-ALBHE2 200YC91 02/25/99
RECEIVABLE 403YC2284 12/22/98
ERM-ALBHE2 200YC91 09/08/98
ERM-BOIARS 200YC570 05/13/98
FK 124YCO0051 STU LOA 04/13/98
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Credit Bureau ReportTradelinesCredit Bureau Reports
FIRM/ID CODE RPTD OPND H/C TRM AIRTOUCH *701PZ963 02/00 10/98 272 104
CHARGE
STUDENTLNS*124VZIO 02/00 09/93 19K COLLECTION ACCOUNT
CO STUDENT*146VS946 02/00 07/93 2760 STUDENT LOAN
COLLECTION ACCOUNT
CO STUDENT*146VS946 08/98 07/93 2760 30(00)60(00)90+(Ol) 08/93-I5
STUDENT LOAN
COLLECTION ACCOUNT
CHEVRON *906OC24
30 (00) 60 (01) 90+ (01)
CHARGED OFF ACCOUNT
CREDIT CARD
F S BK STU*118BB1176
STUDENT LOAN
F S BK STU*118BB1176
STUDENT LOAN&
06/96 08/91 602 05/95-R5,01/95-R3
BAL P/D CS MR ECOA 104 01 15 I
35K 35K I5 74 I
05/96 09/89 CONTACT MBR FOR STATUS
4 666
05/96 11/86 CONTACT MBR FOR STATUS
4448
I5 17 1
202 202 R9
I5 61 I
I
END OF REPORT EQUIFAX AND AFFILIATES -
03/30/00
ACCOUNT NUMBER 5017380
5199616601
519961660002
519961660005 DLA 07/93
7246091511 DLA 06/96
100400172904
100400172902
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Legal Aspects of Collection
Fair Debt Collection Practices
How hard can I push?
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Legal Aspects of Collection
Fair Debt Collection PracticeTo eliminate abusive practices by collectorsGovernment agencies are exempt (letter not spirit!)Prohibited Practices:Threatening or harassing languageCalling before 8:00 AM or after 9:00 PMAbusive languageCalling place of employment (if employer prohibited)
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Legal Aspects of Collection
Fair Debt Collection Practice
Do:Limit communication with debtorLimit communication with third partiesAvoid harassment and abuseAvoid false or misleading representationsProvide written validation of the debt
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Legal Aspects of Collection
Fair Debt Collection Practice
Dont:Dont make contact with debtor more than twice a week unless otherwise arrangedTalk to ANYONE other than the debtor about the debtHarass the debtorThreaten the debtor with actions that can not be carried out
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Credit Reporting
Abide by the FCRA
Notify the debtor of your intent to report debtUse information for legitimate business uses onlyDisclose information ONLY to employees whose duties relate to the business purposeRefrain from selling or distributing the information to third parties
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Legal Aspects of Collection
Fair Debt Collection Practice
Bankruptcy
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Legal Aspects of Collection
What is bankruptcy?
Legal means by which individuals and corporations place a hold on debts incurred prior to a filing date.
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Bankruptcy
Creditors are prohibited from attempting any collection action on pre-filed debts.
Post filing debts are due in the normal course of business.
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Bankruptcy Chapter and VerseChapter 7 - Liquidation proceeding available to individuals and corporations
Chapter 11 - Allows a business to continue to operate while formulating a plan to return to profitability
Chapter 13 - Partial or full pay off of creditors over extended period of time -for individuals only.
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Bankruptcy
Terms and datesNoticeFiling dateCase numberAutomatic stayTrustee341 meetingDeadlinesProof of claimDischargedismissal
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Evaluating Your Collection Performance
Do you have age-less receivables ??
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Evaluating Collection Performance
DSO - Accounts Receivable Turnover
Days Sales Outstanding = days required to collect a dollar of revenue from the date billed until collected
Receivable at end of month ($12,500)Revenue for month ($10,000)$12,500 x 30 days /$10,000 = 37.5 days
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Analysis of Aged Receivables
Aging delinquencies in set time periods 0 - 30 days$30 - 60 days$60 -90 days $
Used for transfer to outside agency
Not helpful in determining causes
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Schedule of Collected Revenue
Total dollars collected by days
Used for new programs
Determines natural collection periods
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Uncollectible Accounts
If write-offs are not authorized
Target large $$ dormant accounts
Identification allows future prevention
Analysis purposes
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Evaluating Performance
Accounts Receivable TurnoverAccounts Receivable AgingSchedule of Collected RevenueUn-collectable Accounts
Comparison of Revenue and Expenses
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Revenue Comparisons
Quarterly or semi-annual reviews
Program reviews
Departmental reviews
Cost benefit evaluations
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In Summary
Set ObjectivesMake a PlanEvaluate your resourcesDesign your toolsEvaluate outside assistanceEvaluate your progress
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Reaching your goals...
UtilizeImprovisePoliticizeCentralizePrivatize
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MONEY NEVER SLEEPS
Wake Yours Up !Through better collections.
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Good Luck !
About your trainer:Linda Patterson, CTPPresident, Patterson & Associates
Linda, who has trained cash handling, collections, and investment courses for the Association of Public Treasurers and Public Treasury Institute for over 20 years, is the President of Patterson & Associates, an investment advisory firm established in Austin, Texas in 1994.
800-817-2442 www.patterson.net
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APT US&CAPT represents over 1,000 public treasury and finance officials in local, county and state/provincial governments throughout N. America. The Association provides education, certifications and technical assistance to its membership. Visit www.aptusc.org for information on the 2007 Annual Conference in San Diego, August 11-15.
PTIPTI provides training manuals and coordinates training seminars for public treasury and finance officials. The Institute and APT formed an alliance in 2004 for a wide range of training manuals workshops. Visit www.PublicTreasuryInstitute.com for information on booking a seminar in your city, county or region or to purchase the latest treasury manuals on line.