Collections for Small Businesses

For those of you who are operating a business on a limited budget, managing your receivables is of the utmost importance. Just a few slow paying accounts can have a daunting effect on the success of your business. It takes perseverance to start a business; but it takes even more perseverance to keep it running efficiently.

Maximizing your receivables is essential to the life of your business. You must avoid holding back or becoming lax when it comes to asking for money that is owed to you.

When signing on a new account, be certain to emphasize your payment terms. Your payment terms outline the timeframes in which you expect to be paid. Verbally review your payment terms with your new customer and ask that they sign on the dotted line accepting your terms.

Optimize the payment process with a courtesy call shortly after services or products were provided. Inquire if the order was received and confirm that there were no disputes with your products or services. Document all correspondences that transpire during the duration of all business relationships. Reiterate when payment is due. To help expedite payments received, you may consider offering a nominal discount if the account pays within a specified period of time (generally 10 days).

Invoice immediately. Invoices should be drafted at the time the order is placed; thus, there is no reason to delay invoicing until the end of the month. This sets the stage for more timely payments received. Companies that invoice immediately and include the invoice with delivery experience expedited payments.

Managing your receivables must start with recognizing when an account becomes past due. Your payment terms should dictate when payment is expected and what consequences will occur if payments extend past the due date; a 1.5% late fee is the typical standard. It is important that you add the late fee to the first invoice that requires duplication. When you reissue an invoice in an effort to be paid after the due date has expired, you set a standard that gives you negotiating power. If you need to remind a customer their account is past due, and they have received a duplicate invoice that has incurred a late fee, you can offer to waive the late fee if the account is paid within a specified period of time (no more than 10 days).

Monitor past due accounts and initiate a consistent follow up process. Avoid waiting thirty days between follow up correspondences (verbal or written). If your payment terms are Net 30, follow up on the delinquent account on the 31st day. If your customer suggests cash flow problems are the reason for the delay, offer to arrange a payment schedule to expedite the payment process. Begin by offering to break the payment into two equal amounts, and negotiate the schedule based on your customer’s ability to pay.

About The Author: Donna Vestre is President and Founder of South Coast Revenue; a Professional Risk Management Firm based in Orange County CA. Donna has over 28 years experience in the debt collection and account receivables industry. Donna is the author of the popular digital resource guide, “Account Receivables – Your Guide to Getting Paid!” A B2B Resource Guide designed to empower businesses in achieving their most successful collection results! For more information about South Coast Revenue, please feel free to visit http://southcoastrevenue.com/ and browse the wide variety of resources and services available to you.

Maintaining Your Corporate Status in California - Part 1

This is Part 1 of an ongoing series designed to provide California corporations general information on how to maintain their corporate standing. In this edition, we will review common issues of corporate governance such as holding director and shareholder meetings and keeping proper corporate minutes.

California law requires that an annual meeting of the Shareholders be held each year for the election of directors for the ensuing year and for other business that may come before the meeting. An annual meeting of the Board of Directors is usually held immediately after the annual meeting of the Shareholders to elect officers of the corporation for the next year, approve and ratify proper acts of officers during the current year, approve the compensation of the key employees for the current year, and to approve the corporation's contributions to its retirement plans, if any, for the current year.

The Board of Directors is charged with the management of the corporation and is held accountable for the ultimate direction of the corporation's business and affairs. Although day-to-day management of the corporation is generally delegated to the officers, the directors are responsible for approving major corporate action, setting goals and policy for the corporation, and monitoring the performance of management in achieving these goals. In performing these functions, the directors are fiduciaries for the benefit of the shareholders. The directors will be held liable to the corporation's shareholders if they fail to exercise "reasonable care", or if they fail to act in the best interests of the corporation ("duty of loyalty").

Directors exercising a duty of care are required to act as prudent persons would act in similar circumstances. In doing so, the directors may rely on the advice of independent experts, but they must make a reasonable inquiry into the facts on which such experts base their advice. The directors' duty of loyalty also includes a prohibition against a director profiting from a transaction at the expense of the corporation and its shareholders. A corporate transaction in which a director has a material financial interest will not be invalid if the transaction is fair to the corporation and the material terms and the director's interest are disclosed to and ratified by the shareholders or by uninterested directors acting in good faith.

To meet the fiduciary requirements of directing the corporation, the Board should convene regularly to discuss the corporation's business and to vote on required actions. Such meetings may be conducted by a conference call if all directors can hear each other simultaneously.

California corporation law also requires that shareholders meet at least annually to elect directors and to conduct other shareholder business. a shareholder's vote is required for a number of significant events, including election of directors, most amendments to the articles of incorporation, the sale of substantially all of the corporation's assets, and certain mergers and reorganizations of the corporation. Shareholder action by written consent process satisfies statutory requirements.

Minutes of both Directors' and Shareholders' meetings should be kept. The minutes must identify the issues before the groups together with copies of the notice of the meetings or waivers thereof, should be placed in the corporation's minute book. A copy of these minutes, certified by the secretary, is prima facie evidence that the meeting took place and that the matters stated in the minutes transpired.

California law requires that the accounting books and records, and the minutes of proceedings of Shareholders and Board of Directors, be open for inspection by any shareholder, director, or holder of a voting trust certificate. Further, corporations are required to send an annual report to shareholders not later than 120 days after the close of the fiscal year. This requirement can be waived in the Bylaws by corporations with fewer than 100 shareholders. The annual report must contain a balance sheet, an income statement, and a statement of changes in financial position for the fiscal year, and also must be accompanied by a report thereon by the company's independent accountants or, if there is no such report, by a declaration by an authorized officer of the corporation that the statements were prepared without audit.

Corporations with 100 or more shareholders that are not subject to federal securities reporting requirements also must comply with additional disclosure requirements. These include describing any significant transactions between the corporation and any director, officer, or 10-percent or greater shareholder.

The information provided in this article is general information only and is not intended as legal advice. DO NOT use this information as a substitute for obtaining qualified legal advice or other professional help. If your California corporation requires assistance with any of the topic outlined in this article, please feel free to contact us.

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

Getting Customers to Say “Yes” to Pay Your Invoices!

Most businesses are owed money at some point. Every business owner offers their product and or service in good faith that once delivered payment will be made. As a business owner that sometimes has unpaid invoices do you often think, “What’s it going to take to get this client to pay? Do I turn their account over to a collection agency? Do I take them to small claims court, or do I write it off to bad debt?”

Your customers need to feel your attention is on their needs and upholding your side of the contractual agreement, not just getting paid. Sometimes that is hard to do when the issue has continued for a long period of time and there appears to be no resolution in sight. Businesses usually intend to pay their invoices. Some of the reasons for non-payment include:

• unsatisfactory performance
• perceived breach of contract terms
• cash flow issues

As the owner of a commercial collection agency, two of the most repeated concerns I hear are: how will using a commercial collection agency affect the relationship with the customer? Will my business still get paid for the overdue invoices? A good commercial collection agency should not interfere with your ongoing business relationship. Their objective is to resolve the lack of payments as quickly as possible. It is a small but important fact; don’t forget your manners and always be courteous and respectful toward others. Exhibiting professional and ethical behavior will you get you further in your collection efforts as a business owner and may create opportunities for future work.

Use words that demonstrate concern for the present issue and the desire to correct the mistake so it is not repeated. Try using a “power word or phrase” to connect with your clients. Power words say to your customers “What can I do to fulfill your need?” In asking this question you demonstrate care and concern about the problem and you want to do whatever is necessary to reach an acceptable payment solution. Here are some “power phrases” to use when working to get the client to say yes and pay the bill:

• What else can I do to help resolve the balance due?
• I’ll take care of that for you.
• I’m sorry for the mistake. I’ll correct that ASAP.
• Let’s work together to resolve this.
• What do you think?
• I don’t know the answer but I’ll find out for you.
• Consider it done.
• Thank you.
• We appreciate your business

Finally it is important to stay on top of your receivables while building your business. As your accounts reach 90 days and older, that is the time to reach out for outside collections help. Working with a collection agency instead of pursuing legal action is usually more cost efficient in time and money. Using a collection agency can help you to reduce the number of accounts written off to bad debt. An outside commercial collections agency will help collect the monies owed for past due products and services. Use them as another way to get your clients to say yes to pay your invoices.

About the Author: Dee Bowden is President of Bowden Revenue Collection Services. Ms. Bowden is a member of the Association of Credit and Collections Professionals (ACA International). Dee Bowden can be reached at (617)365-0814, email dbowden@bowdenrevenue.com or visit the website at www.bowdenrevenue.com.

Selecting a Bankruptcy Credit Counseling Agency

Prior to filing for bankruptcy, individuals must receive a briefing from an approved nonprofit budget and credit counseling agency. After filing bankruptcy and before receiving a discharge, debtors must also complete a course on personal financial management designed to help them avoid debt problems in the future. I am often asked by clients which agency to choose.

Here in the Southern District of California, the U.S. Trustee's Office maintains a list of authorized credit counseling providers. However, there are only approved agencies that stand out with respect to the services that my clients have received: Springboard Nonprofit Consumer Credit Management, Inc. ("Springboard") and the Institute for Financial Literacy ("IFL").

A common complaint I hear is that agencies do not have sufficient staffing to handle emergency requests for counseling. Some agencies delay speaking with for several days for even a week. Both Springboard and IFL offer counseling over the Internet and via telephone. I recent months, clients have reported to me that both Springboard and IFL were able to handle their requests for immediate credit counseling. IFL offers the added advantage of emailing the completion certificates directly to my office.

While clients are free to to choose any approved agency, Springboard and IFL profile competitive service and reasonable prices.

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.