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3 Ways A Small Business Can Beat the Double Dip Recession

Tuesday, August 10th, 2010

A small business can beat the double dip recession by reducing the consumption of resources, and optimizing time and money by outsourcing business functions and incorporating efficient systems.

1. Answering services

Many small businesses have downsized to maintain profit margins in the recession. However, downsizing should not affect the quality of customer service. Phone answering services make sure all calls are attended by trained personnel, basic questions and issues are addressed by them and only callers needing special information are directed to business experts. This allows small and mid sized businesses to devote more time and employee hours on revenue generation while keeping track of incoming calls that could be business leads.

2. Business VOIP

Small businesses can cut down costs drastically by replacing traditional PBX phone systems with partial or complete VOIP phone systems. Small and mid sized businesses can save on the costs of calling long distance customers, partners and suppliers,  and free up resources as only one network needs to be managed for voice and data transmission by using VOIP communication tools and conferencing technologies. Small business VOIP systems are scalable, easy to maintain, user-friendly and reliable.

3. Collection agencies

In lean times, many customers hold on to payments to maintain cash flow. Their gain is your loss. Bad debts can squeeze the life out of small or mid sized businesses as they rely on immediate payments to maintain daily operations. Collecting payments is a delicate task that takes up valuable time and resources. Small businesses can outsource the job to professional collection agencies to receive timely payments without hurting customer relationships.

These measures are relatively inexpensive and offer both short-term and long-term benefits for the business. A smart business implements timely solutions to overcome problems, and converts the solutions into opportunities of growth and profit.

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Selecting the Right Collection Agency for Your Business

Thursday, February 18th, 2010

Every business needs to partner with a collection agency to help recover its bad debts. Collection agencies have the personnel, tools and knowledge to help with debt collections.

Collection agencies try to recover bad debts by contacting delinquent customers through written notices, phone calls and personal visits. As the collection agency is working on your behalf, the behavior of the collection agents is very important as it will most definitely affect your business’ relationship with the customers. Therefore, it is important to thoroughly vet collection agencies, their practices, style of working and references.

You must verify the below important factors before selecting  the right collection agency for your business’ debt collection needs:

Years of Experience

The experience of the collection agency can be assessed by asking these questions:

  • How long has it existed?
  • Who are its clients?
  • How long has it been working for these clients?
  • Has it received any awards or recognition for its services?
  • Does it have insurance?

Experience  in your specific industry

Bad debt accounts vary with the type of business — student loan, mortgage, medical loan, child support, service debt and so on. All these accounts require collection agencies to abide by different legal standards and procedures. In fact, some collection agencies have dedicated collection services for specific types of debts such as healthcare, retail, financial, etc.

You must verify if the collection agency has experience in recovering bad debt for customer accounts in your specific industry. An inexperienced collection agency could ruin your customer relationships through improper interactions and dealings.

Business References

Get several references from businesses or establishments that have worked with or are currently working with the collection agency. If you cannot get references, verify the collection agency’s reputation by contacting the Better Business Bureau or Chamber of Commerce.

Collection Agency’s Fees and Rates

Collection agencies work on fixed rates or commission. The percentage of the commission is usually fixed mutually by the creditor and the collection agency. However, there could be a significant difference between the amount recovered (minus the commission) and what is transferred to the creditor. This is because the collection agency may add charges for extra services, apart from the commission. Find out about additional fees, so that there are no surprises later.

Collection Ratio

Many collection agencies offer services that are relatively inexpensive. The more important consideration is what is their collection ratio. If there are several bad debt accounts and the collection agency is not able to recover most of them you are still losing money. Another consideration should be how long does it take for the collection agency to recover the bad debt. The older the bad debts the lesser are its chances of recovery.

Some collection agencies pursue bad debts with high balances and neglect bad debts with small balances as they are paid on commissions. However, it is important for your business to recover all ba debts and the collection agency must be willing to work all the accounts to maximize the recovery of bad debts.

Compliance with licensing and state bonding

You must ensure that the collection agency complies with all state bonding and has the license to operate in the geographical region where your customers are located.

Compliance with the FDCP Act

Collection agencies are regulated by the Fair Debt Collection Practices Act (FDCP Act). The FDCP Act protects customers from undue harassment by unscrupulous debt collectors. Make sure the collection agency you hire follows the rules laid down by the FDCP Act. Violation of the FDCP Act will land the collection agency and your business in legal trouble.

Professional and law-abiding collection agencies can help you increase your profit streams while maintaining your customer relationships and keeping you safe from any legal entanglements.

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How to Get Control of Your Bad Debts

Saturday, January 30th, 2010

Bad debts are an unavoidable side-effect of extending credit to customers, a strategy adopted by most businesses to acquire more customers. Though small businesses cannot afford accumulation of bad debts, their collection strategy is weak due to lack of resources and a fear of turning customers away. Small businesses can turn around their bad debt expenses by partnering with collection agencies.

Conventional wisdom has been to bring in collection agencies to recover bad debts after all the other options have been exhausted. This is because people perceive collection agencies to be unscrupulous, boorish and unethical. This is untrue of reputed professional collection agencies. In fact, small businesses that have called in collection agencies earlier in the collection recovery process have been able to collect more in less time while maintaining good relationships with their customers.

Professional collection agencies work in compliance with the Fair Debt Collection Practices Act (FDCP Act), send demand letters to customers and follow up with calls and personal interviews, keep the business informed of progress, and work with business to improve in-house practices to reduce bad debts at the onset. Because of their professionalism and expertise, collection agents build a good rapport with customers making them amenable to settlement or negotiation. They also have the experience to identify customers who are tough cookies and can advise the business owner to report them to credit reporting agencies or file a lawsuit.

Small businesses should search for a collection agency familiar with their industry, scale and practices; vet it carefully; get references from other clients; verify performance records, business policies and collection strategies. After all, the attitude of the collection agency will affect the business’ customer relationships. Once a small business zeroes in on the right collection agency, it can look forward to many fruitful years of working together resulting in mutual benefits.

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Beat The Recession and Win in 2010

Friday, January 1st, 2010

Risk is an inevitable element in business. The recession has rocked small businesses to their foundation and they need to economize and strategize to increase cash flow and maintain operations. Advanced technology, outsourcing services and the internet offer businesses an alternative avenue for growth and expansion while keeping costs low.

Small businesses can build an online presence and acquire more customers by launching a Search Engine friendly website. Website designers and web design firms help businesses to build a website with SEO features in mind so that it appears higher in organic  search rankings  resulting in more visitors and potential customers from search engines like google, yahoo and bing without having to pay for the web traffic using pay per click marketing.

E-commerce companies help businesses supplement their brick-and-mortar stores with an online platform or even move to the internet completely. With e-commerce solutions, businesses can increase their customer reach and profits while dramatically lowering the cost of overheads.

Internet marketing companies work to increase the business’ visibility on the internet through PPC campaigns, social media marketing, behavioral targeting based online advertising, SEM, and other effective marketing strategies. Search engine optimization (SEO) also drives more traffic to the website.

Small businesses that have still not opened up to credit card payments are losing out on a large customer segment. Credit card processing companies can get you started by installing credit card terminals for credit card processing, implementing security features, and other related services.

VOIPse and web conferencing services are also ideal in the recessional environment. They are less costly but as effective as traditional systems. These tools also reduce travel expenses.

Depending on the needs, businesses should consider outsourcing payroll services, collection services, call center services, medical billing, and answering services to avoid the costs of infrastructure and additional in-house personnel. These services allow business owners to focus on the core functions of the business, and drive growth and expansion effectively by bringing expertise into the functions.

The key to beating the recession is maximizing on savings and cutting costs. However, maintaining quality in operations and services is as important or you’ll end up saving pennies and losing dollars.

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It Ain’t Over Till It’s Over

Thursday, December 31st, 2009

Cash flow is the lifeblood of small business. Small businesses rely on customer payments to fund daily operations, pay suppliers and employees, order resources and plan ahead. Without cash flow, a small business is pretty much lifeless.

Recession and bad debts

The recessive environment has impacted small businesses by reducing the disposable income of direct customers. The fall in demand is made worse by client companies that delay payments to collect interest on funds for their own business operations. As small businesses want more business from customers, they avoid the unpleasantness of reminding customers about payments. Plus, many clients are plain difficult. They disown claims to get out of paying. As small businesses are usually short of time, personnel and money, they cannot follow up on payments with the necessary aggression and tenacity. The result is a buildup of bad debts that show poorly on credit reports.

Collection agencies can improve bottom lines

Small businesses plagued with bad debt should consider hiring collection agencies before giving up on overdue payments. These professional agencies can reduce the time to receiving payments, increase profits by recovering high percentage of dues, ensure compliance to the Fair Debt Collection Practices Act (FDCP Act), sustain customer relationships and increase productivity by allowing business owners to divert all their energies towards business growth and profit.

Collection agencies work by sending out demand letters to the debtors, and follow it up with calls or personal interviews to get some commitment towards payment. Usually, this is all that is needed to retrieve payments. However, if the collection agency perceives that the customer is reluctant to pay dues, they may recommend the business to file a lawsuit against the customer.

Collection agencies work on commissions and have the incentive to collect more at the earliest. It makes business sense for small businesses to retain a collection agency for payment collections so that they can recover overdue payments and increase their cash flows for daily operations.

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