IMPROVING YOUR COMPANY’S CASH FLOW

1. IMPROVING YOUR COMPANY’S CASH FLOW

2. Billing & CollectionsBest Practicesby Jodi Nielsen Transworld Systems Inc.

3. Jodi Nielsen BA in Nuclear Medicine Account ExecutiveTransworld Systems Inc. 651-210-1921 Previous Positions include: President -Aquiline Business Center Administrator –Plastic Surgery Specialists Director-Mpls. Ear,Nose and Throat Clinic

4. State of the Economy • US Unemployment Rate 9.7% (August, 2009) • MN Unemployment Rate 8.0% (August, 2009) • Student Federal Loan Distribution for 08/09 school year increased 25% to $75.1 billion • Increase in Adults attending school

5. Best Practices Start at the Admissions Written Agreements Payment Terms Possible Penalties for Violations Proof of Commitment

6. What to include on an invoice? • A clear Student ID # and request it on check • A specific due date • Details Classes, Lab Fees, Housing, Parking, etc. • Acceptable forms of payment • Your phone # • No 30, 60, 90 boxes

7. Start Early – Recover MoreWe all know that the older an account gets, the harder it becomes to collect. But did you know that at 60–90 days past due accounts begin to depreciate at the accelerated rate of 1/2% per day? At 180 days past due funds have depreciated to the point where only 30% on average will ever be recovered. 95% 100% 90% Critical Depreciation Period 1/2% per day 74% 80% 70% 60% 50% 40% 30% 30% 20% 10% 10% 0% A G E O F A C C O U N T S IN DAYS 0 30 60 90 120 150 180 210 240 270 300 330 365 Source: U.S. Department of Commerce study on depreciation of accounts held in-house

8. Follow Up Early • Be the “Squeaky Wheel” • Written request for payment including due date and acceptable payment types • Remind and thank them for earlier commitment • Attach copy of previous commitment

9. Top 10 Ways to Improve Collections Businesses do not always get paid for the service or product they provide. The following steps are critical to reduce this cash flow killing problem.

10. Top 10 Ways to Improve Collections Rule 1 Have a Defined Credit Collection Policy Clearly state your terms of payment in writing for every student.

11. Establish WrittenInternal Collection Procedures • Easier when training new employees • Demonstrates importance placed on collections • Establishes performance benchmarks • Review and update as needed • Keep it clear and simple

12. Defining a Collection Policy • Define “past-due” • Define acceptable payment arrangements • How many written notices? (Emails) • How many phone calls? • How is returned mail handled? • Do you make personal visits?

13. Top 10 Ways to Improve Collections Rule 2 Invoice Promptly and Send Statements Regularly If you don’t have a systematic billing system, get one.

14. Top 10 Ways to Improve Collections Rule 3 Use “Address Service Requested” Post Office will research addresses of “mail skips” and for a small cost of seventy cents they will forward the mail and in return send you a post card with the most current address on file.

15. Top 10 Ways to Improve Collections Rule 4 Use Your Aging Report, Not Your Feelings Be diplomatic, but be persistent. Tip: When sending email, Click Request a Read Receipt

16. Top 10 Ways to Improve Collections Rule 5 Contact Overdue Accounts More Frequently Contact late accounts every 10-15 days.

17. Cash Flow Improvement “Come on, I know you’re in there, I can see your eye through the peep-hole!

18. Top 10 Ways to Improve Collections Rule 6 Make Sure Your Staff Is Trained • Even experienced staff can become jaded • Firm but courteous is the key • Staff must “sell” concept to students that they should pay what is owed

19. Collecting by Phone • When to start calling • Goal: Payment in full with 1 call • Track days/times of calls • Getting past the gatekeeper • Set goals of # of calls • Mental Attitude – expect success • Ask for payment TODAY (credit cards)

20. Communicating by Phone • Make a connection with Studemt • Actively listen for clues for motivation • Speak clearly and energetically • Have objective in mind • Know the next step – be prepared • “It’s my policy that… • Take good notes (just in case)

21. I know you have responsibilities as we all do… I don’t care about your problems… Positive vs. Negative Communications

22. How to Ask For Money Asking For Money is A 3-Step Process Step One – Sympathize Show compassion, “I know how that happens sometimes” This diffuses any possible anger and catches them off guard.

23. How to Ask For Money Asking For Money is A 3-Step Process Step Two – Restate the Obligation “Mr. Smith, your account was due on m/d/y.” This should cause some guilt on their behalf as well as have them realize you are “right” in asking to be paid.

24. How to Ask For Money Do Not Ask • How much can you pay? • When can you pay? • Can you pay something? • Note: This gives control of the conversation to the debtor, enabling them to give unreasonable answers

25. How to Ask For Money Asking For Money is A 3-Step Process • Step Three – “How Much Are You Short?” • “Mr. Smith, of the $200 that is due, how much are you short?” • If can pay some now, then give finite time to pay balance. • If short whole amount, you are still in control of payment terms.

26. Top 10 Ways to Improve Collections Rule 7 Admit and Correct Any Mistakes On Your Part • Customers realize that “to err is human” • They will appreciate prompt and courteous action when an oversight is caught • Beware: Do not try and cover up mistakes!

27. Top 10 Ways to Improve Collections Rule 8 Follow the Collection Laws in Your State • No public advertising of the debt • No calling at odd hours, threats, etc

28. Top 10 Ways to Improve Collections Rule 9 Use a third party sooner • After 90 days, in-house efforts are more expensive and less effective • Third party demands motivate customers

29. Remember this slide? 95% 100% 90% Critical Depreciation Period 1/2% per day 74% 80% 70% 60% 50% 40% 30% 30% 20% 10% 10% 0% A G E O F A C C O U N T S IN DAYS 0 30 60 90 120 150 180 210 240 270 300 330 365 Source: U.S. Department of Commerce study on depreciation of accounts held in-house

30. Depreciation In fact, at 12 months, only 10 in 100 will pay you.

31. When to Seek a 3rd Party • According to written policies/procedures • Broken promises – “check is in the mail” • Unable to reach by phone (voicemail, in a meeting, answering service, etc.) • Disconnected Phone or Number changed to unlisted • Missed Payments, Payments getting smaller

32. When to Seek a 3rd Party – cont’d • Certified mail returned “Unclaimed” • Admission of inability to pay • Bounced Check and no response • Disputed Balance

33. Licensed, bonded insured All terms in writing References available Reputable Experienced in your industry Hold Harmless Agreement Performance Guarantee Nationwide coverage Pricing (flat fee vs. percentage) Status Reports Personal account representative Soft or hard collections at your direction Electronic account submission and updates What to look for in a collection agency

34. Top 10 Ways to Improve Collections Rule 10 Nobody Collects Every Account • Even with a good billing and collection policy, a few accounts will never be collected • A consistent collection process will diminish the number of slow and non pay accounts, and that’s a victory in itself!

35. Cash Flow Improvement “It may seem we’re sinking deeper into debt, but really we’re just experiencing a quarter of negative growth.”

36. Traditional Approach STEP ONE: In-House Efforts STEP TWO: Percentage Collection Agencies or Dept. of Revenue 1 2

37. Traditional Approach How’s a traditional approach working for you? • Are you satisfied that your staff spends so much of its time on delinquent accounts that won’t be paid? • Are you satisfied paying a percentage collection agency 30 to 50% of the money that is rightfully yours? • Are you satisfied with the ROI you’re getting on collection of past due accounts?

38. Three Phase Solution Traditional Approach to A/R Client’s In-House Efforts Traditional Agency Approach • Statements • Letters • Phone Calls • Emails Percentage agency takes 20 – 50% of amount collected State Dept.-Revenue Recapture Transworld Approach to A/R Client’s In-House Efforts GreenFlag Profit Recovery Written Demands Transworld Systems Verbal Demands Legal Demands • Statements • Series of demands sent – client determines #, timing and tone • Phone-based traditional • profit recovery

39. Collections:What’s Your Legal IQ? True or False #1 An account must be at least 90 days past due before sending to collections.

40. Collections:What’s Your Legal IQ? True or False #2 You must inform debtors before turning their account over to a collection agency.

41. Collections:What’s Your Legal IQ? True or False #3 You cannot speak to a student’s parents regarding the debt.

42. Collections:What’s Your Legal IQ? True or False #4 As long as a student pays $1 per month, you cannot turn their account over to collections.

43. Collections:What’s Your Legal IQ? True or False #5 If a check is marked “Payment In Full” you can simply scratch it out.

44. Collections:What’s Your Legal IQ? True or False #6 Even if you never use a collection agency, you can threaten turning the debtor over anyway.

45. Cash Flow Improvement

46. Cash Flow Improvement Loan Manager

47. Questions? Jodi Nielsen 651-210-1921 Jodi.nielsen@transworldsystems.com http://web.transworldsystems.com/jodiandkaye

48. Transworld Quick Facts 39Years of Experience 600 Phone Collectors 60,000Clients Licensed in 50 States 100Offices Nationwide $700 million+ Collected Annually