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Get Delinquent Bills Paid

Every business has trouble getting some customers to pay. So what's the best way to handle this day-to-day annoyance? Companies typically turn to collection agents and attorneys and pay them around 25 to 30 percent of the amount retrieved. But you can shave this cost by using a "dunning service."

This may sound intimidating but it's merely a computer service that turns out dunning notices. There's no collection system other than the notices. No one calls or takes your customers to court.

For approximately $15 including postage, dunning services send several messages. Think about it. If there are a hundred pieces of mail on your desk, wouldn't you open the dunning notice first because it comes in an official-looking telegram envelope?

Using a dunning service gets attention and results. You may find that about 50 percent of your delinquent customers pay you after receiving these notices. And later, you can always turn over the accounts that don't get paid to a more expensive collection attorney or agency.

Another tip: Try to save on a collection attorney by negotiating for a lower rate. Attorneys may initially ask you to pay 25 to 33 percent, but some settle for 15 to 20 percent - a significant rate reduction.

Want to Get Paid Faster?

In today's competitive business world, you need to take advantage of every weapon available. Even a psychological advantage can be important.

If you don't already provide postage-paid, pre-addressed envelopes to your customers, you might want to give it a try. Many companies discover that when they supply the postage and envelope, their invoices get paid faster. There's a perceived benefit associated with the convenience.

Of course, it can be difficult to justify the cost of providing return postage. This is especially true if you're sending out thousands of invoices to one-shot purchasers who might never buy from your company again. But if you mail out statements to the same group of customers on a regular basis, it can create goodwill and improve cash flow.

If you have questions about this article topic or other general business-related questions, please contact Small Business Manager Jim Gante, CPA at 717-757-6999 or 800-745-8233. You may also use the comments option below to send Jim an email.

Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.

IRS Circular 230 Notice: To ensure compliance with requirements imposed by the IRS, we inform you that any US tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code.

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