By creating Credit Policies and Financial Policies, you can pass on a majority of the cost of collections to your customers. They are the reason you are using a third party to collect the debt. They simply did not abide by their obligation to pay you. Each state has different laws and rules for collection fees that are added to accounts when placed for collections. I have found that if you include the following statement, there is no reason that the courts in any state will not grant you these addition costs as it is a legal and binding signed agreement.
The statement is:
In the event your account becomes past due and is referred to an outside collection agency or attorney, you will be responsible for the collection costs at the rate of 33% of the balance due, along with reasonable attorney fees and court costs incurred by this office.
It is important to include the exact amount you are going to add on. If you put reasonable collection costs or fees, it is up to the judge or referee to determine what is reasonable. By stating the exact percentage that you will be adding on and having the customer sign the agreement, you are creating a binding contract that will hold up in court.
We do not collect all of the collection fees, sometime we use it as a settlement tool to get your original balance collected quickly in one lump sum. This also increases your total recoveries in a shorter period of time. We do collect enough to reduce your out of pocket expenses by as much as 80%.
Here is a simple scenario:
If you place $100,000.00 per year for collections (generally 6 months past due).
The Agency collects around 35% of those accounts placed: $35,000.00
The Agency charges you 30% which is $10,500, you then net out $24,500.00
Use collection fees to reduce your costs and increase your collection rates
If you place $100,000.00 per year for collections now at 3 months past due.
We collect 50% of $133,000.00 which is $66,500.00
We charge 29% of what is collected $19,289.00, you then net out $47,215.00
By using these ideas and concepts you would increase your net return (PROFIT!) by an astounding 96%!
By including this simple statement, you can reduce your cost of collections and also place the accounts out sooner, which results in a higher recovery rate. The older the account, the more difficult it becomes to recover it. People’s lives change over a 3 to 9 month period. They move, get new jobs and sometimes just disappear and you are not able to make contact with them. That is why it is important to create collection policies that your internal operations use to evaluate your past due receivables. It is important to make contact with the customer for payment immediately after the account becomes past due and to follow up on any arrangements that are not kept. Your staff will have 60 to 90 days to try and get the customer to pay. If they are unsuccessful, you can place the account at 90 days past due and have a good chance that we will be able to collect it. By adding on the fee, it also creates an incentive for the customer to avoid the account going to collections. You can create a final letter and send a copy of the signed agreement that states that they will be responsible for the collection fees at the rate of 33%.
Create your Credit Policies and Financial Polices using any part of the example below:
Credit Policy and Patient Responsibility
Thank you for choosing Name of your Business or Practice as your health care provider. We are committed to your treatment being successful. Please understand that prompt payment of your bill is considered part of your treatment. We have put together the details of our Credit and Financial Policies below. Please read carefully and sign below to begin treatment.
All patients complete our information and insurance forms.
FULL PAYMENT IS DUE AT THE TIME OF SERVICE.
For your convenience, we accept cash, checks or Visa/MC.
We offer payment plans with prior credit approval and signed agreement.
A finance charge of 18% annually (1.5% per month) will begin accruing after 60 days from the date of service.
PATIENTS WITH INSURANCE COVERAGE
We may accept assignment of insurance benefits after your second visit. However, we do require your co-payment be paid at the time of service. The balance incurred is your personal responsibility whether your insurance company pays or not. Coverage amounts vary from policy to policy and we cannot guarantee the amounts of coverage offered by your insurance carrier. It is your responsibility to seek coverage amounts and limits of liability on your insurance policy. You understand that your insurance policy is a contract between you and your insurance company. This office holds no party to that contract and will not be held responsible in the event your insurance company denies any claim.
USUAL AND CUSTOMARY RATES
Our practice is committed to providing the best treatment for our patients. We charge what is usual and customary for our area. You are responsible for regardless of what your insurance company’s arbitrary discrimination of usual and customary rates.
Delinquency (90 days past due)
In the event your account becomes past due and is referred to an outside collection agency or attorney, you will be responsible for the collection costs (up to 33% of the balance due), along with reasonable attorney fees and court costs incurred by this office.
I have read and understand Name of Business or Practice Credit and Financial policy with respect to payment on my account. I understand and agree to the terms of this agreement
Signature of patient or responsible party Date
By working with your customers in the beginning to avoid payment problems you will maintain a lasting professional relationship. When customers become delinquent on paying, they generally won’t use your services. This is a loss of additional revenues you would see if you were lax on your collection and credit policies. With the proper strategy and training, your staff can make sure everything runs smoothly and your revenues will be at their maximum. As a matter of fact your staff will enjoy collections more if you share PRP’s Secrets with them in our free report.
Read our free report on:
Use the Psychology of Collections to Collect the Debt & Keep the Customer
This report will instill new ideas and concepts to help your staff communicate with your customers in a positive way. They will be motivated to handle the accounts that become past due.