2. Revenue Collections Seminar Revenue: It’s Yours for the Taking Association of Public Treasurers (www.aptusc.org)www.aptusc.org

3. Collection Goals  Fair and timely collections  80% Collection rate  Reduced costs  Efficient staff use  Security  Reduced float  Automation when possible  Accurate record keeping  Complete approach to collections

4. Reaching your goals...  Utilize  Improvise  Politicize  Centralize  Privatize  Focus on all revenue not just delinquent revenue

5. Getting Started  Identify your sources of revenue  Taxes, utilities, fees, fines, etc.  Assign responsibilities  Assess needs of departments  Find and clarify existing policies

6. Getting Started  Determine  Who  How  Where all revenues are received

7. Centralize  Centralizing collections –  especially delinquent collections  Centralization may improve efficiencies  Centralizing utilizes resources  Centralizing focuses $$ impact Finance/Treasury Current Collections Cashiering Delinquent Collections

8. Centralized Collections  A centralized collection department can increase the collection of revenues  Eliminates duplication  Utilizes staff  Builds departmental support  Creates centralized information  Strengthens settlement authority

9. Centralize Processes Not People Standardize Cashiering in outlying departments Receipting procedures Deposit procedures Centralize Combination delinquent billing Utilize combination billing Centralize receivables Combine department information

10. Getting Started  To get started  Create a plan  how to manage collections  how to administer collections

11. Strategies  Generate support from elected officials communicate your goals/purposes  Tolerate short term seasonal delinquencies focus attention elsewhere  Prior year delinquents are one-time revenue  Focus on big-ticket and attainable collections

12. Getting Started “ To collect all revenue promptly and maintain the goodwill of the customer”  Create a “Mission Statement”

13. Getting Staff Started  Assign Responsibility  Assign Tasks  Set Objectives

14. Utilize New Technology  Lockbox  MICR Encoding  Generic Bills  Credit Cards  Remote Deposit  ACH  Positive Pay  Specialty Mailers  Cross Referencing

15. Lockbox Lockbox for high volume items Utilities and taxes Lockbox is more than payments Capture and transmission of Images and Data Expediting Information Processing Useful for all high volume payments Avoids Capital Expenses Keeps You Up-to-Date In Technology

16. Lockbox  The goal is reduction of float  Mail float  Unique post office box and multiple pickup  Automated postage direction  Processing float  24/7 operations  Direct deposit to bank  Direct transmission of data to you  Clearing float  Multiple deposits

17. Lockbox Processing LOCKBOX -opens mail -sorts -verifies payment -captures image -deposits funds -transmits Same day deposit to your account Same day transfer of data and images to City

18. JUST GET STARTED !!  Determine revenue sources  Develop a collection plan  Identify Obstacles  Write a Mission Statement  Develop procedures  Assign Responsibility  Get Started!

19. Developing a Collection Plan  Develop well defined procedures  Script telephone calls  Write model letters  Evaluate collection agencies  Evaluate credit card use

20. Obstacles to Effective Collections

21. Obstacles  Political Considerations  Internal Politics  External Politics

22. Obstacles  Political Considerations  Understanding the Art of Collections

23. The Art of Collection  Understanding human nature  Turning objections to opportunities  Effective communications  Successful negotiations

24. The Seven Axioms of Collections

25. The Seven Axioms - #1  Collect before you send the bill. Government is not in the business to extend credit.

26. Minimize your credit risks  Obtain all needed information at time of service  Establish relationships with clients  Refuse service if appropriate  Require deposits where possible  Obtain collateral  LOC  CDs

27. Identify individual’s credit risk The Four C’s of Credit:  CHARACTER- willingness to pay  CAPACITY- ability to pay  CAPITAL- financial condition  CONDITIONS- current credit

28. The Seven Axioms - #2  Collect before you send the bill  The best technique is simply to ASK  Ask By Telephone

29. The Collection Phone Call  Collection telephone calls should be:  PERSONAL - know your client  IMMEDIATE - don’t delay contact  INFORMATIVE - to both parties  FLEXIBLE - adjustable

30. The Collection Phone Call Pre-Call Planning:  Use records concerning the account  Use all sources in the organization  Contact the right person: the decision maker

31. The Collection Phone Call Develop an Opening Statement  Ask for the right party  Identify yourself and your entity  State the reason for the call  Wait for responses – Pause

32. The Collection Phone Call Plan the approach:  Be clear with planned questions:  Give specific amounts, dates, reasons  Avoid negative phrases  Anticipate excuses

33. Ask for the money  State the facts  Ask for the balance in full  Negotiate through objections  Settle on mutually agreeable terms  Be sure of their intentions

34. The Collection Phone Call Ask for the money!  Be ready for excuses  Involve the customer in the options  Be prepared with payment plans

35. Reasons and Excuses  Already paid…(get details)  In dispute…(mediate)  No money…(situation and plan)  Bankruptcy…(info and file)  Not scheduled…(late fees)  Carry over?(payment plan)

36. The Collection Phone Call Closing the deal!  Reiterate the commitment  Get a commitment from the customer  Agree on dates and amounts due  Confirm it in writing  Calendar for follow-up

37. The Collection Phone Call Leaving Messages  Confirm the name of person responsible  Determine the best time to reach the person  Leave your name, organization,telephone and request to call back  Get the name of person taking message  ALWAYS be courteous  Do not make a demand for payment

38. Record Keeping - Collection Call Planner Customer__________ Tel.______ Date______ Opening Statement:_____________________ If not, payment plan will be:______________ Benefits to the payment plan:_____________ Excuses expected:______________________ Especially useful for new employees.

39. Record Keeping - Customer Contact Forms  Date:  Customer:________________Tel:_____  Individual:________________________  Invoices Due: #____________________  Contact Response:__________________  Action:____________________________ Create a database of all contacts.

40. Record Keeping - Call Log  MONTH: _______________ Date Customer Invoice/Amt Phone

41. The Seven Axioms - #2  Simply Ask! By Telephone By Letter

42. The Collection Letter  Creativity increases collections  Creativity gets noticed  Creativity generates support  Creativity motivates staff

43. The Collection Letter  Motivate them to pay  Don’t threaten without follow-through  Use accurate information  Brevity is best  Write on a six-grade level  Check to avoid unintended inferences

44. The Collection Letter  State the facts  State the proposal  State the reason  State the Action  Review letters periodically  Personalize  Avoid humor  Be Creative

46. The Seven Axioms - #3 ¬ Collecting even before your send the bill ­ Simply Ask! ® Do not treat everyone the same

47. Customer are not equal  Size and type of account  Level of risk

48. The Seven Axioms  Collecting even before your send the bill  Simply Ask!  Do not treat everyone the same  Late fees are the best INCENTIVE Use as much as possible

49. The Seven Axioms - #5  Collecting even before your send the bill  Simply Ask!  Do not treat everyone the same  Late fees are the best incentives  The earlier the effort - the better the return

50. Warning Signals  Returned mail, no forwarding address  Broken promises of payment  Messages ignored  Changes in payment habits  Customer changes banks  Partial Payments or post dated checks  Customer’s key personnel are leaving

51. Early Bird Success  Initiate billing immediately  Establish monthly cycles  Contact delinquents a.s.a.p.

52. The Seven Axioms - #6  Collect before you send the bill  Simply ASK!  Do not treat everyone the same  Late fees are the best incentives  The earlier the effort, the better the return  Be CREATIVE  Make your request stand out in the stack!

53. Creativity pays...  Return envelopes  Coupon books  News articles  Different approaches  Technology  Departmental assistance

54. The Seven Axioms - #7  Collecting before you send the bill.  Simply ASK!  Do not treat everyone the same  Late fees are the best incentives  The earlier the effort, the better the return  Be creative   You have to find them to make them pay!

55. Information Sources  Be creative - be Columbo –  Who has the information?  Relatives?colleges?  Landlords?professional groups?  Employers?trade groups?  Roommates?other creditors?

56. Choose your weapon and focus  Free or inexpensive sources  Cross-cross directories  Internet directories  Public records

57. Outside sources of information  Informational databases  Credit reports  Social searches  Search disks  Professional skip-trace companies

58. Collecting Your Money

59.  Successful Collection Telephone Calls  Successful Collection Letters  Collecting Returned Checks

60. Returned Checks  Require repayment be in cash, cashier’s check, certified check or money order.  DO NOT accept a second bad check.  Add a service charge - if legally allowed  Post warning signs clearly stating fees  Keep a history of returned checks  Consider NSF collection by ACH

61. NSF and ACH  New bank service  NSF checks are not re-deposited immediately  Check data changed to an ACH  ACH targets likely payment date  First of the month?  Appears to increase collections 20%  May be lower bank cost also…

62. Collecting Your Money  Successful Collection Telephone Calls  Successful Collection Letters  Collecting Returned Checks  Other Collection Techniques

63. Other Collection Techniques  Promissory notes  Discontinuation of service  Amnesty  Withhold or deduct payments  Deny contracts, Loans or Grants (database)  Legal Action  Guido?????

64. Other Legal Remedies  Wage garnishment  Property lien  Levy  Property seizure

65. Making It Easier To Pay  Accepting Credit Card Payments

66. Accepting Credit Cards Advantages to customers More choices for the customer (especially in-transit clients) Ease of payment May enable earlier payments May produce better records

67. Accepting Credit Cards Advantages to your organization Faster access to receivables Reduces mistakes Reduces cash handling Eliminates check losses Reduces billing and collection efforts (shifts collection burden to credit company)

68. Accepting Credit Cards Disadvantages Cost to the governmental unit Check percentage charge versus flat rate Credit rate costs to customers May add extra steps administratively Possible legal hurdles

69. Making It Easier To Pay y Accepting Credit Cards y Electronic Payments

70. What are Electronic Payments?  ACH and EDI  The banking world is going to EDI  Exchange of electronic payment and backup information through standard formats via financial institutions  EDI uses on payments and receivables  Variable trailer information available  Trailer length is critical on internal information flow  Electronic withdraws of monthly payments from customer’s account through direct debits

71. Electronic Payments Advantages  Customers save processing costs  Eliminates late payments  On-time collections and cash flow  Security  Minimal excuses re lost, stolen checks

72. Electronic Payments Disadvantages  Procedural controls  Pre-notification cautions  NSF collections by ACH requires disclosure

73. Making It Easier To Pay  Accepting Credit Cards  Electronic Payments  Direct Payment  Accepting off-site payments

74. Using Technology  Payments by phone, fax, or internet  Front end payment acceptance  Verisign  Remote deposit

75. Collecting Your Money  Successful Collection Telephone Calls  Successful Collection Letters  Collecting Returned Checks  Other Collection Techniques  Write Offs

76. Write-offs  When to give up?  Discharged bankruptcies  Wrong responsible party  Deceased accounts  Invalid referrals  Court denials of claims/judgments  Amount or age doesn’t warrant efforts

77. Write Offs: When?  When cost benefit of further action is not justified  To accurately present your financial position  Guidelines: after one year write off a) most accounts without legal problems; b) small amounts (under $25.00) c) problem accounts

78. Using Contracted Services

79.  Using a Collection Agency

80. Considering a Collection Agency?  Stability and Reputation   Location and Coverage  Procedures and Capabilities  Compliance / Client Service

81. Using a Collection Agency Advantages  Contingency fee basis   Collection focus only  Pressure of “collection agency”  Possible credit report impairment  More productive staff usage

82. Using a Collection Agency Disadvantages  Loss of contingency income  Customer reaction  Unsupervised collection activities  Need for repetitive quality reviews

83. Using Contracted Services  Using a Collection Agency  Using a Collection Attorney

84. Collection Attorney Considerations  Cost  Letterhead Effect  Oversight

85. Using Contracted Services  Using a Collection Agency  Using a Collection Attorney  Using Credit Bureaus

86. Credit Bureaus  Payment information available to subscribers  Judging a credit report  Unspoken fear of credit impairment  Bureaus: Equifax, Atlanta, GA. Transunion, Chicago, IL Experian, Cleveland, OH

87. Credit Bureau Report Debtor Information

88. Credit Bureau Report Public Records

89. Credit Bureau Report Creditor Inquiries

90. Credit Bureau Report Tradelines Credit Bureau Reports

91. Legal Aspects of Collection  Fair Debt Collection Practices How hard can I push?

92. Legal Aspects of Collection Fair Debt Collection Practice  To eliminate abusive practices by collectors  Government agencies are exempt (letter not spirit!)  Prohibited Practices: Threatening or harassing language Calling before 8:00 AM or after 9:00 PM Abusive language Calling place of employment (if employer prohibited)

93. Legal Aspects of Collection  Fair Debt Collection Practice  Do:  Limit communication with debtor  Limit communication with third parties  Avoid harassment and abuse  Avoid false or misleading representations  Provide written validation of the debt

94. Legal Aspects of Collection  Fair Debt Collection Practice  Don’t:  Don’t make contact with debtor more than twice a week unless otherwise arranged  Talk to ANYONE other than the debtor about the debt  Harass the debtor  Threaten the debtor with actions that can not be carried out

95. Credit Reporting  Abide by the FCRA  Notify the debtor of your intent to report debt  Use information for legitimate business uses only  Disclose information ONLY to employees whose duties relate to the business purpose  Refrain from selling or distributing the information to third parties

96. Legal Aspects of Collection  Fair Debt Collection Practice  Bankruptcy

97. Legal Aspects of Collection  What is bankruptcy?  Legal means by which individuals and corporations place a hold on debts incurred prior to a filing date.

98. Bankruptcy  Creditors are prohibited from attempting any collection action on pre-filed debts.  Post filing debts are due in the normal course of business.

99. Bankruptcy Chapter and Verse  Chapter 7 - Liquidation proceeding available to individuals and corporations  Chapter 11 - Allows a business to continue to operate while formulating a plan to return to profitability  Chapter 13 - Partial or full pay off of creditors over extended period of time -for individuals only.

100. Bankruptcy  Terms and dates  Notice  Filing date  Case number  Automatic stay  Trustee  341 meeting  Deadlines  Proof of claim  Discharge  dismissal

103. Evaluating Your Collection Performance Do you have “age-less” receivables ??

104. Evaluating Collection Performance  DSO - Accounts Receivable Turnover  Days’ Sales Outstanding = days required to collect a dollar of revenue from the date billed until collected  Receivable at end of month ($12,500)  Revenue for month ($10,000)  $12,500 x 30 days /$10,000 = 37.5 days

105. Analysis of Aged Receivables  Aging delinquencies in set time periods 0 - 30 days$ 30 - 60 days$ 60 -90 days $  Used for transfer to outside agency  Not helpful in determining causes

106. Schedule of Collected Revenue  Total dollars collected by days  Used for new programs  Determines natural collection periods

107. Uncollectible Accounts  If write-offs are not authorized  Target large $$ dormant accounts  Identification allows future prevention  Analysis purposes

108. Evaluating Performance  Accounts Receivable Turnover  Accounts Receivable Aging  Schedule of Collected Revenue  Un-collectable Accounts  Comparison of Revenue and Expenses

109. Revenue Comparisons  Quarterly or semi-annual reviews  Program reviews  Departmental reviews  Cost benefit evaluations

110. In Summary  Set Objectives  Make a Plan  Evaluate your resources  Design your tools  Evaluate outside assistance  Evaluate your progress

111. Reaching your goals...  Utilize  Improvise  Politicize  Centralize  Privatize

112. MONEY NEVER SLEEPS Wake Yours Up ! Through better collections.

113. Good Luck ! About your trainer: Linda Patterson, CTP President, Patterson & Associates Linda, who has trained cash handling, collections, and investment courses for the Association of Public Treasurers and Public Treasury Institute for over 20 years, is the President of Patterson & Associates, an investment advisory firm established in Austin, Texas in 1994. 800-817-2442 www.patterson.net www.patterson.net

114.  APT US&C  APT represents over 1,000 public treasury and finance officials in local, county and state/provincial governments throughout N. America. The Association provides education, certifications and technical assistance to its membership. Visit www.aptusc.org for information on the 2007 Annual Conference in San Diego, August 11-15. www.aptusc.org  PTI  PTI provides training manuals and coordinates training seminars for public treasury and finance officials. The Institute and APT formed an alliance in 2004 for a wide range of training manuals workshops. Visit www.PublicTreasuryInstitute.com for information on booking a seminar in your city, county or region or to purchase the latest treasury manuals on line. www.PublicTreasuryInstitute.com