Rev Up Your Revenues
Collecting past due accounts has always been important although not always popular. However, many local governments may take for granted, or even overlook, collections on receivables. In these difficult economic times when more scrutiny is being given to reducing capital projects, cutting expenditures, and decreasing staffing levels, it is time to rev up revenues through applying an effective delinquent collection program.
Long before “stimulus checks” and “economic recovery” became household words and long after the economy recovers, the revenue from collecting overdue accounts is key to the bottom line when the focus is on revenues.
Here are some easy steps:
- Be sure to identify all the types of receivables owing to the government. Develop a strategic plan to collect that revenue. Begin with focusing collection efforts on the largest dollar amount of debts and work down to lower dollar value debts. Decide where you can recover the most money for the least effort and expense. For example, it is more effective to mail a collection notice on a $1,000 account than it is for a $5.00 account. Review processes and make sure collection efforts are focused and aligned appropriately.
- Review the processes for handling bankrupt accounts. Some local governments automatically write off receivables when they become bankrupt. Many debtors mistakenly believe that a bankruptcy means that they do not ever need to pay a bill again and long after the bankruptcy is discharged they will claim that their debt is not owed. A proof of claim can be filed and possibly be paid through the bankruptcy plan. Properly flag accounts so that when the bankruptcy is dismissed or discharged, you will know that the debt is once again collectible.
- Ensure all collection tools available under state law are being used. Notwithstanding fancy collection tools or attorneys, the most effective effort can be the simplest - telephone calls and collection letters. To save on postage expense, develop a one-size-fits-all collection letter that can serve as a legal notice for any future collection action.
- If the state allows an offset against income taxes and lottery winnings, be sure to take advantage of this program. In Virginia , local governments may participate in the Set-Off Debt Collection program, whereby the locality may submit debts such as library fines, taxes, water bills, parking tickets, and all types of receivables for offset against income taxes and lottery winnings.
- Another often overlooked area is penalty, interest, and fees. Evaluate your late payment policies and apply any fees that are allowable by law. Look for fees that may allow you to recover the costs of collection efforts. Fees and late payment penalties not only increase revenue but provide an incentive for timely payment.
- Advertising can also be effective. If the budget and the state laws allow, advertise the names of debtors in the local newspaper. To save even more costs, post these names on the entity's Web site. Consider mailing a notice prior to advertisement such as “you may avoid having your name published by paying this debt before” a certain date. This may bring in additional revenues without having to pay for an advertisement. Again, this is an incentive for timely payment.
- Determine which debts can be recorded as a lien against real property. For example, some states allow liens against real property to be filed for weed abatement fees, demolition charges, and inoperable motor vehicle violations as well as for water/sewer billings.
- Take advantage of licensing and permitting regulations. Provided code allows, a government may be able to withhold business licenses and even building, zoning, or subdivision permits if there are delinquent taxes or parking tickets.
- Coordinate with Accounts Payable to intercept payments to vendors who owe a delinquent debt to the locality. Create a policy that the local government only contracts with vendors who do not owe delinquent taxes, licenses, or permits.
- There are numerous free Web sites that allow searches to find addresses and telephone numbers for debtors. Some sites provide detailed debtor information that will aid collections at a nominal cost. In addition, if the policy allows write-off of accounts for deceased debtors, there are numerous Web sites that provide information on deceased persons. The point here is to spend time on accounts that can be collected.
- It may sound simple, but require up-front payment rather than invoicing for a local government service. “Pay in Advance” works better than “Pay Whenever You Want.” From items such as police reports to recreation registrations and from solid waste services to the sale of surplus equipment, require advance payment. This reduces expenses of billing and also eliminates the chance of bad checks or the account becoming delinquent.
- Depending on the type of debt or tax and the local laws, consider coordinating efforts between agencies such as the state agencies, courts, health department, licensing, and alcoholic beverage control. For example, determine if a vehicle license plate registration can be withheld for unpaid local government taxes or if a restaurant alcohol beverage license can be revoked or withheld for non-compliance due to delinquent local taxes.
For more tips, next month's article will have more details on some unique collection strategies that may further keep delinquency rates low while keeping those revenues revved!