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  • 2. Realization Rates Realization rates should be approximately 90 to 95 percent.
  • 3. Issues to Consider Insurance carriers aggressively dissuade policyholders from pursuing bad debt. Check exclusion clause in policy for pursuit of bad debt and suits to recover unpaid fees. Strict adherence to carrier policies to prevent cancellation or suspension of policy and benefits. Obtain permission from carrier and provide requisite notice. Statute of Limitations for accounting malpractice. Independent investigation of file. Economic reality of lawsuits.
  • 4. How to increase realization rate, collectreceivables and not violate liability policies. Tighten risk management and assessment policies. Secure engagement letters which include policies regarding payment of fees. Act timely and diligently to collect past due balances. Review work papers and files for any possibility of counterclaims and suit. Consult with your carrier regarding the claim.
  • 5. High Risk Clients
  • 6. Engagement Letter1. A solid engagement letter is essential.2. Engagement letters should include: --Standard clauses. --Fees. --Specific work being performed. --Limitations. --Resolution of disputes. --Reservation of right to withdraw or terminate engagement. --Specific clauses which will protect the practitioner. --Rates subject to change.3. Do not proceed without the signed engagement and initial retainer.
  • 7. Addendums to Engagement Letter Change in scope or additional work to be performed. Change in fees or rates. Client must sign off on addendum before performing future work.
  • 8. Fee Disputes and Non-Payment:Always Anticipate a DisputeA. Include clauses for past due accounts.“Invoices will be presented monthly and are due on presentation. Invoices for which payment is not received within 30 days of invoice date shall accrue interest at the rate of 1.5 percent (or the highest rate allowable by law) per month. We reserve the right to halt further services until payment is received on past due invoices. If we should be requested to issue a report, we require that we be paid in full prior to such issuance for all work performed to date (or for all work to date and the estimated time and expenses through such report).”
  • 9. Fee Disputes and Non-Payment:Always Anticipate a DisputeB. Include clause regarding fee disputes. “In the event that you disagree with or question any amount due under an invoice, you agree that you shall communicate such disagreement to us in writing within thirty (30) days of the invoice date. Any claim not made within that period shall be deemed waived.” “In the event that collection procedures are required, you agree to pay all expenses of collection and all attorneys fees and costs actually incurred by our firm in connection with such collection, whether or not suit is filed thereon. If litigation is required regarding collection of the account we will be paid our hourly rates for all time actually expended by our firm in connection with such action.”
  • 10. Fee Disputes and Non-Payment:Always Anticipate a DisputeC. Include a provision limiting your firm’s liability. “You agree to indemnify and hold our firm, its partners, and employees harmless from any and all liabilities, costs and expenses relating to this engagement, and expenses (and those of our legal counsel) incurred by reason of any action taken or committed to be taken by us in good faith. In no event will our firm be liable for incidental or consequential damages even if we have been advised of the possibility of such damages.”
  • 11. Other Considerations Consider Alternative Dispute Resolution. Obtain carrier’s written permission to include fee dispute language in engagement letter. Consider a clause when accountant is a witness. --Time and work required.
  • 12. Client Rejection Do it in writing. Include writing containing warning that advice given during client intake interview should not be relied upon as it was offered without investigation of underlying facts and documentation.
  • 13. Collecting Receivables
  • 14. Collection Trends Source: Commercial Collection Agency Association100% 94.9%90% 89.9% 81.3%80% 69.6%70%60% 52.1%50% 39.1%40%30% 22.8%20% 9.3%10% 0% Due Date 30 Days 60 Days 90 Days Six Nine One Year Two Months Months Years
  • 15. IMPACT OF BAD DEBT WRITEOFF ON SALESYour Write And Your Netoff Profit is 2% 3% 4% 5% 6% You will need the following amount of additional sales to offset theloss $100,000 $5,000,000 $3,333,333 $2,500,000 $2,000,000 $1,666,666 $250,000 $12,500,000 $8,333,333 $6,250,000 $5,000,000 $4,166,666 $500,000 $25,000,000 $16,666,666 $12,500,000 $10,000,000 $8,333,333 $750,000 $37,500,000 $25,000,000 $18,750,000 $15,000,999 $12,500,000$1,000,000 $50,000,000 $33,333,333 $25,000,000 $20,000,000 $16,666,666$1,500,000 $75,000,000 $50,000,000 $37,500,000 $30,000,000 $25,000,000$2,000,000 $100,000,000 $66,666,666 $50,000,000 $40,000,000 $33,333,333Source: Commercial Collection Agency Association
  • 16. General Collection Process
  • 17. Legal Process
  • 18. Post Judgment Collections Property or income execution. Bank subpoenas with restraining notices to freeze bank accounts. Sell commercial property. Restrain monies due from third-parties.
  • 19. Information Essential toCollect Your Money Judgment Banking information. Clients. Assets. Place of business and locations.