The Definitive Guide to selling your Accounts Receivable.
Your self-pay accounts are not all paying you. You have already run them through a collection agency. How do you get more money from these accounts? Sell them!
No matter if you are a medical office, a rental company, or any other small business professional you will most likely have account receivables that are going unpaid from clients.
Selling these accounts is actually a pretty simple process. In addition, after the first sale is completed, it can be set up to happen again on a monthly, quarterly, or yearly basis depending on how big your files of bad debt are.
What is required of you? You will need to get together a list of your non-paying account receivables, preferably in spreadsheet form such as on an Excel spreadsheet for the purchasing company to do their due diligence. The more information you can provide here, the better, but it should at least include the Balance Due, Date of Service, Debtor name, any Co-maker name , address, contact information, SSN (this can be masked) and last payment date and amount. Any additional information can also be helpful. In addition, some sort of proof of the debt, usually just a last statement, will need to be provided at closing. This can be done in hardcopy or via electronic form such as a PDF file. The CFPB is moving towards requiring this documentation on debt sales.
Upon agreement of pricing and closing terms, the purchasing company will produce a Purchase Agreement to close the transaction. Once both parties agree and execute that document, the purchasing company will fund the deal as agreed in the Purchase Agreement, you will then provide the complete spreadsheet files in unmasked form along with the final bills as proof of the debt, and sign off on the Bill of Sale that will be included in the Purchase Agreement.
How much is your non-paying bad debt worth? That will be determined once you get the spreadsheet to the purchasing party for them to do their due diligence. Expect some questions at this point, such as how many agencies the accounts have been to, whether any legal work was done on them, that type of thing. Prices of non-paying account receivables can range from 20 basis points/per dollar for older out of statute accounts to several cents on the dollar for fresh accounts that have never been to an agency. In general, the first sale will be a clearing out of older accounts along with some newer accounts, and the price per dollar will be lower than future ongoing sales where the accounts are newer. The type of debt will also weigh into pricing. What it really boils down to is the recovery rate the purchasing agency can expect. After the first deal is done, the purchasing agency will actually have some results on your specific office’s recovery rate, and later deals can be priced based on these actual results.
What should you look for in a Purchasing Agency? Really, the same thing you would look for in a collection agency. You want a company that has good standing and understands that these are patients who could potentially come back to your office. You want an agency that understands your clients debt, and all the associated laws with collecting it. You want to be able to communicate with them on any issues that may arise, but you also should expect them to be able to handle the collections with minimal interference with your office once the deal is closed and you have provided them the information and paperwork you agreed to.
What do you have to do after the sale? This is the beauty of this arrangement, basically nothing! Any calls you get on the past due accounts you have sold, you simply forward to the company that purchased them. They will take care of everything from there. There could be some minor refund/repurchase requirement of bankrupt or similar accounts, or the odd account you need to close for some legal reason from your end, but for the most part, you are finished spending money chasing non-paying accounts.