1. IMPROVING
REALIZATION RATES
FRANK FRANK GOLDSTEIN & NAGER P.C.
1430 BROADWAY, SUITE 1615
NEW YORK, NEW YORK 10018
TEL: (212) 686-0100 FAX (212) 686-6726
WWW.FFGNESQS.COM
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, collect
receivables 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.
6. Engagement Letter
1. 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 Dispute
A. 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 Dispute
B. 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 Dispute
C. 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.
14. Collection Trends
Source: Commercial Collection Agency Association
100% 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 SALES
Your Write And Your Net
off Profit is
2% 3% 4% 5% 6%
You will need the following amount of additional sales to offset the
loss
$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 $33,333,333
Source: Commercial Collection Agency Association
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 to
Collect Your Money Judgment
Banking information.
Clients.
Assets.
Place of business and locations.
