Financial Management Institute

Who Is Kenneth Grayer .....Really

2012-01-24T16:01:00.000-06:00

Spontaneous Idealists like me are creative, lively and open-minded people. I am humorous and dispose of a contagious zest for life. My enthusiasm and sparkling energy inspires others and sweeps them along. I enjoy being together with other people and often have an uncanny intuition for their motivations and potential. Spontaneous Idealists are masters of communication and very amusing and gifted entertainers. Fun and variety are guaranteed when I am around. However, I may be sometimes somewhat too impulsive in dealing with others and can hurt people without really meaning to do so, due to my direct and sometimes critical nature.

I am a keen and alert observer; I miss nothing which is going on around me. In extreme cases, I tend to be oversensitive and exaggeratedly alert and I am inwardly always ready to jump. Life for me is an exciting drama full of emotionality. However, I quickly become bored when things repeat themselves and too much detailed work and care is required. My creativity, imaginativeness and originality become most noticeable when developing new projects and ideas - I then leave the meticulous implementation of the whole to others. On the whole, Spontaneous Idealists attach great value to their inner and outward independence and do not like accepting a subordinate role. I therefore have problems with hierarchies and authorities.

As a Spontaneous Idealist I am one of the extroverted personality types. I enjoy working in a colorfully diverse group of people who interest and inspire you. Working in a “secluded room” is not my thing. My sense for the motivation of others is almost eerie. I constantly observe that which happens around me and have no problems noticing all sorts of things simultaneously or communicating with several people at the same time.

My enthusiasm is contagious to others and that is why my colleagues and friends all appreciate me as an important member of their team. My articulateness and sensitive ear for nuances in conversations with others obviously play a role. For me, this team-oriented environment is very important because I need to receive positive feedback and recognition like other people need air to breathe. It would be practically impossible for me to contribute everything I need to maintain my high ideals, by myself.

Variety, challenges and fun are important ingredients in my area of responsibility. I appreciate receiving new stimulation, meeting new people, and continuously collecting unique experiences. However, too much routine, too much detail work and the necessity to stick with one project for a very long time is not my thing. My strength are creative problem solutions, discovering new ways and opportunities, the conceptualization of new ideas on one hand, but not so much their concrete implementation on the other. Ideally, I have a staff of capable colleagues that takes over my concepts and runs with them.

This Is Me!! ….

Should-a, Would-a, Could-a, ...Are You That Business Owner or Entrepreneur

2012-01-06T12:19:00.001-06:00

Entrepreneurs are persistent, and yet vulnerable. When an entrepreneur is locked onto an idea or a thought, they will stop at nothing to see a project succeed. Entrepreneurs think “Do Now”- develop the plan along the way. In the beginning there is only one direction and that’s up-maybe you take a couple of hits along the way but that’s all part of the journey. The plan that should not be developed along the way is your “Getting Paid Plan”

The start-up phase of anything is exciting- it’s dealing with the bumps and bruises along the way that if you are not prepared can leave you and the business vulnerable or even bankrupt. What is the most important aspect of a business? Is it sales, marketing, or cash flow? It’s all of the above if you don’t market the business; there are no sales thus any cash flow. The guru’s say “If You Don’t Plan-You Plan to Fail” are the so called guru’s giving you the complete “Plan For Success”?

It has been my experience that most businesses fail due to cash flow management- what I mean by that statement is entrepreneurs don’t think about policies and procedures until it is too late. In the beginning you should be thinking-what are my policies and procedures if a client is not paying me, or is a slow or sporadic payer, at what stage should I consider outsourcing, what skill sets if I hire an accounts receivables representative have, what resources are available for credit & collections training, how much money am I losing if the receivables stay on my books etc.. There is not enough emphasis placed on Entrepreneurs and Small Business owners to get the education they need in order to efficiently and effectively manage their accounts receivables.

As I have stated in the past most small business owners and entrepreneurs are reactive in nature instead of proactive. You should of done-ABC, which would have done-XYZ and prepared you to handle obstacles that came your way that could have yielded a more positive result. At some point entrepreneurs, small business owners and the gurus should stop take a step back and realize just how important it is for businesses to have a plan in place for their credit and collections. Oh-how does that saying go “If You Don’t Plan-You Plan To Fail”

Let’s Get It Right The First Time

Thanks For Reading My Blog
Kenneth Grayer

Establishing Your Credit & Collections Policy

2012-01-03T18:12:00.000-06:00

A credit and collections policy is a document for your business and your clients. Whenever you aren’t paid immediately for the product or service you just provided; you have just extended your client a line of credit even if this was not your intentions. Let’s look at the other side your client does pay you immediately but the check was no good, the clients bank account was closed or perhaps the client was not happy with the product or service you provided or maybe the client is a slow or sporadic payer.

A credit and collections policy addresses all the issues above and much more. Here is the bottom line you went into business to make money, be in control of your destiny well I hate to break the news to you without your own established policy it’s easy to let your client’s control you based on what their needs are. There is an old business school joke that says “You Set the Price, I will set the Terms” and your clients literally did and do.

Some Consideration in Setting Your Policy

Let’s take the guess work right out of it and get started in setting up your policy by asking yourself the following questions:

1. How do I want to receive payment cash up front, Cash On Delivery (C.O.D) or extend credit
2. When I establish a new customer what processes do I have in place I.e.…credit application, detailed explanation of services to be provided
3. Establish a survey that ask question such as: were you satisfied with the product or service provided...(Optional) however this limits the possibility of any disputes and addresses any issues or concerns the clients may have.
4. Will I accept deposits for work performed or shipment of products?
5. What contract forms do I need and what type of language do I need in my contracts.
6. Debt Management Recovery Plan (what action will you take to recover outstanding receivables)Recovery Action by (This is where you are to select an agency for collections activity) Debts in excess of $______ (example $1,000.00) will be referred out for collection Delegation of Authority (Whom will have authority to place accounts for collections) This is Typically the responsibility of the CEO, President, CFO When account is unsuccessfully recovered (Forward flow to Legal Counsel for litigation)

Any number of credit and collections policies will do the trick; well I should not say that, the policy should be industry specific. The main idea is to establish your credit and collections policies before you open your doors for business. I know that could be difficult but it will eliminate spur of the moment decisions and will allow you to think clearly when you begin to discuss your policies with your clients and staff.

An informed client is a happy client. The issues that I see when it comes to your credit and collections policies are enforcing them, this is not a document that should be taken lightly and your clients should be aware that you do enforce your credit and collections policies.

After your policies are established it is important to sit down with your executive team and review this policy with them. Especially your sales force since they are the ones that will be selling your product or service. As a start-up it is ok to not have such a rigorous financial policy we don’t want to scare customers or clients away. On the other hand it may be in your best interest to eliminate the business that has issues with signing contracts with you or make firm commitments

Who's But Are You Covering

2011-12-26T22:50:00.001-06:00

When it comes to not getting paid for the products or services that you provide, I always ask my students "Who's Ass Are You Covering"? I get blank stares-we all know the look "Deer In Headlights" I would like to ask you that same question, Who's Ass are you covering and then immediately after that ask yourself-Why? At a minimum here are the top items small business owners spend money on:

- Business Cards/Brochures
- Website,
- Incorporating Services
- Marketing

Here is what we spend time thinking about Sales, Sales and more Sales - this is not a bad thing. It's exciting when you make your first deal, but always take a deeper look at your new potential client do your homework "Cover Your Ass". Run credit checks, pick up the phone and contact references and inquire about how they pay, contact their bank etc...

Tip: When contacting banks you might want to say "that you need to verify funds on checking account number in the amount of $10,000 thank you" if you noticed I did not ask "if it was ok to verify funds on account number" you’re asking for permission will more than likely get a No response every time. You have to assume that they are going to provide you with the information-you might get some push back but keep trying.

Tip - do not refer to your potential new clients as babe, buddy, honey, sweet heart, brotha, bro, homey; for obvious reasons.

Prior to doing business with your new potential client take 15 minutes to go over your credit & collections policy this way there are no surprises if your new client begins to have problems paying their A/R's on time? Remember not every sale or client is a good sale or client to have.

Thank You for reading my Blog
Kenneth Grayer CEO/President
Financial Management Institute Inc
Email: training@teamfmi.com
Web: www.teamfmi.com

Credit & Collections Policies vs. Business Plan

2011-12-26T13:21:00.002-06:00

Learning to collect on your delinquent Accounts Receivables should be a priority to you when you open the doors of your business. When individuals make the decision to go into business there is a lot of emphasis placed on writing a business plan but at what point does writing your credit and collections policies become a thought? Typically when you are not getting paid for the product or services that you have provided is when you spring into action. This is being reactive not proactive.

Not enough emphasis is placed on what to do or how to collect from non-paying or slow paying customers. Organizations such as the Small Business Administration would have you believe that your business plan is the most important document needed to successfully operate your business, which is partially true. I agree that some sort of business plan is necessary.

Starting and running a business is very exciting and rewarding in the beginning-all the fun stops when you are not getting paid for the product or service that you have provided. Let's think this through-if your business is suffering then your household is suffering as well?

Now you have to convey to your creditors "I will pay you when my clients pay me" . The harsh reality is you have taken more of a personal approach with your clients, and you don't want to upset them because they might not want to do business with you anymore. I can respect the emotional thought process but honestly it's you or them.

In the start-up phase of your business venture your goal is to go out and market your product or service and chase money latter, sometimes that money you are chasing never comes back to you and the client whom you thought was a "Good Guy" is gone and out of business which can and will soon be you if you don't get proactive.

Don't procrastinate on writing your credit and collections policies. Thank you for reading my Blog visit us at www.teamfmi.com and subscribe to newsletter

Financial Management Institute
Kenneth Grayer
CEO/President
Email: training@teamfmi.com

2011-12-18T13:00:00.000-06:00

Professional Collections is not a difficult profession everyone can do this job but not everyone can handle the job. You have to have mental toughness to succeed; experienced and highly skilled/trained collectors reading this know exactly what I’m talking about.

Being a collector or managing your account receivables requires several different skills set. Just because you call on a business that has outstanding receivables does not mean they are going to pay you right away. All businesses go through tough times and give objections why they cannot pay their contractual obligations.

The primary objectives of a professional collector is to educate the client on the facts, gather as much information from the client/customer and motivate them to make a decision. The decision that some business owners will make is to hang up or simply evade your calls. Most business owners do not default on contracts intentionally, something happened. A professional collector will ask the appropriate questions to gather full & complete information & provide the best possible arrangements for themselves, and the client if they want to continue to do business with them.

Another important factor is professional collectors must use every means available to make contact with their customer in the shortest amount of time. Let’s say you decide to place accounts with a collections agency for a fee if collected is called a contingency account. Contingency accounts are accounts that are placed with a collection agency by a creditor (That's You) to liquidate their portfolios or locate a business that has relocated and all the information that you have from the client is no longer valid information. Yes this does happen

Collectors must use appropriate skip-tracing efforts when necessary. When a professional collector has located the business/owner we must ensure that the individual understands the purpose of the call and establish an authoritative line of communication with the business owner.
Being a successful collector requires excellent communication skills; you have to be able to analyze situations, make decisions, manage your time, have patience, use a little finesse, and have a heightened level of focus. The first thing I like to do with a collector is determine if in fact this is something they really and truly want to do. Now that I have a commitment from you, buckle up !!

Q - Are you one of thoughts guys whose wife or girlfriend always says "You Never Listen To Me"? please don't say "NO"- You lying Ass (LOL). Communication is a conversation between two or more individuals. One person listens and one person speaks…It is important to understand that Two people cannot have a successful conversation and accomplish a common goal with interruptions. Developing communication skills will ensure the collectors’ ability to control a call made or received and increase your earning potential.

It’s not what you say; it’s how you say it that will eventually get you paid. As a collector you will handle many different telephone calls from business owners who are: frustrated, angry, and embarrassed unless they just don’t give a shit. During your communications you have to determine what is going to be a motivating factor to getting your invoices resolved.

Visit http://www.teamfmi.com

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2011-12-04T21:15:00.001-06:00

Keeping It 100% Real With You This Is A Must Read - Blog

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2011-11-25T19:43:00.001-06:00

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2011-11-25T18:54:00.000-06:00

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2011-09-22T19:31:00.000-05:00

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2011-05-22T21:06:00.000-05:00

by Alan Nasser and Kelly Norman

It was announced last summer that total student loan debt, at $830 billion, now exceeds total US credit card debt, itself bloated to the bubble level of $827 billion. And student loan debt is growing at the rate of $90 billion a year.

There are far fewer students than there are credit card holders. Could there be a student debt bubble at a time when college graduates’ jobs and earnings prospects are as gloomy as they have been at any time since the Great Depression?

The data indicate that today’s students are saddled with a burden similar to the one currently borne by their parents. Most of these parents have experienced decades of stagnating wages, and have only one asset, home equity. The housing meltdown has caused that resource either to disappear or to turn into a punishing debt load. The younger generation too appears to have mortgaged its future earnings in the form of student loan debt.

The most recent complete statistics cover 2008, when debt was held by 62 % of students from public universities, 72 % from private nonprofit schools, and a whopping 96 % from private for-profit (“proprietary”) schools.

For-profit school enrollment is growing faster than enrollment at public schools, and a growing percentage of students attending for-profit schools represent holders of debt likely to default.

In order to get a better handle on the dynamics of student debt growth, it is helpful to sketch the connection between the current crisis in public education and the recent rapid growth of the for-profits.

Crisis of Public Education Precipitates Private School Growth

Since the most common advise to the unemployed is to “get a college education”, and tuition at public institutions is at least half or less than private-school rates, public higher education institutions have been swamped with an influx of out of work adults. This has resulted in enrollment gluts at many state colleges. At the same time, tuition is increasing just when household income and hence the affordability of higher education are declining.

Here is how this scenario unfolds:

With few exceptions, state-funded colleges and universities set tuition rates based on policy and budget decisions made by state legislatures. High and increasing unemployment and declining wages have resulted in declining public revenues. This in turn leads to budget cut directives from legislative bodies to public higher education institutions, often accompanied by the authority to increase tuition.

For example, a 14% budget cut to an institution may be "offset" by giving the governing boards of the school the authority to raise tuition by a maximum of 7%. Often the imbalance created by a cut to the base budget and an increase in tuition is made worse by limits on enrollment. A state legislative body may cut an institution's budget, allow it to increase tuition, but not provide per-student funding increases to keep pace with the accelerating enrollment demand.

This affects tuition rates at for-profit institutions. More students who would otherwise attend a state institution or a private, non-profit school are finding themselves without a seat at over-enrolled campuses. More students are pushed into the online and for-profit sectors, and proprietary schools sieze the day by inflating their tuition costs.

Because online colleges lack the enrollment constraints of a physical campus, they are uniquely poised to capture huge proportions of the growing higher education market by starting classes in non-traditional intervals (the University of Phoenix, for example, begins its online classes on a 5-week rolling basis) and without regard to space, charging ever-increasing rates to students who have no other choice.

Instead of waiting for an admissions decision or a financial aid package from a traditional college, students can enroll immediately online. This ease of use and accessibility to any student has allowed the for-profit sector to capture a growing portion of the higher education market and a growing proportion of education-targeted public money. Enrollments at for-profit colleges have increased in the last ten years by 225%, far outpacing public institution increases.

Thus, the neoliberal assault on public education not only tends to push more students into private institutions, it also generates upward pressure on tuition costs. This results in growing pressure on enrollees at proprietary schools to take on student loan debt.

How Healthy Are Student Loans?

The extraordinary growth of student debt paralleled the bubble years, from the beginnings of the dot.com [1] bubble in the mid-1990s to the bursting of the housing bubble. From 1994 to 2008, average debt levels for graduating seniors more than doubled to $23,200, according to The Student Loan Project, a nonprofit research and policy organization. More than 10 % of those completing their bachelor’s degree are now saddled with over $40,000 in debt.

Are student loans as financially problematic as the junk mortgage securities still held by the biggest banks? That depends on how those loans were rated and the ability of the borrower to repay.

In the build-up to the housing crisis, the major ratings agencies used by the biggest banks gave high ratings to mortgage-backed securities that were in fact toxic. A similar pattern is evident in student loans.

The health of student loans is officially assessed by the “cohort-default rate,” a supposedly reliable predictor of the likelihood that borrowers will default. But the cohort-default rate only measures the rate of defaults during the first two years of repayment. Defaults that occur after two years are not tracked by the Department of Education for institutional financial aid eligibility. Nor do government loans require credit checks or other types of regard for whether a student will be able to repay the loans.

There is about $830 billion in total outstanding federal and private student-loan debt. Only 40% of that debt is actively being repaid. The rest is in default, or in deferment (when a student requests temporary postponement of payment because of economic hardship), which means payments and interest are halted, or in forbearance. Interest on government loans is suspended during deferment, but continues to accrue on private loans.

As tuitions increase, loan amounts increase, as do private loan interest rates, which have reached highs of 20%. Add that to a deeply troubled economy and dismal job market, and we have the full trappings of a major bubble. As it goes with contemporary bubbles, when the loans go into default, taxpayers will be forced to pick up the tab, since just about all loans extended before July, 2010 are backed by the federal government.

Of course the usual suspects are among the top private lenders: Citigroup, Wells Fargo and JP Morgan-Chase.

Financial Aid and Subprime Lending

A higher percentage of students enrolled at private, for-profit (“proprietary”) schools hold education debt (96 %) than students at public colleges and universities or students attending private non-profits.

Two out of every five students enrolled at proprietary schools are in default on their education loans 15 years after the loans were issued. In spite of this high extended default rate, for-profit colleges are in no danger of losing their access to federal financial aid because, as we have seen, the Department of Education does not record defaults after the first two years of repayment.

Nor have the disturbing findings of recent Congressional hearings on the recruitment techniques of proprietary colleges jeopardized these schools’ access to federal funds. The hearings displayed footage from an undercover investigation showing admissions staff at proprietary schools using recruitment techniques explicitly forbidden by the National Association of College Admissions Counselors. Admissions and enrollment employees are also shown misrepresenting the costs of an education, the graduation and employment rates of students, and the accreditation status of institutions.

These deceptions increase the likelihood that graduates of for-profits will have special difficulties repaying their loans, since the majority enrolled at these schools are low-income students. (Forbes magazine, Oct. 26, 2010, “When For-Profits Target Low-Income Students”, Arnold L. Mitchem)

A credit score is not required for federal loan eligibility. Neither is information regarding income, assets, or employment. Borrowing is still encouraged in the face of strong evidence that the likelihood of default is high.

Loaning money to anyone without prime qualifications was “subprime lending” during the ballooning of the housing bubble, when banks were enticing otherwise ineligible candidates to buy houses they could not afford.

Shouldn’t easy lending without adequate credit checks to college students with insecure credit also be considered “subprime lending”?

Government’s Bias Toward the Private Educational Sector

In 2009 President Obama initially pledged $12 billion in stimulus funds to help community colleges through the economic crisis. Last March that sum was slashed to $2 billion.

We see a drastic cut in federal stimulus funding even as state funding for higher education is expected to fall even further. At a time when community colleges across the country are overflowing with returning students seeking new skills and high school graduates who can’t afford ever-rising tuition rates at many four-year schools, the majority of education-bound stimulus funds are going to for-profit institutions, not community colleges. (Our home state of Washington illustrates the general direction of the administration’s “reform” of higher education: for the first time in the state’s history, public funds no longer pay the majority of higher education costs.)

Apart from stimulus funding, overall government student aid is disproportionately aimed at those attending proprietary schools. Nearly 25% of federal financial aid is spent on students attending for-profit colleges, even though these colleges enroll less than 10% of the nation’s college students.

Proprietary schools now rely on federal financial aid – PELL Grants and federal loans – as their primary source of revenue. Not-so-incidentally, proprietary schools are among the largest donors to Education Committee members.

Proponents of the system defend it by pointing out that public colleges also rely on taxpayer subsidies for the majority of their revenue. But this overlooks a decisive difference: what proprietary schools don’t have that public schools do, is an obligation as a state agency to deliver a high quality education to its students. Instead, proprietary schools have a legal fiduciary duty to their stockholders, like any other for-profit enterprise. As a result, according to a PBS Frontline investigation, the sector spends 20 to 25 % of its budget on marketing and only 10 to 20 % on faculty.

The Track Record of For-Profit Colleges

The track record of for-profit colleges does not justify their disproportionate share of government largesse.

Drop out rates are higher than they are at public and non-proprietary private schools, often as high as 50 %. Irrespective of whether a student drops out, the for-profit college has already pocketed tuition and fees. The student is left still burdened with a substantial debt obligation.

As for graduation rates, a 2008 report by the National Center for Education Statistics puts the graduation rate for students at for-profits beginning their studies in 2002 at 22%, an 11% drop from students enrolling in 2000. The same cohort attending public and private non-profits graduated at rates of roughly 54% and 64%, respectively. Graduate or not, the debt burden remains.

Suppose the student either seeks to transfer to a public or another non-profit, or completes her studies and enters the job market with a proprietary degree? Many students assume that credits are transferable to a public or nonprofit, but they aren't, so they pay twice to attain their degree. The school holds out the lure of high-paying jobs upon graduation, but too often no such jobs exist or they require education or experience beyond what the school provided.

Congressional studies have shown that the earnings of proprietary graduates are the lowest of all graduates. According to a 2009 Bloomberg report on salary comparisons between traditional and online degree-holders, graduates with bachelor’s degrees from traditional colleges earn a median salary of $55,200, while those with degrees from the University of Phoenix earn only $50,500, and $43,100 from for-profit American Intercontinental.

On top of these earnings and job-prospect disadvantages, proprietary graduates bear the heaviest academic debt burden. The Education Department reports that 43 % of those who default on student loans attended for-profit schools, even though only 26% of borrowers attended such schools. Many of those who attended for-profits don’t earn enough to repay their loans.

It’s not uncommon for a student who either paid out of pocket or took out a loan for a $30,000 degree to find herself stuck in a $22,000 a year job. This only adds insult to injury: a Government Accounting Office (GAO) study reports that “A student interested in a massage therapy certificate costing $14,000 at a for-profit college was told that the program was a good value. However, the same certificate from a local community college cost $520.00.” (GAO, “For-Profit Colleges: Undercover Testing Finds Colleges Encouraged Fraud and Engaged in Deceptive and Questionable Marketing Practices”, Nov. 30, 2010)

Paying back student loans out of low income and over a long period of time can rule out the possibility of making other financial investments required for the vanishing American Dream, such as buying a house, or saving for retirement or for one's children's education.

All in all, the for-profits’ track record is more than dismaying. In too many cases, students leave proprietary schools in worse financial shape than they were in before they enrolled. The problem is not limited to proprietary graduates: this generation of college grads now possesses more debt than opportunity.

You might think that the unflattering record of for-profit schools would restrain government gift-giving. After all, the Obama administration’s current education policy would punish “underperforming” public schools and teachers. But these policies target the public sector exclusively. The villains are supposed to be irresponsible public schools and teachers’ unions. It is entirely consistent with Washington’s agenda that the dismal performance of proprietary schools does not jeopardize their future access to public financial aid funds - as long as the student does not default on their loan within two years of dropping out.

The Career College Association, the lobbying arm of publicly traded colleges, finds all this to be irrelevant. It relies on a different type of indicator from the rest of the higher education sector to measure the success of its for-profit colleges: stock prices. Remarkable. We see the disproportionate flourishing of “schools” whose primary concern has nothing to do with education.

The Private Lenders: Securitization as Usual

The two largest holders of student loans are SLM Corp (SLM) and Student Loan Corp (STU), a subsidiary of Citigroup. SLM -Sallie Mae- was originated as a Government Sponsored Enterprise (GSE) in 1972. The idea was to prime it for eventual privatization. In 2002 Sallie Mae shed the its GSE status and became a subsidiary of the publicly traded holding company SLM Holding Corporation. Finally, in 2004 the company officially terminated its ties to the federal government.

As the nation’s largest single private provider of student loan funding, SLM has to date lent to more than 31 million students. In 2009 it lent approximately $6.3 billion in private loans and between $5.5 billion and $6 billion in 2010.

In the 1990s, well before its full privatization, Sallie’s operations were increasingly swept into the financialization of the economy. It jumped whole hog onto the securitization bandwagon, lumping together and repackaging a large portion of its loans and selling them as bonds to investors.

SLM created and marketed its own species of asset-backed securitized student loans, Student Loan Asset Backed Securities (SLABS). When derivatives trading went through the roof following the 1998 repeal of Glass-Steagal, increasingly diverse tranches of Sallie-Mae-backed SLABS entered the market. The company is now also buying and selling the obligations of state and nonprofit educational-loan agencies.

Student loans were included in the same securities that are blamed for the triggering of the financial crisis, and financial products containing these same student loans continue to be traded to this day. The health of these tranches and securities is, as we have seen, highly suspect.

SLM’s risk was minimized as long as the feds guaranteed its loans. But as part of last March’s health care legislation, starting in July 2010 federally subsidized education loans were no longer available to private lenders. What do education loans have to do with health care? Since the government took federal loan originations in-house, making them available only through the Department of Education, it no longer has to pay hefty fees (acting as the guarantee) to private banks. The Obama administration expects to save $68 billion between now and 2020. $19 billion of this will be used to pay for the $940 billion health care bill.

While there appears to be no relief for student borrowers, private banks manage to survive apparent setbacks just fine. SLM will do quite well despite the withdrawal of government backing. The company anticipated the change in government lending policy by executing an ingenious trick as a borrower. Early last year it made its insurance subsidiary a member of the Federal Home Loan Bank of Des Moines, which agreed to lend to big-borrower SLM at the extraordinary rate of .23%. And anyhow, subsidized loans are almost always insufficient to cover the entire cost of a college degree. For a while the student gets to enjoy the benefits of a government loan. Interest rates are lower and during deferment interest does not accrue. But eventually many students must also take out a private loan, usually in larger amounts and with higher interest rates which continue to mount during deferment.

The Worst-Case Scenario: Going Bankrupt

Credit card and even gambling debts can be discharged in bankruptcy. But ditching a student loan is virtually impossible, especially once a collection agency gets involved. Although lenders may trim payments, getting fees or principals waived seldom happens.

The Wall Street Journal ran a revealing report on the kinds of situation that can lead to financial catastrophe for a student borrower. (“The $550,000 Student Loan Burden: As Default Rates on Borrowing for Higher Education Rise, Some Borrowers See No Way Out”, Feb. 13, 2010) Here is an excerpt illustrating the toll that forced indebtedness can take on the student debtor:

“When Michelle Bisutti, a 41-year-old family practitioner in Columbus, Ohio, finished medical school in 2003, her student-loan debt amounted to roughly $250,000. Since then, it has ballooned to $555,000.

It is the result of her deferring loan payments while she completed her residency, default charges and relentlessly compounding interest rates. Among the charges: a single $53,870 fee for when her loan was turned over to a collection agency.

Although Bisutti's debt load is unusual, her experience having problems repaying isn't. Emmanuel Tellez's mother is a laid-off factory worker, and $120 from her $300 unemployment checks is garnished to pay the federal student loan she took out for her son.

By the time Tellez graduated in 2008, he had $50,000 of his own debt in loans issued by SLM... In December, he was laid off from his $29,000-a-year job in Boston and defaulted.

Heather Ehmke of Oakland, Calif., renegotiated the terms of her subprime mortgage after her home was foreclosed. But even after filing for bankruptcy, she says she couldn't get Sallie Mae, one of her lenders, to adjust the terms on her student loan. After 14 years with patches of deferment and forbearance, the loan has increased from $28,000 to more than $90,000. Her monthly payments jumped from $230 to $816. Last month, her petition for undue hardship on the loans was dismissed.”

Indebted Students’ Job Prospects

Most of those affected by the meltdown of 2008 had completed their education and were either employed or retired. The student loan debt bubble signals a generation that enters the work of paid work saddled with debt and earnings prospects poorer than what job seekers could expect during the period of the longest wave of sustained economic growth and the highest wages in US history, 1949-1973.

According to the National Association of Colleges and Employers more than 50 % of all 2007 college graduates who had applied for a job had received an offer by graduation day. In 2008, that percentage tumbled to 26 percent, and to less than 20 % in 2009. And a college education has been producing diminishing returns. For while a college degree does tend to correlate with a relatively high income, during the last eight to ten years the median income of highly educated Americans has been declining.

Every two years the Bureau of Labor Statistics issues projections of how many jobs will be added in the key occupational categories over the next ten years. The projected future jobs picture indicates that the grim employment situation is not merely a temporary reflection of the current unusually severe downturn.

BLS releases two job projections, on the Fastest Growing Occupations [2] and on Occupations With the Largest Job Growth [3] [3]. BLS focuses on the former, where the two fastest growing occupations, biomedical engineers and network systems and data communications analysts, require a college degree. BLS comments that occupations requiring postsecondary (a bachelor’s degree or higher) credentials will grow fastest.

But we need more information, about the degree requirements of the total number of job categories listed in both projections, and about the number of new jobs expected to materialize in each projection.

Of the total jobs listed, only one of five require a postsecondary degree. By far the fastest growing category is biomedical engineers, projected to grow 72.02 %, from 16,000 in 2008 to 27, 600 in 2018. That’s 11,600 new jobs. Is that a lot? Well, compared to what? The percentage figure, 72.02, is high, but what about the number of new jobs? Let’s compare that Fastest Growing occupation with retail salespersons, the fifth occupation on the Largest Growth list. Retail sales workers will grow by a mere 8.35 %. But that amounts to almost 375,000 new jobs, an increase from 4,489,000 jobs in 2008 to 4,863,000 jobs in 2018. Compare that to the 11,600 new jobs at the top of the Fastest Growing list. Just do the simple math on all the categories on both lists: the majority of new jobs are projected to be low-paying.

Most new jobs will offer the kind of wage we would expect from an economy in which, according to one of president Obama’s most repeated phrases, “we” will “consume less and export more”. BLS avers as much when it projects that fewer than 12 million of the 51 million “job openings due to growth and replacement needs,” will require a bachelor’s degree.

The dire situation of this generation of college students sends a clear message regarding the responsibility of a democratic government. Infusions of liquidity supposedly intended for working people are presently mediated by banks, which are the direct recipients of the funds. This policy has had virtually no effect on the fortunes of wage earners, even as it has enabled a windfall for the banks. What is needed is New-Deal-style direct aid to working people, in the form of wage supports (e.g. living wage legislation), direct aid to students at low interest rates, government creation of jobs in education, health care and infrastructure improvement, and strict regulation both of the recruitment practices and tuition of for-profit colleges and of the predatory practices of private lenders.

Elizabeth Warren’s brainchild, the Consumer Financial Protection Bureau, is a good place to start. The Bureau promised to address student loans, and has mentioned setting rules regulating advertising and creditworthiness. But should the Bureau decide to regulate usury rates, it will encounter the same kind of opposition that insurance companies displayed toward the regulation of premiums, co-pays and deductibles prior to the March 2010 health care legislation.

Progressives can begin to counter this opposition, and address the overall debt crisis, if we organize to press this agenda, and refuse to support at the ballot box candidates who are deaf to our demands.

Alan Nasser is professor emeritus of Political Economy at The Evergreen State College in Olympia, Washington.

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2011-05-22T20:22:00.000-05:00

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Credit & Collections Policy

2011-03-08T18:19:00.000-06:00

Receivables Training Academy

Credit and Collections Policy
Part – 1 of Series

What is a C&C Policy? The C&C policy sets forth who, what, where, when and how a organizations receivables will be handled.

All businesses that extend credit, or who provide goods and services to persons or another organization should have a clearly defined C&C policy.

It is common practice for businesses to offer the following forms of business credit: Delayed Payment, Financing, Charge Card, Checking Services and now Factoring. The new player on the block is the Receivables Exchange. The Receivables Exchange pares your receivables with a person or a business to purchase your receivables for pennies on the dollar. It says right on their website:

The Receivables Exchange is a “revolutionary” financing tool that helps businesses boost cash flow when they need to, on their terms. The Exchange can help your business:

Make payroll or pay bills
Manage extended payments from customers
Build a strategic cash cushion

First of all this is not revolutionary. Debt Purchasing, payroll and cash cushions have been around for decades. In the collections industry we consider this platform debt purchasing. Now the cons to their program are your business must meet the following criteria:

1. A minimum of $2 million in annual sales
2. At least two years of operational history
3. Registered to do business in the U.S.

Here Is the Bottom Line

Delinquencies will continue to be a problem if internal factors such as, lack of a good information system, passive collection of repayments by untrained staff, poor methodologies and policies are not addressed. To deal with delinquency the business should have a clear system for analyzing, controlling, and managing delinquency and a clear policy for reporting late receivables as part of the overall financial health of the business. In our next newsletter we will address the analysis of the cause and effects of delinquency.

Criminal Illinois Penalties For Writing Bad Checks

2011-02-11T12:14:00.002-06:00

Receivables Training Academy

Criminal Illinois Penalties: Up to $500 fine or up to one year in jail, or both. Civil Illinois Penalties: Treble amount of check but not less than $100 nor more than $500 plus attorney's fees and court costs.

Section 3-104(2)(b) of the UCC, defines a check as "a draft drawn on a bank and payable on demand." A postdated check, since it is not payable on demand, does not satisfy this demand.
Consequently, it has generally been held by most states that the giving of a post-dated check does not constitute a present fraud nor is it within the scope of the bad check laws.

In most cases, NSF checks are not considered under the bad check law if they are used to pay an antecedent debt. Therefore, if a debtor gives a debtor an NSF check to pay a note payment or to pay an invoice that is on account, the act generally does not fall within the bad check law. However, if the debtor provides a creditor with a NSF check for a COD order, then that act does fall within the bad check laws.

Bad checks, also known as NSF checks, bounced checks, rubber checks, insufficient checks, bogus checks, etc., can be a big problem for an individual or for any size company. There are both civil and criminal penalties for this unlawful act, although it is much more costly and difficult to prove a criminal case. Always consider your goal: to recover the money or punish the check writer?

Any person who issues a bad check in the state of Illinois because the drawer
does not have an account with the drawee, or because the drawer does not
have sufficient funds in his account may be liable, in addition to the amount of
the check, for the sum of $25.00, or for all costs and expenses, including attorney
fees, whichever is greater, plus interest. To be eligible for any costs and expenses
in excess of $25.00 in a non-litigated collection action against the issuer of a
bad check, a person undertaking such action must make a written demand by
certified mail, return receipt requested, delivered to the last known address
of the issuer of the bad check. The written demand must include a demand
for payment within thirty (30) days of the mailing of the demand and a notice
of liability for the costs and expenses. (810 ILCS 5/3-806)

Any person may pursue a cause of action against the issuer in the state of Illinois
of a bad check in small claims court or any other appropriate court. If the issuer
of a bad check fails to make payment within thirty (30) days following delivery
or acceptance by the addressee of a written demand by both certified mail and
by first class mail to his last known address, or attempted delivery thereof and
the demand by certified mail is returned to the sender marked "refused" or
"unclaimed", he may be liable, in addition to the amount of the bad check,
damages of treble the amount so owing, but in no case less than $100 nor more
than $1,500, plus attorney fees and costs. (720 ILCS 5/17-1a)

(810 ILCS 5/3‑806) (from Ch. 26, par. 3‑806)
Sec. 3‑806. Any person who issues a check or
other draft that is not honored upon presentment
because the drawer does not have an account with
the drawee, or because the drawer does not have
sufficient funds in his account, or because the
drawer does not have sufficient credit with the
drawee, shall be liable in the amount of $25, or
for all costs and expenses, including reasonable
attorney's fees, incurred by any person in connection
with the collection of the amount for which the
check or other draft was written, whichever is greater,
and shall be liable for interest upon the amount of
the check or other draft at the rate provided in
subsection (1) of Section 4 of the Interest Act.
Costs and expenses shall include reasonable costs
and expenses incurred in the non-litigated collection
of the check or other draft.

A person who undertakes a non-litigated collection
against the person who issued a check or other draft that
is not honored upon presentment shall make a written
demand by certified mail, return receipt requested,
delivered to the last known address of that person in
order to become eligible for any costs and expenses in
excess of $25. The written demand shall demand payment
within 30 days of the mailing of the demand and shall
include notice of liability for the costs and expenses.

A fee or charge not to exceed $4.50 may be assessed
to any person or owner of a commercial checking account
or other similar commercial account where a check or other
draft that is deposited into the account is dishonored
upon presentment because of insufficient funds or because
the drawer does not have an account with the drawee;
provided, however, that, the limitation on the fee or
charge specified in this paragraph does not apply to any
fee or charge assessed to any bank or other depository
institution or to any non‑commercial checking account
or other similar non‑commercial account.

Receivables Training Academy

2011-02-11T11:24:00.000-06:00

Receivables Training Academy

Many small businesses in the private sector do not have the required debt load that a collection agency would require to take on their receivables. Small companies could benefit from learning how to effectively manage their receivables from a collection agencies perspective. I would not rule out using a third party collection agency but you will still give your self an opportunity to collect on receivables that you would have written off as bad debt.

How does a collection agency work? What are the characteristics of a good bill collector? How and why does an account end up in a collection agency? There are many misconceptions about collection agencies. This article will clarify the inner workings of a collection agency. The five sections of a collection agency are: sales, office administration, collections, skip tracing and management. The sales department is responsible for obtaining the delinquent accounts from creditors. These creditors consist of small, medium and large businesses in the private and public sectors.

The sales people in a collection agency are generally paid a salary plus commission, and receive bonuses over a predetermined figure when it is reached. People working in sales take no part in collecting on the accounts they secure for the agencies. Sales staff partner with management to determine the contingency fee structure for each client. In larger collection agencies, there are usually national and sometimes regional sales managers who will get national accounts. These will be distributed to local offices for collection. The office administration is responsible for processing incoming accounts and distributing them to the collection staff. Much of their time is spent answering calls from both creditors and debtors.

This aspect of their job requires a great deal of tolerance and patience. In many instances the initial contact the agency has with a new debtor can determine the outcome of the collection effort. Due to the fact that most of the work done by collection agencies is over the phone, the clerical staff's ongoing telephone conversations in stressful situations is a vital contribution to the overall success of the collection agency. The collection department will vary in size depending upon the size of the agency. When the accounts are received by the collection department, they are distributed by the collections manager to the agency staff based upon type of account, and in some cases, difficulty of collections. Collection departments will often include an individual experienced in working legal files. This person is responsible for working judgments, doing asset searches, and giving appropriate instructions to the attorneys.

The earnings of most collectors consist of a small base salary and predetermined bonuses. A typical collector's monthly caseload involves 300-500 accounts with daily call volume of a minimum of 150 calls a day. A skip tracer's job is very important to the success of the agency. The skip tracer is responsible for locating debtors who have moved and left no forwarding addresses or phone number. A variety of methods is employed to locate debtors and where they work. Another responsibility may include helping the legal collector locate assets after a judgment has been obtained. Skip tracers are usually paid a hourly wage. The management team of an agency generally consists of individual department managers and a general manager. Due to the unique nature of collection agency work, it is extremely difficult for managers to keep their staff motivated.

The general manager carefully monitors the flow of work through the agency and supports each department in working to it's full potential. One of the most difficult jobs the general manager does is hire collectors, as that job has an unusually high attrition rate. The general manager, compliance officer and the training team is responsible for making sure that the agency adheres to all laws pertaining to collection practices. To fully understand the workings of a collection agency, one needs to understand the types of accounts the staff deals with on a daily basis. A typical account turned over to a collection agency has had no payments made for six months or more, and very often, no payments made for two or three years. Many times when the collector reviews the account, he or she can plainly see the number of broken payment arrangements that have been made by the debtor. In most instances it is also clearly evident that repeated attempts at communication by the creditor to the debtor have been ignored.

This information prepares the collections person for initial contact with the debtor. Based upon the review of the account history, most collection people will accept a reasonable payment arrangement. However they will be skeptical about the debtor's commitment to keep it. One unique aspect of the collection business is that the collector knows that the collector's initial contact with the debtor might be the only time they talk. It is imperative for the collector to inform the debtor of a process that is already in motion and that the only way to stop the process is appropriate payment on the account. Depending upon the size of the account, the process may include reports to credit agencies, and or litigation. By the time an account reaches a collection agency, the creditor has already agreed to pay the agency anywhere from 15%-50% of the collected amount. This fact influences settlement negotiation. If a debtor wants to avoid litigation, the collection agency may work with the debtor to settle the account in the following ways:

1) One time lump sum payment to settle the debt. This requires no follow up or maintenance by the collection agency.

2) A large payment followed by a few smaller payments.

3) An agreed upon settlement amount split over six monthly installments.

One should never ignore a phone call from a collection agency. Communication with a collector is as important as communication with a creditor. While it is true that a collection agency will not file a lawsuit against a debtor for a bill of $50.00, the unpaid bill will show up on a debtor's credit report and cost the debtor thousands of dollars down the road in increased fees for loans and mortgages. In the event one needs to deal with a collection agency, it should be done so in an expeditious professional manner. As in any credit situation, do not ignore phone calls or communication from a collection agency.

Receivables Training Academy

2011-02-06T11:08:00.000-06:00

Receivables Training Academy

Receivables Training Academy is an innovative solution that can greatly increase the value and save organizations financial resources by outsourcing collections training. Building on a decade-long track record of superior results it has accumulated in collections training and consulting for organizations to tackle all their collections challenges. To learn more about RTA please visit www.rtacademy.com

Financial Goal Setting (Not A How To)

2010-12-09T13:52:00.000-06:00

A Little Humor
Hey everyone, it's that time of the year health club membership are up everyone is on the bandwagon to loose weight, eat right you know who you are. Your all excited and your saying "Girrrl I'm gonna loose all this weight off my A$$". Now fellas if you are echoing those same words well that's just a topic for a different day.

Setting Financial goals is just as important as your health goals; it's like we know what to do but sometimes we disconnect from the goal.

A Coach-Um Up
Q-What are the motivating factors to setting this goal?
(Example: are these goals motivated by deeper values and interest, or by social pressures, perhaps guilt.)

Staying Focused On The Outcome
For many years and even today we view goals in terms of Short and Long Term goals. In my opinion when we set goals and categorize our goals this can be very challenging especially if the individual is not accustomed to setting goals let alone achieving financial goals.

This is in the book on How To set and achieve short and long term goals. The real "How To" book should be called "How In The Hell Can You Tell Me How To Set and Achieve Financial Goals When You Don't Know A Damn Thing About Me" now that's a "How To"

Listen the important thing to do is:

Identify the behaviors that manifest when you start to disconnect from the goal. (Is it in certain social groups, is it the late night infomercials that lure you in to buying items that you don't need, is it a family member that always seems to know when your check comes etc..)
When you begin to understand what the set of circumstances were that caused you to disconnect from the goal, achieving the goals become easier.
If you struggle with holding yourself accountable for your action plan you can always connect with me at kgrayer@fmiedu.org

Thank You For Reading

I'm Out Kenny G.

Here is the Coach-Um Up Questions of The Day

2010-12-09T12:00:00.000-06:00

1. What social situations (having people around you) affect how I deal with money

Financial Planning Vs. Financial Coaching A Heated Debate

2010-12-04T19:37:00.001-06:00

Hey everyone this is Kenneth I recently had a conversation with a Certified Financial Planner (CFP) regarding Financial Coaching and let me tell you it was interesting well actually that is an understatement to say the lease. It actually became a heated debate whether Financial Coaching techniques were useful in helping a client achieve financial success.

This individual asked me what I felt was a Financial Planners job description was. I explained in my "Opinion" of course with a smile, so I said "the difference between a Financial Coaching practice and that of a Financial Planner is that the planners objective is to provide advice, this individual agreed, and the education process was a means to introduce himself to the community and the end result was to sell various securities instruments hence more of an educate to sell model". Well interestingly enough this individual took offense that I would suggest such a thing so I asked "such a thing like what" this individual said educate to sell products. Interesting I thought; so I asked how do you make money he confirmed through the sell of financial instruments so I asked a question, Q- What are you trying to achieve? this individual went on about how successful his practice was and his clients portfolios are worth x-amount of dollars which of course was ob-seen amounts of money "Not The Norm" and how he takes the time to get to know his clients.

Well after debating Financial Coaching vs. Financial Planning with this person for an hour we shook hands and went our separate ways.

In summary the main objectives of a coach is to listen deeply to the coachee and be their as an accountability partner to help the coachees improve their position by learning about themselves, make empowering decisions, set and achieve goals, resolve issues all through using effective questioning rather than simply presenting a solution or the coaches viewpoint.

Kenneth Grayer talks about Financial Coaching

2010-12-01T12:24:00.001-06:00

The Coaching Industry

The Coaching industry itself is divided into several coaching platforms; such as Executive Coaching, Life Coaching, Entrepreneurship Coaching, Small Business Development Coaching, Money Coaching, Credit Coaching and so on. The one that I can not seem to rap my brain around is the Friendship Coach. My understanding of Coaching is that a coach is not a friend but a strategic partner.

Educate to Sell

There are organizations that use the word coaching to sell or license financial products. We call this platform educate to sell. Now I'm not say that selling products or licensing products is wrong. What I'm saying is that if your coach is selling or licensing products you should not consider this individual a coach unless they have the proper Financial Coach training and credentialing.

What is A Financial Coach:

In my opinion a Financial Coach is an accountability & strategic partner, a provider of perspective, a motivation partner with an emphasis on forward thinking, a focus partner and an intention partner.

What Skills Should a Financial Coach poses.

Financial Coaching is about transformation. In order to transform ones Financial Behavior, a coach should be skilled in Behavior Modification techniques, Change management skills as a component of Behavior Modification, Motivational Interviewing skills, Adhere to a standard code of ethics & conduct and Basic Coach training.

Are The How To's Coaching?

Americans have been bombarded with all the how to build credit, how to invest in stocks, or how to create a budget and so on. If all the how to books, seminars, workshops on how to build wealth, manage money, build credit, invest in the stock market or create a budget were working, our debt would not stands at $2.4 trillion - and many Americans are “just making it”, and dealing with huge financial stresses on a daily basis.

In Summary

Being a Financial Coach takes time, patience and commitment to ongoing research and education.

At FMI we"Create Conversation For Change." that empowers the coachee to own, and commit to their financial success.

Preventing Leadership Failure

2010-08-12T16:19:00.000-05:00

Preventing Leadership Failure

The DNA of Entrepreneurship

2010-08-12T16:13:00.000-05:00

The DNA of Entrepreneurship

How Small Business Can Do More With Less

2010-08-12T16:00:00.000-05:00

How Small Business Can Do More With Less

http://www.blogtalkradio.com/teamfmi.rss

2010-02-17T21:22:00.000-06:00

http://www.blogtalkradio.com/teamfmi.rss

FMI Money Talk Radio

2010-02-11T21:31:00.001-06:00

FMI Money Talk is a weekly internet radio station were individuals can call in and have financial questions answered. Guest Call In Number 646-595-4265 We look forward to speaking with you.
Listen to Fmi Money Talk on Blog Talk Radio