If you have ever filed an unclaimed property report with the state of California you know what I am referring to and if you haven't but you filed a preliminary report in June with the State you are about ready to life the nightmare of California's due diligence process. Just last month you were asked to submit a preliminary report to the state of California. This report was a list of all the companies and individuals that your Company, at least according to your books and records, "owes" unclaimed funds.
Well, since June California has been very busy. The State has been reviewing that list, checking it twice, and comparing it against tax records and other resources for the purposes of locating these "owners." The result of all this effort is in about a month or two they will be flooding the state with letters from the California State Controller. These letters will notify these folks that there is potentially money owing to them and if they wish to claim it they need to contact YOU to get their money.
Now, like my mother always said, there are two sides to every story, the problem and the solution.
The Problem: This is going to create CHAOS...phone calls and emails will begin flooding in and will be routed to whomever you listed as the "contact." Hope it wasn't the CFO. Many of the recipients of these letters will be placed in a state of utter confusion. However, once they realize this is about money, they suddenly need it immediately.
The Solution: An immediate solution is to get another job. Now while this is tempting, it is not very practical. The second solution, prepare for the deluge. Here are some additional recommendations.
1. Beat them to the punch... send out your own letter. Not surprising, the letter that California sends is very confusing. Remember KISS? Well, let's keep this really simple. Send out your own letter ahead of California. Now what this will cost you in postage, it will save you in lost time answering phone calls and responding to faxes. The letter should simply indicate that the individual will shortly be receiving a letter from the California State Controller notifying them that they may have funds owing to them from your Company. If you wish you can also indicate that this has yet to be verified and the final report is due to California in November.
If you would like to receive a sample letter, just drop me an email or give me a call.
I would STRONGLY advise you provide a phone number that individuals can call with any questions. Now, you can provide detailed instructions on the voicemail, but many will still have questions so I advise you have a real live person answering the phone. I discuss this in greater detail below.
Please be advised there are NUMEROUS steps you can take prior to sending California the list in June that can mitigate the number of records, the inaccuracy of records, etc., which have a direct impact upon the pain you will feel during the due diligence process. These will be discussed at another time...I promise.
2. Man the battle stations. As I mentioned above, the letters that California sends out are very confusing. Once they see a phone number, most people stop reading and just dial. Their question, "I got this letter what does it mean?" Or, "This letter says you owe me money." The key is you and hopefully, your team, must be ready for the phone to start ringing. As I mentioned, the phone that will start ringing is the one who is as the contact on your preliminary report. If it was the Vice President you may want to remedy that situation very quickly.
Unfortunately, I can't wave a magic wand over this one. Below are some suggestions based upon lessons learned the hard way...experience.
(1) Answer the phone; don't let the calls pile up. It's amazing how quickly some people can get in contact with the CEO of the Company demanding their check.
(2) Have a process for responding to the faxes, they pile up as quickly as the phone calls. Similar to the phone calls, they go to the fax belonging to the contact.
(3) A phone log is not necessary, as I mention below, you will ask for verification by receipt of the fax.
(4) DO NOT PROMISE WHAT YOU CANNOT DELIVER. I can guarantee if these folks do not receive a check quickly they will call back. It amazes me every time...they didn't even know about the check and suddenly the electricity is going to be shut off if they don't receive their money. Tell them that after the final verification process if they are owed the funds when they can expect to receive their checks. BE REALISTIC! Otherwise you will get to know some of these people so well you will be exchanging holiday cards.
If you do not have the capability to handle the deluge, consider outsourcing this process. It generally only lasts about 1 - 2 weeks. I can assist in identifying resources.
3. Keep score. It is essential that you track all the information coming at you. Remember these are responses to your preliminary report. If you make payments in response to these letters I am fairly confident you don't want to also pay the state, although California certainly needs the money.
Once again, I wish I had an easy answer...I don't, but here are some suggestions.
(1) Require that those requesting payment fax or mail in the letter they received from California as verification. You will need to maintain these faxes as proof that a request was made for payment. If possible you should attach a copy of the issued or cashed check, depending upon the size of the Company. If this is not possible, a listing of checks issued from AP would suffice. If the dollar amount requested is over a certain threshold you may want to request proof of identification.
(2) Now you may ruffle some feathers, but once you receive the fax or letter you may want to send out your own letter requesting verification that funds are owing to the individual or company.
(3) If you have reporting software you most likely have the capability of tracking responses to due diligence letters. If you have reporting software and you have not taken advantage of this function, reach out to your provider. (If you would like to know about reporting software, give me a call and I can put you in contact with a great resource).
(4) If you do not have reporting software, you must ensure that you are accurately tracking the responses you are receiving. Remember this is not only important for reporting purposes but also for reconciliation purposes.
(5) As I mentioned above, these folks are going to call you repeatedly wanting to know when they will receive their check. They will also call wanting to know if you received their fax. I STRONGLY recommend you have a method for tracking faxes received and checks processed.
(6) KEEP COPIES and ORGANIZE THE RESPONSES! Whether you prefer hard copy or electronic, make sure you keep copies of all responses, faxes, letters, emails. This is proof in case you are ever placed under audit or there is ever any confusion regarding a payment.
Tracking is the key to ensure your California reporting is successful. I just touched the surface. If you read something here that resonated with you or you have questions, please call and we can discuss. Each of these suggestions should be modified and tailored to a Company's needs.
Thanks for reading, and as always, feel free to call or email if you have any questions or comments.
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