Credit Collection Tips

Credit Collection Tips

Commercial debt collection is often a balancing act. On one hand, you want to collect the past due balance as quickly as possible.  On the other hand, you do not want to do any serious or permanent damage to the business relationship with the customer with collection techniques that are over aggressive.  Every collector must perform this balancing act every time they contact a delinquent customer.  They cannot afford to be too empathetic to the customer’s issues and problems, but they must take some cues from the customer’s statements and responses in creating a win-win outcome whenever possible. 

Here are a few collection tips for your consideration:

  • Use the telephone as your primary collection tool.
  • Shorten or eliminate grace periods before calling to inquire about past due balances.
  • Always remain polite and professional.
  • Start your collection discussion by asking for immediate payment of the entire past due balance.
  • Don’t be in a hurry to make any concessions to a delinquent customer.
  • Never make a concessions until you have received enough information to conclude that the customer needs and deserves additional time to pay the past due balance.
  • Approach the debt collection process systematically.
  • Set specific and measurable collection calls for yourself and if applicable for your subordinates.
  • Try not to leave voice mail messages. Instead, call back and ask the debtor company operator to speak to a “live” person. This simple technique often works.
  • If you must leave a message, give your name and telephone number at the beginning and the end of the message. Always ask for a return telephone call the same day.  Always provide the dollar amount of the past due balance.  Always state that your message is urgent.  Never ask the debtor to call back as soon as possible, or alternatively at their earliest opportunity.
  • If there is an order on hold as a result of the delinquent status of the account, make sure that this information is communicated to accounts payable. For many debtor companies, an order on hold automatically triggers a payment and a return call to the creditor company.
  • Don’t use your speakerphone on routine collection calls.  It is rude.
  • Don’t waste time. Get to the point of the call and stick to it. Discussion of the weather or ball game score can wait.
  • Keep personalities out of the collection discussion. Always avoid confrontations.
  • Avoid arguments.  Seek solutions.
  • Pay close attention to the customer’s replies to your questions and comments.  Take notes throughout the conversation of key points, comments, and commitments.  Always review your previous collection notes before making a collection call.
  • Follow up promptly on any broken payment commitment – asking why it happened, why you were not notified, and when the payment will be made.
  • Shorten the collection cycle by faxing rather than mailing any requested supporting documents – even when there are a large number of documents to send.
  • Make certain your collection calls are interactive. If the customer is not communicative, be direct. Ask for their comments and feedback.
  • When an account slows payments, consider contacting the trade references originally provided to see if the problem is unique to your accounts receivable or updating the credit bureau report on the customer.
  • Confirm all commitments received from the customer at least verbally as a way to summarize and complete each collection call.
  • If a customer has a history of making and then breaking commitments, confirm their commitment in writing.  Better yet, arrange for them to confirm their commitment to you in writing.
  • Take careful notes and be sure you know the full name and title of the person you are speaking to or negotiating with about payment.

Two final thoughts:  First, there is a point in every discussion / negotiation with a debtor when you have achieved all you are going to.  It is important to know when to end the call.  If you have a satisfactory commitment, it is time to congratulate yourself.  If not, it is time to lick your wounds and more on.  One thing that credit professionals can learn from our friends in sales is this:  Once you have made the deal, stop talking. 

Second, it is human nature for collectors to ignore difficult problems or choose to delay dealing with them.  The basic fact is that collection problems typically do not go away; and they do not get better.

 

Source: Encyclopedia of Credit

 

 
 

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