Over the years (and more often than not by trial and error), I have learned what often / frequently / usually works well, and what does not seem to work as well when making collection calls. Here are some of the things that I have learned along the way:
- Be assertive in your collection calls. Don’t become aggressive. Aggressiveness is unprofessional.
- Never apologize for bothering a delinquent customer by calling for payment status. Instead, begin your call by asking when a check for the past due balance was mailed.
- Always ask for the status of the entire past due balance. Do not ask only about the status of invoices that are over a certain number of days or weeks past due.
- Keep the promises you make to a customer. For example, if you promise to release an order based on a commitment by a customer to pay the past due balance — even if you regret your decision after the fact, you still need adhere to your promise. Your regret will remind you to think carefully before reaching any agreement with a delinquent account.
- Don’t bluff; say what you mean and mean what you say. For example, if you tell a customer their account will go on hold if payment is not received within 7 days, you must follow up on that commitment. If you fail to hold orders, you will have seriously damaged your credibility with the customer and will find it difficult to obtain reasonable payment commitments from them in the future.
- Keep your sales department informed about collection problems involving their customers. Salespeople have a vested interest in making certain that invoices get paid and new orders get shipped rather than held.
- Do use the telephone as your primary collection tool. Don’t rely on written reminders, dunning notices, faxes, emails or instant messages.
- Remember that written reminders work well only with creditworthy customers that have inadvertently overlooked one or more past due invoices.
- Expect to receive payment in full for the entire past due balance from every customer and on every collection call.
- Don’t give the customer an excuse not to pay you. For example, never start the conversation by asking if the customer needs a copy of an open invoice. Doing so provides a handy excuse for that customer to delay payment even longer.
Consider offering cash discounts as a way to accelerate cash inflows.
- Don’t permit unearned cash discounts. Doing so is an invitation to the customer to continue to take larger and later unearned discounts.
- Take time to document payment commitments in a letter or fax when negotiating with a customer that has already broken one or more payment commitments.
- Create or use a handful of templates to complete routine correspondence quickly. Be sure to ask for the full name and title of the person you speak with in the debtor’s accounting department. Keep that information on file in case you need to follow up.
- Don’t leave voice mail messages except as a last resort. Chances are good that the customer’s A/P department will not return your call. As a common business courtesy, you will almost certainly wait [waste] at least one business day before making a second call. A better option would be to find out when the person you need to speak with will be available and call back at that time.
- Don’t forget to allocate a certain amount of time to addressing and resolving smaller older balances. Collection success rate drops dramatically once account balances become more than 120 days past due.
Michael C. Dennis is the author of several books including “Credit and Collection Handbook.” He can be reached by e-mail at: firstname.lastname@example.org. Michael will be teaching a Bulldog Collection Webinar on April 21, 2011 at 12 noon Pacific Time.