On one consulting assignment, I was asked to help the collection team become more efficient in debt collection. Following introductions, I wandered from collector to collector and what I found were collectors dialing for dollars rather than using a well thought out strategy for prioritizing calls and having quality discussions with delinquent customers. For example, when the person they wanted to speak to was out or unavailable, they simply left a message. As a result, one collector had left seven (7) messages over a period of two weeks for the same A/P contact inquiring about payment status. Another collector was calling for the first time about a large balance already 21 days past due. These were not isolated incidents. They happened frequently enough that I was able to identify areas to improve within the first hour.
For the collector that left 7 messages, it seemed obvious that A/P had no intention of returning his calls. My solution: Leave two messages for someone and if they do not respond, make no more calls to them. It works this way: Leave two messages for the A/P clerk, followed by two for the A/P Manager or Controller, followed by two to the CFO, and then on to the company President or business owner.
Another collector ignored a large past due balance for 21 days. When he finally called for payment, he accepted the first offer made by the customer. Why? In my opinion, he was poorly trained. My solution: Train collectors so they understand that their role is as negotiators, not note takers. Their goal is to negotiate for the fastest possible payment. While the volume of collection calls is important, the quality of interactions with debtors is more important. Using this situation as an example, I suggested this approach:
“As you know, your account has a past due balance of $xx,xxx and that amount is already 21 days past due. I am not going to be able to convince management that waiting an additional 10 days for payment is a good idea or a good deal. Who do I need to speak to in order to discuss a more realistic payment commitment?”
An easy way to explain this concept to collectors is to remind them that Accounts Payable’s first offer is always their worst offer. Dialing for dollars is effective when you are calling the right accounts at the right time. Properly trained collectors quickly move beyond note taking and negotiate confidently with their customers for the fastest payment possible.
What about you? Do you have any horror stories or success stories you would like to share about your collection efforts?
Michael Dennis’ Covering Credit Commentary. Michael’s website is www.coveringcredit.com.
The opinions presented are those of the author. The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors. Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.