Are You Hearing What You Want To Hear? – Michael Dennis, CBF

Listen For Clues

Debtor’s Plan Pledges up To 10% Recovery for Unsecured Creditors. I read this recent headline a couple of times. Then I stopped to think about what it actually means to unsecured creditors. What it really says is that unsecured creditors could receive as much as ten cents on the dollar… but are guaranteed absolutely nothing. Payment will be somewhere between 0% and 10% of the approved unsecured claim amount in this bankruptcy.

Have you been fooled by hearing what you wanted to hear instead of what the debtor actually said. I have. One example involved a multi-million dollar payment I needed by the end of the calendar year. The A/P rep told me the check would be issued without fail on the 23rd of December. What he failed to mention was that the company was on furlough from December 21 to January 2nd so there was no one to mail out the check. Ouch.

Some debtors find ways around unwary collectors. Consider this simple statement: “We will issue a check for the past due amount on Friday of this week.” What the debtor actually said was that a check would be generated on Friday. They did not say the check would be signed on Friday, and they certainly never promised it would be mailed on Friday. There are plenty of debtors that cut checks and then hold them until they decide which creditors must be paid, and which can be delayed even longer.

Here is another deceptively simple statement: “I expect the check to be signed and the payment to be mailed to you by Friday of this week at the absolute latest.” This is not a commitment for payment. I would describe it as more like a weather forecast than a payment promise. Why? Because the two words “I expect” were included. What happens if the payment is not made as agreed? You learn that what the A/P contact expected to happen did not occur.

The solution is to require specificity from your customers. This requires attention to detail on the part of collectors. For example, when on a collection call, you should know the full name, title and phone number/extension of the person with whom you are negotiating. Collectors need to listen carefully to determine whether debtor has made an unqualified commitment for payment. Collectors should always take the time to verify a commitment by repeating back the commitment and asking the debtor to confirm it. Also, if a collector has any concerns about a commitment being broken, they should: (1) ask the debtor’s representative to agree to call you if their commitment changes for any reason, and (2) call the day payment is scheduled to get the check number and confirm the payment is in the mail.

Michael Dennis, MBA, CBF, LCM

Please reply with other solutions and experiences to the “hearing what you want to hear” phenomenon.

Michael Dennis’ Covering Credit Commentary. Michael’s website is

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.

3 Replies to “Are You Hearing What You Want To Hear? – Michael Dennis, CBF”

  1. Many times I’ve had a large payment that I needed to get in, and told my customer to use my FedEx account to get that large end-of-month check into my hands. A couple of customers sent the money out, via FedEx, but under two-day delivery, or, worse, ground delivery. This delayed my receipt of the money until after EOM, and gave them a few days of float at my firm’s expense.

    After a couple of occurrences of this folderol, I advise customers to *overnight* (not simply “FedEx”) the payment, and, if they are in danger of going on hold, tell them I must have it *in hand* by the close of business the next day, and I make sure their Controller and/or CFO is aware of this requirement. Compliance improves dramatically when there is a threat of immediate consequences after trying to pull a fast one….

  2. Dennis,

    The fact that last Thursday was Thanksgiving doesn’t automatically grant you a pass for your regular Thursday blog. You owe us one. Keep that in mind.

    Part of a collector’s lexicon:

    To be clear: are you saying that the check will be signed today, mailed today, approved today? (Check some, all, or none of the above.)

    Are you giving me your word that the check will physically leave your premises and enter the post office today? (Of course, in one case they did mail the check the day indicated. What they failed to disclose was that it was mailed to the actual check-signer who lived in another state.)

    And so it goes….

    It is common for A/P personnel to recite the check number of the out-going check. I almost never bother to write it down. The check will either arrive as promised or it will not. Providing a number doesn’t mean the check is prepared, that it is signed, or that it will be mailed. We are all too familiar with the check that is dated the 1st but the envelope is postmarked the 12th.

    When I qualify a statement, I also ask if they are empowered to ensure that they can perform. If they tell me they have to pass the check on to the next approval step, the strength of their promise loses much weight. Typically, I reiterate what they have told me and advise them that my cooperation is based on their word; not their boss or co-worker. I expect that what they tell me will happen is said because they can and will make it happen. In other words, any failure to perform cannot be blamed on anyone else. There is the unspoken knowledge that if they lose my trust; it will not be quickly repaired. Only the truly desperate are willing to squander goodwill at such a high cost.

    If they have to stand in front of the check-signer to get it processed, that is what they must do. I fully expect that they might have to plead with their boss and mention that they gave their word and if they break their promise, their job becomes tougher and the company’s standing is going to be weaker, impacting the relationship.

    Under those conditions, and not wanting to jeopardize their personal character, quite often the truth rises and they will honestly tell me they can’t guarantee anything and that they do not know when the check will be mailed or the amount. When further credit or the extension of aging on past dues is declined because there is no commitment, there is no surprise.

    On the other hand, once the ground rules are set, it makes the process so much smoother. You are told the check is mailing, you release the pending order without waiting for its receipt, and the check arrives as promised.

    While it is an added burden, it is useful to confirm the conversation with an email, or at the very least, readily retrievable notes. The emails affirm your understanding and performance expectations. It is always strong evidence when you base subsequent actions on their past slips and you can forward documentation that obviates any need to rely solely on recollections.

  3. Lies
    Damn lies… and
    The lies that debtors tell you

    So nothing has changed since I retired. Good to know.

    Best regards


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