7

Honey or Vinegar

There is an old expression that you can attract more bees with honey than with vinegar.

Does this relate to business to business debt collection?  Will a friendly approach to debt collection result in a faster payment than a more direct approach in which the collector is “all business.”  Honestly, I don’t have any statistics about this.  However, long ago I managed an accounts payable department.  One way that we dealt with suppliers was to prioritize payments based on our interactions with the creditor company.  For example, if a creditor company sent an email or fax with a friendly inquiry about the status of payment, it was usually ignored — unless the creditor was one of the ten or so key vendors identified by management to A/P.

In addition, if the collector simply asked for the status of payment, our standard response was that payment of the past due balance would be made in 14 days.  If the collector pushed harder by stating that payment proposal was unacceptable and that our account could or would go onto shipment hold, we would then negotiate in good faith.

An interesting aside:  We did a study of how many creditors did not complain when we told them they would have to wait an additional 14 days before their past due balance was scheduled for payment, and found that on average about 70% of suppliers accepted this offer without protest.

The lesson here is to become one of the 30% that pushes back when debtors try to delay payment.

This brings us full circle to the original question:  Honey or vinegar?   In my opinion and based only on my opinions and personal experience, the creditors that are more assertive and less accommodating will get paid sooner.  So, nice guys don’t always finish last, but they might get paid last in B2B collections.

Michael Dennis, MBA, CBF, LCM

What are your thoughts?

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.

 

7 Responses to “Honey or Vinegar – Which Results in Faster Payments? – Michael Dennis, CBF”

  1. MelissaK says:

    I think using honey is the right approach in regards to relationship building. However, when it comes to getting the payment, we will push back and question the customer to get more information. We’ve found when we remind our customers of their terms and ask why they are not paying within them, we get a better result than just accepting the status quo. It is always important to confirm the amount due now and then the next question is confirming the next payment coming due. Making sure the check is actually being sent and not just scheduled.

  2. Margaret Spencer says:

    I have seen it work both ways, and I think you have as well. Some collectors are just more effective with the take-no-prisoners approach. Others do well as the good cop ingratiating themselves with their AP contacts. I think it also depends on the account. What you might do in a collection call with a second or third tier customer [in terms of sales volume with your company] may be quite different from what you would do with a key customer or a FOB [friend of the boss] account.

    I’m just offering an opinion… not a criticism.

  3. F. Scott Wilson says:

    There is an old hiccup remedy my grandmother used, which was a tablespoon filled with a mixture of sugar and red wine vinegar. Believe it or not, it was very effective, mixing sweet and acid.

    The same is true of collections. I always start out friendly, but letting the customer know that I definitely expect payment. If they promise and then deliver the monies as agreed, I stay friendly. Broken promises lead to a less friendly (but still professional!) response. My customers understand that I’m working to build a strong working relationship, but also that such a relationship requires that they do the same.

    Both approaches have their place in collections; the key is knowing which one to use and when.

  4. Eddy Sumar says:

    Life is not a one-size-fits-all. We need different sizes to fit different needs and situations. In collections, a mixture of honey and vinegar approach, in appropriate measures, depending on the needs of the situation, is recommended.

  5. Arrel Tucker says:

    A mixture of both is what works the best. I fully agaree with Eddy. It doens’t take very long to know which of your customers you can trust and which ones you need to push, and sometmes push hard. You reward the good ones with honey and push the vinigar on the ones who require it. But even when pushing hard you can do it in a honied way. That is how you build relationships that last and can be of benefit to both sides.

  6. Thank you to everyone for your insights. If the majority rules, it is clear that a mixture of hard and soft collections [Honey+Vinegar] is the preferred approach to B2B debt collections. I am certainly not going to argue the point. I appreciate you taking the time to share your comments with me and with other readers.

    Best regards

    Michael Dennis

  7. Ken Zanolini,MBA,CCE says:

    Great article!

    I believe that every collection & customer situation is different & may need just enough honey or just enough vinegar to get the cash! The true credit expert can determine that combination for the perfect dressing & become the true chef!

    Business has always been about money & relationships & whoever can possess both usually wins the game!

Leave a Reply