If this article on debt collection tips piqued your interest, take heart. You are not alone.
Each day across this great country, there are literally thousands of people who have been tasked with the job of trying to collect money from slow paying customers. Almost everyone in your shoes got the job by accident or default. Debt collection is also one of the most critical roles in the finance world. Let’s face it - if the money you are owed doesn’t come back into your bank, your company may go out of business and then no one has a job.
How to Get Great Results on Your Next Debt Collection Call
Here are 7 helpful debt collection tips for creditors; tips you can use when negotiating with your slow paying customers.
Tip #1 - Preparation
Understanding the Negotiation Process - Collecting money that is owed is a negotiation. Effective negotiators prepare themselves as much as they can, but are also always willing to listen, learn, and adjust along the way. Negotiation is one of the most important debt collection tips to master. When preparing to make your first or thousandth call to a customer, remind yourself that every step in any negotiation is predictable – and that includes what is said and how people react. Nothing should catch you off guard. Understanding this tenant of the negotiation process will give you the confidence needed to work your way through the debt collection call.
Physical Preparation – This step is also critical. Make sure you have all of the customer’s data at your fingertips, plus a clean pad of paper, calculator, and access to email. Other helpful items may include a copy of your contract, access to all invoices, and delivery slips (if applicable). Having these tools close by will enable you to easily navigate through your customers concerns and confirm issues for validity.
Understanding Your Customer and Their Industry – This debt collection tip will put you in the upper echelons of successful collectors. Your ability to converse with your client at their level will build credibility in their eyes. It will also put them on notice (unconsciously) that you know their entire business and are likely very aware of weak excuses. Before making the call, you should obtain information about the real reason for non-payment. So how do you learn about your customer? Start by organizing a quick meeting with your sales staff. The sales department will have a wealth of knowledge about your slow paying customer and the probable reasons for non-payment.
Tip #2 - Be Proactive
Staying proactive is another debt collection tip to master. Some of my most successful clients proactively reach out to their customers as soon as a product or service has been delivered. The calls are couched as a customer service call, but they look for positive feedback on the usual stall tactics of their industry. For example:
“Hi John. Thanks for your order of our whizbang widget. Did you receive it on time? Great! Was it in working order and not damaged during shipment? Perfect! Our invoice was attached. Was the pricing accurate from our sales department? That’s good. Is there anything that might prevent you from authorizing our invoice for payment? Excellent! Thanks very much for your order and we look forward to receipt of your payment by _____ date.”
Typical reasons for delayed payment can be averted by you proactively getting a “yes” from your client that those typical stumbling blocks are not an issue.
Tip # 3 - Have a System for Great Notes
Accountability is a powerful tool when looking for promises of payment. When speaking to your customer be sure to document everything. Take accurate key notes from the conversation and listen for business intelligence such as:
- “My customer _____ isn’t paying me, so….”
- “Your payment has been approved, but I’m not authorized to release it.”
- “Our cheque run date is _____.”
- “We process our EFT’s on _____ date.”
- “I will have your payment by _____ date.”
- “Our controller/CFO just resigned, so….”
Sometimes the smallest detail is the key to successful debt collection.
Who are your clients’ customers? When do they normally get paid?
Documenting everything and taking great notes, plus being able to accurately refer to promises made is very helpful should you have to call your customer again or if you end up in court giving evidence.
Tip # 4 - Track Promises
Many accounting systems have a place where notes can be saved, but they do not give you the ability to effectively track promises made and kept. Tracking promises is also a key debt collection tip. If your internal system does not have a tracking option, then you must develop your own method. Many in-house debt collectors use their Outlook calendar and enter promises from customers that should have been received the previous day. For example, if your customer promises payment next Monday, put a notification in your calendar for Tuesday afternoon. In the notification, give your cash application staff time to post your customer’s payment received the previous day. As you can see, prompt cash application is critical to this process, so you are not calling customers who have already paid.
Many credit processionals will ask for a list of customer payments from the previous and current day to be certain they don’t call customers who have kept their promises.
Tip #5 - Timely Follow-Up
Shocker alert! Not all customers pay when they said they would. A timely follow-up is another one of those must-do debt collection tips. Luckily most people feel bad when they break a promise so use that power by accurately tracking your broken promises and immediately calling your customer back. If you don’t call them, or you wait too long, you are sending a message to your customer that you aren’t serious about the credit terms and conditions and they will take advantage of that.
Making the follow-up call is fun!! All the pressure is on your customer. Open your conversation something like this:
“Hi, Jack? It’s Dave from XYZ Corp. We spoke a few days ago about that invoice.”
At this point, maximum pressure is on your customer. They remember your call. They remember the promise made. The normal (predictable) response is to give a reason why you haven’t received payment.
Smile to yourself, take a calming breath and “listen” intently to what your customer is saying. Right now, they are also in their most vulnerable state, so what you say and do at this point could have positive or negative outcomes. Use this opportunity to ask detailed questions that will help you assess your customers ability and willingness to pay. Because you are calling them about their broken promise—you could ask your customer almost anything and they will answer you because they feel bad. Continue to document everything and put all notes and information you have gathered into your note system. Be sure to again ask for your money and a firm commitment as to when it will be received.
Tip # 6 - Listen for Top Twelve Warning Signs
The Top Twelve Debt Warning Signs (of non-payment of debt) are a whole article unto themselves. It is critical that you acquaint yourself with these warning signs and develop a strategy for specific actions when your customer uses or mentions any of these phrases.
Tip #7 - Colleague Consultations
Unfortunately, not many articles on making collection calls suggest this debt collection tip. Performing post-call debriefs with another credit colleague is a fantastic way to check that you stayed on point, and that you will make the correct decision for the given situation.
Consultations or workouts provide you with objective feedback on your performance. It will help you to adjust your calls for maximum effect. Your colleagues will benefit from this exercise too with everyone learning from everyone else.
If you are working alone and consults are not an option, we recommend meeting with your CFO or business owner at the end of the day and have a general discussion about your contacts for the day.