When A Client In Collections Wants to Pay You Directly

One of the more frequent questions we receive is, “What do I do when the customer you sent to collection wants to pay me directly?”

First, this is an excellent problem to have. On average, considering all industries with whom we work, the recovery rate from a client in collections is approximately 30%, so receiving payment means you are already beating the odds.

Second, if your customer is paying the full amount of your account – take their money. The next step is to let your collection provider know you have received full payment. That way, the agency can stop contacting your customer and update the customers’ credit file as Paid In Full. This step is critical as creditors and data furnishers (collection agencies) are legally responsible for accurate credit reporting.

But What If My Customer Pays an Installment?

Our first response is to take their initial payment to reduce your risk, and then do NOT get into repayment negotiations. The reason why we say this is that you do not have all the information to negotiate effectively, whereas your collection service provider should have the full financial profile of the client in collections, including a clear picture of their capacity to pay you in full and how quickly they can pay.

Side Story – our national Media customer accepted $1,000 per month on a $150, 000 debt, and felt lucky.  Unfortunately, they didn’t know their customer had a low seven-figure line of credit and only had a low five-figure balance. Instead of paid in full, they’re stuck with payments for $1,000 a month from now until somewhere warm freezes over – unless they use a Withdrawn Offer Strategy (subject for another blog post). 

Had the client consulted us before accepting this agreement, the radio advertising account could have been paid in full by now. Not taking the deal is harder than it sounds. Most creditors will do it because they feel fortunate that the account holder is now calling them. It isn’t magic that they are calling now – its because they don’t like the fact we are pushing them, and they are hoping you will give them better terms.

If your client in collections shows up in your office and wants to negotiate repayment terms, we recommend conferencing in your collection service provider. Tell your customer you are encouraged to see that they want to resolve their account but have engaged a collection professional, and they must be involved in the negotiation. Your firm will have to pay the collection firms fee, so let them earn it. It is in their interest and yours to negotiate the best terms possible.

You Are Part Of A Team Now

And finally, let your collection provider know of all communication or payments from your past-due client. It shows your customer that you and your vendor are on the same page and in sync. Otherwise, your client in collections can take advantage of you yet again. You have hired third-party professionals – let them do their work.

At PCM Corp, we have credit management expertise that spans the entire credit-to-cash cycle and can help your company get paid faster. Please call us toll-free at 1-866-266-0117 to learn more about PCM Corp.

You might also like our post entitled Sales + Credit In A Down Economy.

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