Category Archives: In-House Debt Collection Strategies
What to do if a customer files for bankruptcy
As a business owner, you always hope your customers will be financially stable and able to pay. Unfortunately, some customers will end up filing for bankruptcy. This can be a stressful time, especially if it was one of your more important customers. You may be asking yourself “What do I do now?” or “How do I prevent this situation from getting worse?” Here are six steps to take when you are notified that a customer filed for bankruptcy.
1. Arrange for all goods in transit to not be delivered
Depending on how you deliver your product and conduct business this could be as simple as an email or it could involve a more complicated process.
2. Make sure all future shipments are canceled
Again this could be easier said than done, depending on your arrangements.
3. Check to see if you can submit a reclamation notice on already delivered products
4. Determine how much the customer owes and collect all financial documentation to support this claim.
You should begin organizing all financial documents related to this customer in order to be able to provide sound financial proof of the debt owed to your company.
5. File a proof of claim with the bankruptcy court.
There are many important things to note about this. Make sure you include the required supporting documentation with your claim. Make sure you send the proof of claim by registered mail, with a return receipt requested. You should contact the court to make sure the documents were received after an appropriate amount of time. It is always a good idea to keep duplicate copies of all documents in a secure place in case the court misplaces the originals
Bankruptcy can be a pain to deal with but if you are proactive you can save yourself time and money later down the line. It may seem confusing at first, but the situation will only get worse the longer you wait to deal with it. As always, if you have any questions or concerns contact a lawyer.
Setting Priorities To Get The Job Done
Most industries are feeling the squeeze. “Downsizing†is the new buzzword that describes what many face: More work with fewer hands to do it. It’s no wonder so many feel overwhelmed at work.
Working efficiently should be part of our work ethic whether you’re a victim of downsizing or not. But if you are in the throws of a smaller work force, learning to make the most of your time is more critical than ever.
For collection professionals, prioritizing is a must with or without an economic squeeze. Given the enormity of the many details collectors manage, it’s important not to become entangled in the minutia at the risk of losing sight of the big picture.
For that reason, an over simplified snapshot is helpful when prioritizing a day or a week’s worth of work.
The critical tasks come first: collections, credit approvals, cash applications. These are the meat and potatoes that affect operations and/or the bottom line.
It comes down to separating the critical tasks from the non-critical ones. If a task doesn’t impact the bottom line, consider it non-critical. That doesn’t mean it doesn’t get done at all. It just isn’t at the top of the list.
If you’re in a position to delegate, do so. Learning this skill can save your neck if your workload is more than one person can reasonably manage. It’s surprising the number of people in management positions who struggle with delegating responsibilities.
Peace of mind comes with delegating to the right person. Once you’ve placed your trust in someone to take over a task or series of tasks, let it go and let them run with it. Make yourself available to them but keep your hands off.
Spot Fraud Fast
Fraudulent orders cost businesses millions every year. Spotting fraud and stopping it in its tracks takes a keen eye and a skeptical outlook.
These following 3 flags serve as a starting place for spotting fraud:
Flag 1. A signed credit application
The starting point for most orders is an email with a request for a quote. Fraudsters like to include the request for 30-day terms along with that. Most of the time, honest customers are cautious about signing anything and that includes a credit app. So when a customer follows up the request for a quote with not only a signed credit app but also a financial statement or a bank reference right off the bat, it’s heads-up time for the credit professional. Something is wrong.
You know this process. Legitimate customers can most certainly be in a hurry, but eager to sign things and provide detailed financials? Not so fast! Fraudsters, on the other hand, rush everything. They’re banking on hasty decisions and fast transactions.
Flag 2. Vetting process
The ‘Same Name Scam’ is when thieves will use legitimate company names to place orders. They will sometimes include the names of the CFO’s or the VP of sales on the orders, which you know, isn’t at all typical as they aren’t the ones who place orders. By adding “.com†or “.net†to the end of the business name, they’re hoping that you recognize the legitimate business name and therefore, process the order with no further thought. That in itself is a red flag as businesses don’t typically use “.com†on their order masthead.
Flag 3. Shipping address discrepancy
It’s a clever trick for a Same Name fraudster to follow up a legitimate order from a legitimate company with a fraudulent order from their bogus copy. It often goes down like this: An order from the legitimate company shipped last week without a hitch. A follow up order is placed a week later with what appears to be the same company name. When it’s fraudulent, the shipping addresses won’t match between those two orders and it’s not uncommon for the fraudulent order to be a “rushâ€. They’re hoping that the combination of the successful delivery of last week’s order and the ‘rush’ nature of the new one, you’ll process the rush order with no further investigation.
Catching the address discrepancy before the order is processed is the key here. When they don’t match, start making phone calls. And in that process, forget about using any information on the original PO or email order. Email requests from a fraudulent source will of course include fraudulent contact information and phone numbers. Your skepticism is an asset! Go directly to the company website. Call the purchasing department to verify the names of those making purchases. And if you confirm that it’s fraudulent activity, provide the victim company with the fraudulent email correspondence and everything the would-be thieves have sent to you.
Many of our blog posts emphasize the importance of fostering a relationship with your customer and this is a good reason to do so. The better you know your customer, the easier it is to spot an order that didn’t originate with him.
Customer In Need of Help?
When a customer is up to their credit limit, they may be in need of help.
Quite often, when one of your customers is up to his knees in financial trouble, he’s also up to his chin in embarrassment. As a businessperson, the pressure is tremendous financially and emotionally.
For that reason, many won’t reach out to you in advance of the trouble they see coming. They’re uncomfortable. Embarrassed. And probably hopeful that they can turn things around before the inevitable happens.
Some customers don’t realize that just because they can’t pay the whole amount, doesn’t mean there aren’t alternatives. Hiding seems easier. But you know differently. You know they’re wrong about all of this.
You can show them as a credit professional that there are alternatives and that working on it before it becomes a bigger problem is a great business move!
Set your goals:
- Identifying the source of the problem.
Is it a temporary cash-flow problem or is it more serious? When you talk with your customer, you have to get down to the bones of the matter. Exactly what is the issue? If they’re facing bankruptcy, they may have no desire at all to move forward to fix the problem. They may be too far down the road of defeat leaving you little option but to place that customer on permanent C.O.D. or some other severe limitation. But you really won’t know until you listen to their story.
- Open the doors of dialog.
When you view the customer as the customer and the problem as the problem, you’re establishing yourself as an ally in working this thing out.
There is light at the end of the tunnel. Your job is to help your customer see that. Once they do, you’ll be helping to offer relief by outlining the options for payment. Remember, they want this debt paid as much as you do.
- Offer alternatives.
Circumstances change from customer to customer. Once you’ve established the problem, and that you’re both on the same side trying to solve it, you can then come up with the right options to make it all happen.
For the customer that makes daily purchases, perhaps a daily C.O.D. term will meet the need for a set period of time. A monthly payment plan may be a better fit for the more infrequent customer. Can it be paid off in 6 months? 8? Set that limit and put it in writing.
If the balance is large, it may not be doable to pay it off in 6 months and therefore, a longer payment plan that includes interest rate might be the right gesture. The point is, there are options that are fair to you both. Explore them together to come up with the right plan.
Your Winning Staff: How To Keep Them Moving Forward
Your team means everything to your bottom line. Therefore, keeping them motivated, challenged, and positive should be a priority.
There are a few very simple habits you can form that will help to create the work environment that promotes your staff toward success.
- Be the go-to resource.
Establishing yourself as a reliable and available resource can bring a sense of safety to the work environment. When a staff member feels that she can come to you, even if she’s found herself in over her head, together you can solve problems before they rage out of control.
- Have your team’s back.
If a staff member ends up in the cross hairs of an angry customer and need to turn to you for support, be the back up they need. It’s not unusual for a customer to change their tone when referred to the manager who is in full support of his or her team.
- Make expectations clear.
Typically, people who know what is expected will meet those expectations. When the waters are murky, there’s hesitation. Spell it out – set the bar – communicate with clarity.
- Be reasonably flexible.
We often coach our clients to be flexible when attempting to collect a debt. It’s necessary to hear the customer’s story and then determine what level of flexibility is reasonable in that instance. The same is true with staff. Yes, being consistently on time for work is a must, for instance. But extenuating circumstances do happen.
- Offer growth opportunities.
People are certainly unique. Most of us want to grow … but depending on which generation you’re dealing with, not everyone defines “growth†as “climbing the ladderâ€. In fact, a lot of people these days don’t find ladder-climbing in the least bit appealing.
The key is to talk to your staff individually to find out what forward momentum in your company looks like to them. In all likelihood, what they are attracted to will also be what they’re good at. Provide opportunities for them to move in their desired direction.
Having a team in place that is well trained and equipped is an investment of time and money for you. Keeping them motivated and challenged, with opportunity for growth. This will build a sense of loyalty to you.
Analyzing and Pursuing Past Due Accounts
You have an account that’s past due. But why?
Why is the key question to answer before you make a move. Only with the answer can you come up with a solution to get the account back on track.
The answer can come from any number of channels. The sales team may alert you to circumstances on the floor, like a diminishing inventory or the loss of a major client. There may even be a natural disaster that impacts your customer, like flood or fire. Typically, the simplest way to get to the bottom of things is to ask.
If you have multiple past dues, before you begin the process of asking about late pays, you may find it useful to divide the customers into two categories:
Those who generally keep their commitments
VS
Those who frequently break promises to pay
When dealing with the first category, the customer for whom paying late is not the norm, getting to the truth of why payments have slipped will probably be easy. This customer is more likely to tell you straight up what’s going on, unless it’s something deeply personal.
The second category of customer, the one who routinely pays late and frequently breaks promises will probably not give up the truth easily. For this customer, paying late is probably how he/she does business as a general rule. Good luck figuring out why.
No matter which type of customer you’re dealing with, it’s important to hop right on the issue. Waiting to make contact for 30, 45 or 60 days past the due date just sets you up for running the catch-up treadmill. Don’t put it off … analyze the file, strategize and begin asking questions.
Creating a collection strategy will help you streamline your efforts and collect the money. Getting to the truth of the matter gives you the information you need to take the next step toward payment.
Set Your Priorities
Size of company and level of debt will require different approaches to collection. Type of industry, may require special consideration particularly for seasonal businesses or areas of the country afflicted with drought or flooding or some other wide spread disturbance. This is the type of information that will help you prioritize your collection cases.
As an example, you may give the customer who has experienced damage from a storm extra time to pay … an exception you wouldn’t make for the customer who simply chose to pay someone else ahead of you. For this reason, we can’t emphasize enough the necessity of knowing each customer and the details of each case.
Create A Plan (Strategy)
When we talk of strategies, we’re simply suggesting a step-by-step process or plan, which includes counter-actions in response to the customer’s behavior in the course of collection. In other words, your customer may respond to your actions in any number of ways: Your strategy needs to include your counter-move/s.
In a perfect world, your first step toward receiving payment would result in payment in full. In which case, you simply make note of the details of your interaction for the file and move on to your next case. But in a not-so-perfect world, your first step may result in a promise to pay. In which case, you have more strategy to implement: a timely follow-up.
In a really-totally-messed-up world, your customer may flat out refuse to pay. In that case, you must employ a more stringent strategy that will include getting to the core of the customer’s complaint. If it’s legit, you take a route to make things right, which may often be unique to that particular situation. If the complaint is not legit, your strategy may become more complicated, requiring compromise, mediation or litigation.
The point is, having a general plan in place will help you expedite the matter even in the event of a curve ball. Yes, each case is different and may require a plan change, but with a basic strategy already in place, you’re ahead of the game.
Get the Collection Ball Rolling
Having a plan already in place will make collecting a tad easier. (We said ‘easier’, not easy.)
You’ve read this far so you already see how critical it is to understand your customer, the industry and specific circumstances in order to collect. No two customer’s are alike, even those in the same industry. Before you make your initial contact, analyze:
Size of company
Geographic location
Seasonal ebbs and flows
Size and age of debt
Industry trends
20Payment habits
Analyze Your Results
Each case deserves your full attention whether it was resolved without blood, sweat and tears or not. Document the events as they unfolded. This is information that will help you make wise choices in the future.
Negotiating With A Customer Takes Finesse
Negotiation is an art.
It takes a boatload of finesse to negotiate successfully. Not only do you require a result in your favor, but you want to be fair to your customer, as well. When everybody wins, you’ve negotiated masterfully.
To get to that win/win result, you must do the following:
Make Good On Your Promises
Negotiations always go more smoothly when you have a history of following through on your word. If you make it your practice to only say what you mean and then do what you say, your customer will trust that this pattern will continue even in a negotiation. When you have that trust, you’re sure to make headway.
Listen Intently
We can assume that the need for negotiation arose because something in your business relationship got off track. With that as the foundation, it stands to reason that people may enter into negotiation discussions with their guard up and ready to do battle.
If you can avoid entering into discussions with that attitude, you’ll be ahead of the game. Hearing your customer out, without interruption is a great place to start. Extending this courtesy is likely to come back to you.
Do your homework
You want to establish yourself as an expert on this case. To get there, you must study the case from beginning to end and know the details to the letter. Know dates and times, promises made and promises broken, and have ample evidence to back your self up.
Consider Your Customer’s Point of View
The more you understand your customer’s needs, the better you can anticipate the angle he will take during negotiations. What’s best for his business? What would be his ‘perfect world’ outcome? If you can understand it, you can work to making that outcome work for you as well. This will help to bring about your win/win scenario.
Viewing the problem as the problem instead of viewing the customer as the problem will help you negotiate fairly for the best possible outcome for both parties.
Have You Organized Your Company for Success?
Credit Management Must Be Top Priority
Many sales are made because the right amount of credit was extended at the right time. Conversely, many deals are lost for lack of an agreeable credit policy.
Therefore, credit management must be top priority.
The solid credit management process in a company will benefit every area of your business. From sales to marketing, fast and savvy credit decisions keep the gears of the entire machine moving smoothly and cash flowing more freely.
That’s why company organizational structure is so important.
Many companies place their credit and collections department on the other side of the building from everyone else. They get compartmentalized right out of the thick of things. And it can be detrimental to the whole.
Too much distance can keep information from flowing to the people who need to have it. By keeping credit and collections in close proximity, the company has a whole can better understand its customers. Consider the following:
The history of a customer relationship is critical to unraveling the reasons behind non-payment. Moreover, customer history can help predict future business behavior. Each department has its own interactions with your customers, unique to that department depending on what they handle for the customer. When those experiences are shared with other departments, a more complete picture of customer health emerges.
As an example, the sales department may physically see things in your customer’s business that your credit department would never see: an empty warehouse or decreased foot traffic through the store. And from the other angle, your sales team may be unaware that his/her customer’s payments are growing further and further apart. These are predictive behaviors that effect both departments. Armed with the knowledge, they can collaborate to solve a problem before it actually becomes one.
By keeping your credit and collections department located within sharing distance of other departments, critical information can help wave red flags in time to make a difference.
Have you structured your operations optimally?
Millennials In The Boomer Workplace
We’re in a big transition period. The Millennial generation will make up over half of our work force in just a few short years. “Old schoolers†(ie Boomers) will soon be training this new generation in the work place … and it doesn’t come without its challenges.
Technology is the biggest contributor to our challenges.
Our tech savvy world changes by the minute. And while the boomer generation is keeping up pretty well thus far, Millennials clearly have an edge. They’ve grown up using computers first as toys, and now at school and at their workstations.
Learning technology is not unlike learning a language. If you learn as a child, it’s second nature. If you tackle a new language as an adult, it’s a big challenge. And because of this edge, the boomer who trains the Millennial may find the tables can turn quickly.
Because there are huge generational differences between boomers and Millennials, the following may be helpful to the boomer in making the transition. But let it be noted, this article uses a broad brushstroke when describing both sets of people
Boomers must provide opportunities
Millennials don’t view climbing corporate ladders as an appealing or inspiring career goal the way many boomers have in the past. What they relish in is experiencing new challenges. Give them opportunities for growth with financial incentives.
Don’t stick Millennials with old technology
Stay on the leading edge of technology if you want satisfied this generation of employees. They’ll not only stay with you longer (which saves you money and time), but they’ll be far more productive.
Talk with the younger generations about their long-term goals
Millennials may sometimes appear self-involved or perhaps entitled. Some suggest they appear this way because of their innate understanding of technology. They really are better than the rest of us when it comes to computers. And they know it.
For this reason, they need to see the value in what you offer them. For the boomer, this thinking feels backwards. Boomers grew up in the work force bringing TO the table. Millennials want to see what they can take FROM the table to get them closer to their goals.
If your employee has a long-term plan, find ways to make working for you beneficial for them in attaining to their goals.
Offer feedback … often
Millennials are on the fast track. They want to know what’s next and how to get there now. Instant satisfaction is their way of life.
Employee evaluations must be frequent and offer more challenges to keep them moving forward with you.
Be open to thinking differently
Boomers were raised defining a high work ethic as: staying until the job is done. That means working late sometimes or skipping lunch. The Boomer who finishes the day’s to-do list early will simply hop on tomorrow’s to-do list in order to get ahead. Boomers tend to forfeit family time or personal time for work duties when warranted (or sometimes even when it’s not).
Most Millennials see this differently. Because they’re so tech savvy, they often finish their work quickly leaving them more time at the end of the day feeling as if they have nothing to do. Therefore, many in this generation will consider the workday complete when the to-do list is finished.
The idea of forfeiting time doing the things they love in lieu of working simply doesn’t make sense to them, especially if the work has been completed. In fact, there’s incentive to finish up early if it will leave more time for personal, non-work related activities. Even if its on the computer!
This isn’t a wrong perspective … it’s just different than what Boomers were trained to think about work.
Boomers who are tasked with training Millennials will find it helpful to talk frequently and open their minds to new ways of thinking.