Tag Archives: debt collection

4 Most Common Responses to Your Debt Collection Campaigns

Posted on by

Running an internal debt collection campaign is essential for getting the money back that your company is rightly owed. While it is important to design your debt collection campaign to effectively reach out to clients quickly after an invoice goes unpaid, knowing what to do after your call, email or letter will help drive success.

Here are the top four most common responses businesses receive from their debt collection efforts:


Prompt payment
This is the ideal scenario. Sometimes a missed invoice is a mistake within the accounting department or the result of an employee being on vacation. If the client promptly pays after you reach out to them on a past-due invoice, always verify the following:

  • The best point of contact’s name, email address and phone number
  • Their preferred mode of contact for invoices (email v. mail)


Acknowledgement, with actionable response
This is the next preferred scenario after you contact a client concerning delinquency. When a client acknowledges that they are late on their payment and confirms a date they can pay their invoice, as a company you should follow-up to confirm:

  • Method of payment
  • If they have all of the essential information to pay (routing number, company address, etc.)
  • Reason for late payment. Gathering as much information as possible for your records is important should the delinquency happen again.


Acknowledgement, but no actionable response
In this scenario, the client is aware that are late on their invoice, but does not confirm or offer a date for payment. Always reach out to the client because he or she could have forgotten to include that information in their communication with you; or they could be waiting on someone within their business to confirm a date of payment. Whatever the case may be, it is your goal to get a date set with the client. The probability of receiving payment drastically increases when you can commit the client to a specific date or payment plan.

No response
If you receive no response from a phone call, email or mailing, there may be several reasons for this.

  • You may not be contacting the correct person.
  • The client has a cash flow problem and has yet to find a solution. They are simply trying to avoid communication with you.
  • The client is unwilling to pay the invoice and is trying to avoid you.

With any delinquent invoice, you should always follow the bad business debt timeline, which features a series of phone calls, letters and emails to engage with the client. You can find the full timeline here: http://c2cresourcesblog.com/c2c-resources-commercial-debt-collection-agency/bad-business-debt-timeline/.

Five Tips for Making Collection Calls that Get You Paid

Posted on by

Debt collection calling is not the type of task most employees get excited about. Typically, in-house campaigns take employees out of their comfort zone. For most small businesses it is a task given to employees in addition to their normal job responsibilities. Don’t waste your time and money with an inefficient debt collection calling campaign. Instead, be successful from the start!

Here are the top five things to do when making collection calls:

Always prepare for excuses.

Unfortunately, most debtors will not be quick to offer payment options. Don’t allow yourself to get flustered by excuses. Instead, be prepared. Here are the most common excuses you will hear:

The check is in the mail.
How to respond: Ask for the date of the check, amount, address where it was sent and check number.

I never received the invoice.
How to respond: Always give the customer the benefit of the doubt. This is a great time to verify their preferred method for their invoice: email or mail. Always follow-up this discussion with asking how the customer will pay the past-due balance.

Our business is going through financial problems.
How to respond: Work to set up a payment schedule with the customer.

We completed the wire transfer yesterday.
How to respond: Ask for the routing and banking information. The customer could be telling the truth, but you need all of the information you can collect to verify the validity and make the most of the call. 

 

Do your research before the call.

Learn as much about the customer as possible before picking up the phone. Common information to find out includes:

    1. Has the customer had payment problems in the past or is this uncharacteristic?
    2. Did the sales person have concerns about the account?
    3. Terms of sale
    4. Payment due date
    5. Exact amount due

 

Always be professional.

Never threaten a customer for payment. The goal of the collection call is not merely to successful collect payment; you should try to also maintain the business relationship if possible. When on the collection call, follow these tips:

    1. Never multi-task. Be completely focused on the call.
    2. Speak slowly and take more pauses when you speak.
    3. Never eat food, drink a drink or chew gum while on the phone.
    4. Go into the call with a positive attitude. Your tone and inflection of voice will mirror your attitude.


Ask open-ended questions.

You will never get paid if you only ask questions with Yes and No answers. Let’s look at a scenario:

Option A: Do you plan on paying us soon?

Option B: What date can I expect payment from you?

Option B is obviously the better choice. You are committing the customer to a specific date. Make it a goal to commit the customer to something before getting off the call: full payment, partial payment, or even a date that they can let you know their payment plan (Remember, sometimes your main point of contact does not control the money within the business.)

 

Be deadline-driven, but still flexible.

Debt collection requires you to walk a fine line. You need to be assertive, but not too pushy. Always emphasize the urgency of the matter and try to have the customer commit to dates for payment.

 

Internal Credit Application Investigation

Posted on by

business

Whether you have taken advantage of our free credit applications or not, your business needs to utilize an internal checklist during the investigation process to verify that the information provided is correct. A verification checklist not only keeps your staff honest in verifying the entire application for every client, but ensures that your business is not endangering itself with bad business debt. This is particularly important for clients who you have never worked with.

If you have not used a credit application checklist in the past we suggest making it your year-end goal to review all existing credit applications for credit that is currently extended.

Verify the following business information provided within the credit application and review any discrepancies with your client:

  • Legal entity status
    • Most states’ Secretary of State Websites will allow you to verify the corporate status. Make sure to keep this on file either digitally or as a hard copy. Included on this site will be the principal office location, the business’s original date of formation and their main point of contact.
    • Phone
      • Do not just verify that the phone number is listed online. Dial the telephone number and see if they answer with the name given.
      • Business Name
      • Address
      • Contact Name/Title

Verify the following bank information:

  • Name of bank
  • Address
  • Phone
  • Contact Name
  • Account Number
  • Age of Account

As a best practice, always contact the trade references listed on a credit application. Remember, most business owners only provide contact information of companies who they know will give good references. Nevertheless, contacting the references provided will give you a further understanding of a client’s payment history, relationship with other vendors and balance ranges that they have had in the past. If you do have concerns over a client, you can always investigate and see if they include suppliers on their website who you can reach out to. They may provide you a more accurate snapshot of the client’s history.

The credit application and investigation process are valuable tools for your business. Always keep a copy of both the application and your investigation notes for future reference.

Here is a copy of our internal checklist. Fill it out online or print it out and scan the documentation into your client’s file.

http://c2cresourcesblog.com/wp-content/uploads/2012/09/Internal-Worksheet-Checklist.pdf

Should you treat every customer the same?

Posted on by

 

apples-orange

The short answer: No!

Ever heard of the common phrase, you can’t compare apples to oranges? By treating every customer the same, you are placing them in a basket and assuming they all want the same thing at the same time.

While we believe that every customer should be treated with fairness, treating every customer the same is robotic; and it will lead to unengaged customers who do not feel like they receive a personal experience from your brand. Remember, customers don’t buy from companies; they buy from people.

As a company, you should focus on each customer’s unique needs. Within your CRM, always document unique characteristics of customer that could better your relationship.

  • Does the customer prefer e-invoicing v. paper invoicing?
  • Do they respond best with phone calls over email communication?
  • Did they mention they will be on vacation and you should invoice someone else?
  •  Do they regularly purchase at the beginning of the month? Consider contacting them if you don’t receive their order.

Customers will appreciate the personal touch on their account. While all customers ultimately affect the bottom line and are a source of cash flow, remember they want to be treated like people, not dollar signs.

When an Account Goes to Collection

This is a common question especially when it comes to collections. The majority of your collections efforts should follow your late payment policy. If not, why have a policy in place at all?

Some companies give special treatment to their best customers who falter once with a past due bill. Keeping a quality customer may mean that you need to bend the rules. This is a business decision that has to be made by the executive team. Always keep your eye on the long-term, big picture relationship. Forgiving a late payment once could result in a positive long-term relationship!

Before any action is taken, a series of questions need to be asked and answered on the part of the service provider:

1. How long has the company serviced this customer?

2. Has this customer ever missed a payment before?

3. How much money is involved?

4. How much might the relationship be worth in future sales?

5. How likely is the customer to continue making referrals?

From there, weigh your options on the best way to handle the late payment in order to sustain a relationship.

What Makes a Good Debt Collector?

Posted on by

Businesswoman making a call - C2C ResourcesAs a business owner, your collection call team will lead you to increasing cash flow. But is a good debt collector born with “it” or taught “it”? For small businesses and start-ups, finding the right person on the team is particularly important because often team members wear multiple hats; only needing to step into the role when needed.

We think the right person has a combination of the right personality traits and proper training. Don’t always go for the sales person or accounts receivable person on the team. While they may be directly related to the process, they may not have the personality needed to deal with potentially intense situations.

 

When considering a team member, look for the following traits:

-          Problem-solver: Often driven to find a solution, the problem solver is going to approach the situation with unique ideas. They will be results driven, even if the debtor becomes upset during the process.

-          Self-motivator: Getting on a call is nerve-wracking because the debt collector does not always know how the debtor will react. By having someone with a keen sense of self-motivation, they will be driven to get the work done.

-          Tenacity: If a debtor is persistent with providing reasons as to why they cannot pay, the collector will need to be just as persistent to make sure that the call ends with an action item of next steps in the payment process.

 

And, provide the following training:

-          Selling: The debt collector on your team needs to be able to prove to the debtor that they must pay. This is very similar to a salesperson’s role. By providing the team member with proven tactics you can prepare them for the most challenging calls.

-          Customer Service: While it may be a good idea to pick the most tenacious person on the team, they also need to have good customer service skills. Being too controlling during the situation could turn the customer off and lead to no payment. The ideal candidate would have a good balance.

Finding the right person on your team to handle debt collection calls goes beyond the ability to pleasantly interact with customers. It requires a combination of skills to be effective.

Do you have the right person for the job on your team?

Debt Collection Letters: Writing a Firm Notice That Gets Attention

Posted on by

Your debt collection letter: Is it getting noticed or tossed?

Office Trash, C2C ResourcesThe process of collecting a debt can be nothing short of maddening.

You send reminders, you call, you hear excuses until finally, you find yourself writing an angry Final Demand Collection Letter.

If you’ve gone through this process even once, you know how easy it can be to lose your cool. And justifiably so!

But the fact is, unprofessional, angry verbiage or empty threats will most likely get your letter tossed in the trash.

You need your collection letters to pack the right punch. You need them to avoid the circular file and solicit payment all while keeping your customer relationship intact.

Start with carefully crafted letters that are professional, factual and fair.

Write a basic template for a letter when you’re not frustrated. Then, when you use the template, make sure the facts and figures you insert are spot-on. This approach will keep your emotions out of the verbiage.

Of course, always start with a friendly reminder collection letter. But if the friendly attempt goes ignored, you have to change your tone.

Here’s an example of an escalated letter:

Dear [Customer],

We do value your business, but are concerned that your past due balance of [$$] has not been paid.

Our credit policy requires that we place your credit privileges at [your company name] on hold until payment is received on the outstanding balance.

We do not make these decisions lightly, but it is important that we are fair to our business and that we require our customers honor their commitment to our credit terms.

Please give me a call if there is a problem in sending your check for the past due balance today.

Thank you for your attention to this matter.

Sincerely,

[Your name]

It helps tremendously to follow a strict debt collection timeline for collection calls and letters, escalating the tone as you progress. This keeps your communication fair and methodical.

Our recommendation is waiting ten days between each communication for up to ninety days. After that, it’s time to send a Final Demand Letter.

By spacing out your communication in a fair and reasonable manner, you’re more likely to retain good customers who have simply fallen behind.

Subscribe to our C2C Resources blog to receive commercial debt collection articles right in your email inbox!

Example of a Friendly Debt Collection Letter

Posted on by

Sometimes, making assumptions can get you into trouble. But there are those instances when making an assumption is a good thing to do. When it comes to debt collection notices, it’s smart for your initial contact to be built on the assumption that your customer’s late payment is simply an unintended oversight.

Crafting that first friendly collection letter built around this premise is as simple as stating the facts in a friendly tone. The following as an example:

Dear [Customer name],

Thank you for your recent business. We look forward to a continued business relationship.

I just wanted to send you a quick reminder regarding invoice number [000000] for [$0,000.00] which is now past due. If payment has not already been sent, please send your payment today in order to keep your account current.

Should you have any questions or problems regarding this invoice, please give me a call.

Thank you for your attention to this matter.

Sincerely,

[your name]

Past due invoices are serious and you certainly don’t want that fact to get lost in any fluff. Therefore, it’s in your best interest to keep the letter short, the tone friendly and the expectations clear.

Assume the best when sending your first notice. For most customers, a friendly reminder is enough to prompt the desired action.

The Basics of Debt Collection Letters

Posted on by

Writing effective debt collection letters requires that you keep your two main objectives in mind:

1. To get the invoice paid
2. To maintain customer good will in the process

In many cases, your delinquent customer truly wants to pay you. While this isn’t true of every customer, it’s good to assume that this is the case especially in your first communication with a first-time late-paying customer. First timers usually respond well to a short, friendly reminder.

In the event that your first notice doesn’t conjure a payment, you’ll need to take the next step toward a more forceful communication. It’s effective to space your contacts about 10 days apart, escalating each piece of correspondence from friendly to firm. Our Collections Timeline can help you schedule your notices and phone calls in a manner that’s fair to both you and your customer.

If you reach the point of sending a Formal Demand Notice, it may be time to consider involving a 3rd party. If that is the action you state in your letter, it’s imperative that you follow through. When your customer’s learn that you take the actions you say you’re going to take, they are less likely to blow you off in the future.

Remaining professional throughout the collection process can help to maintain good will with your customers, even when communication gets uncomfortable. Make your expectations clear in each letter and be prepared to work with your customer toward a resolution for the best chance of collecting the money you’re owed.

3 Ways To Make Debt Collection Calls Easier

Posted on by

Calling your customer about a past due invoice can be one of the most challenging aspects of operating a business. It’s not unusual for aged accounts to pile up because business owners are uncomfortable making debt collection calls. There is a way to ease some of your own apprehension though. By doing the following 3 things, you may find the calls just a little easier to make.

1. Write down excuses

Before you pick up the phone, sit down and list out the most common reasons and excuses for non-payment you’ve heard in the past. Once it’s completed, think about your possible responses and write those down next to the excuse. Think about what worked before and what didn’t.

As an example, I’m sure you’ve heard the excuse, “The check is in the mail.” And while you hope that’s the case, you can’t know for sure, so you’ll want to press for a more concrete verification. Consider a response like, “That’s good! May I have the check number, amount and date sent so I can make sure it posts correctly?” A response like that isn’t confrontational and may result in a speedy debt recovery.

Silly as you may feel, consider rehearsing your responses out loud. This will help you think on your feet throughout the conversation.

2. Know the details of the past due account

Have the following information at hand in advance of the collections call. This will help you maintain control of the call.

How much is owed?
What are the terms of the sale?
What did they purchase?
When was the payment due?
Are there numerous open invoices?
What is their payment history with you?

3. Put yourself in a positive state of mind

A positive disposition and friendly tone of voice will help to set a good tone for an uncomfortable collection call. Take a few minutes to think positively and prepare your self for a professional, pleasant and respectful conversation. Set yourself on a slow and steady course, prepared to leave ample time for listening to your customer’s point of view without interruption.

Half the battle of making a successful debt collection call is the preparation you do before hand. Feeling like you have all your bases covered before you begin the conversation will set you more at ease and help you stay in control.

How about it? How do you prepare for collection calls?

 

Your In-House Collection Policy

Posted on by

Albert Einstein said, “The definition of insanity is doing the same thing over and over again, and expecting different results.”

No matter what we do, some customers will become delinquent. Controlling A/R delinquency is of paramount importance to the financial health of your business. Bad checks and charge-backs are serious. After all, the easiest way to reduce your profit or go out of business is by an escalating loss of revenue. And since A/R is nothing more than revenue that has yet to be received, it obviously poses risk to the company to which the money is owed.

Handling aged accounts should be done through a process of escalating letters and telephone calls. If you’ve implemented a regimented in-house collection procedure but are unable to resolve an account at 90 days, it’s time for a formal demand letter. But once the demand letter expires, you need to consider a new approach before you wind up duplicating your own efforts. This is where Einstein’s words hit home. Don’t make the mistake of sending follow up letters or making follow up phone calls after you’ve sent your final demand letter. You’re diluting the spirit of the demand, giving the debtor a sense of immunity.

C2C Resources offers a web-based collection software program … and it is free to use. It provides tools that will enable you to focus your A/R efforts and can help you formulate and implement an effective internal collection policy. There is no cost or commitment required. C2C Resources provides this service in an effort to assist our partners in navigating pitfalls associated with aged receivables. Use of the system will result in fewer accounts hitting the 90 day mark and will result in more efficient cash flow for your business.

In creating that policy, the most important thing to do is schedule a series of letters and phone calls that build upon one another.