Whether you’re a debt collector or a business owner trying to get a customer to pay their bills, it is important to know how to negotiate effectively with debtors. Simply calling and demanding payments oftentimes will alienate a customer, especially if they have a reason for late payment. Here are some tips designed to help business owners or credit department managers improve the success of their collection efforts:
- If you haven’t contacted the customer since their bill became past-due, you should start with a reminder that they haven’t paid yet. It is possible they simply misplaced the bill or forgot to send you a check, and starting your call with a reminder instead of a coarse demand for payment will help maintain goodwill with your customers. Furthermore, they will be more inclined to send a payment they’ve forgotten about in a timely manner if you provide a firm but respectful reminder before making accusations or assumptions.
- If they haven’t simply forgotten to pay the bill, the most important step in negotiating a payment from your customer is to find out the reason they aren’t paying. By understanding the reasoning your customer has, you will be far better prepared to come up with a payment solution that will satisfy both sides.
- If you offer a payment option to the customer and they refuse it, require them to come up with a counter-offer. Even if their counter isn’t enough for both sides to agree on, it will send a message that you are taking the negotiation seriously and won’t let them walk all over you.
- Have a concrete minimum offer you will accept for any payment plan you pursue. If you create a payment plan with your customer, this minimum should be an amount they can realistically pay but is also substantial enough that it won’t take years of payment to pay off the debt. If the customer’s offer is below this amount, immediately reject it. Even if you later end up agreeing to a payment option below your minimum, rejecting an offer below your minimum right away will send a clear message to the debtor and will force them to make another counteroffer.
- If a debtor or customer simply can’t afford to make any payments (as a result of bad business, injury, etc.), don’t try to force them into payment plans or agreements they can’t make good on. Neither party benefits from entering into a payment plan that can’t be fulfilled, and forcing one on your customers is unlikely to provide any benefit to your business. You’ll benefit more from giving the debtor a few months to try to get their finances in order before beginning a payment agreement.
If you are still unable to negotiate payment from a customer, it may be time to consider hiring a collection agency. Depending on the nature of the debt (consumer versus commercial), a commercial collection agency may benefit your business and help you get your payments faster. See our last blog post for an explanation of the differences between these two types of collection agency, and visit our resource center for tips on choosing the right agency for your needs.