In-House Debt Collection Considerations 4 of 6
By Dean Kaplan+
Once the decision of when to begin the debt collection process has been made, the next question to answer is who to contact about the debt. Whenever possible, the correct person to contact is the person who has the authority to make payments. This is the fourth article in a six part series of articles about the principles of debt collections. This article will focus on who to contact, and how to make contact.
Before making contact with the debtor, it is important to collect all information relevant to the debt including copies of purchase orders, copies of invoices, details of any credit memos, copies of applied and unapplied checks, any written correspondence relating to the debt, details of any open disputed items, copies of shipping instructions and proofs of delivery if applicable. In addition, the debt collector should also examine recent payment history and any published payment data from the trade organizations about the customer. Look at the customer’s financial information, and update the financial data on file if it is not current. By examining the debtor’s finances, this may give the debt collector an idea of why the customer is not paying. Also, researching the debtor before any contact is made will give the debt collector important insight which can help steer the collection conversation in a productive direction.
When making contact with the debtor, a personal visit is probably the most effective debt collection method. Unfortunately, it is also the most time consuming and can be very expensive. The ability to see the debtor when you are discussing the debt gives the debt collector the opportunity to observe the debtor’s facial expression and body language. It also provides the collector with the opportunity to observe the work place, look at inventory levels and see first hand customer activity, if applicable. Due to the costs associated with personal visits, saving these for large customers is probably best.
Phone contact is much more cost effective than personal visits. It is quick and still gives the debt collector a chance to listen to what the debtor has to say. One benefit is that while talking to the debtor, the collector has access to the customer’s file and can access different relevant pieces of information while the conversation is taking place.
It is important for the debt collector to be a good listener when talking to the debtor. However, the debt collector must steer the conversation away from small talk, and not get caught up in listening to endless hard luck stories. Experienced debt collectors know proven methods for countering debtors’ commonly used excuses such as complaints of defective, returned, short shipped or mispriced products, payment was mailed yesterday, the computer is down, etc.
Some emotion is to be expected when contacting delinquent customers. However, it is not uncommon for debtors to become agitated and even abusive when dealing with debt collectors. It is critical for the debt collector to remain calm and businesslike even when allowing the debtor some time to vent. As soon as possible, the collector must politely steer the conversation back to the point at hand. If the debtor continues to be aggressive and unable to talk in a reasonable manner, the collector should terminate the call, and call back after the parties have had a chance to calm down. Usually, when the debt collector calls back a second time, the debtor is better able to talk calmly about the debt and will often offer an apology.
Things to think about before making the collection call include:
a. Always go into the call with the intention of getting full payment for the debt owed.
b. Have a strategy in mind in case full payment is not possible.
c. Know the minimum payment amount the company is willing to accept and the payment terms.
d. If you do not have the authority to negotiate, talk to the person who does have the authority ahead of time and determine what wiggle room is possible.
e. Do not let the debtor know you are willing to accept less than the full amount.
f. Use the payout and payment terms as negotiating tools as the collection process continues.
g. Keep the lines of communication open with the debtor
It isn’t always prudent to push a debtor to pay in full immediately. Sometimes allowing the debtor to stretch payments out over time is the right answer. What the debt collector does not want to do it push the customer into bankruptcy. Slower payments are better than no payments.
Click here if you are ready to go on to the next article in this six part series In-House Debt Collection Considerations 5 of 6.
Be sure to check out the other articles in this series:
In-House Debt Collection Considerations
- Things to Consider Before Starting Debt Collection
- Four Steps to Collection Success
- When to Start The Collection Process
- Making Contact
- Following Up On Collections
- Additional Collection Techniques
The Kaplan Group is a boutique collection agency specializing in large (over $10,000) debt collections due from businesses. Founded in 1991, the company has a stellar reputation (A+ rating with the Better Business Bureau) and is recognized as one of the leading collection agencies for results on large and complex matters.