By Dean Kaplan+
Once the debt collector has begun the debt collection process, the question comes up of how often to follow-up with the debtor. Each collection is unique, but the general rule is that more frequent follow-ups are better because the debtor sees that the company takes the delinquency seriously, and expects payment. This is the fifth article in a six part series of articles about the principles of in-house debt collections. This article will focus on the debt collection follow-up process.
When the debtor makes a payment commitment, the debt collector should take copious notes of the date and amount and put a reminder on the calendar to follow-up if the payment is not received on time. Consistent follow-up will keep the debtor from delaying even more, and shows the company means business.
If payments are scheduled over a period of time, the debt collector should push for the shortest amount of time and weekly payments rather than monthly or bi-weekly. Any payment plan should be put into writing. Two copies of the plan should be sent to the debtor, with the debtor signing one and sending it back as an acknowledgement that the plan is acceptable and in effect. A written statement should always be included in the payment plan document that states that if a payment is missed, the entire amount becomes due immediately.
When dealing with a large and/or long-term customer who has become delinquent, it may be a good idea to continue shipping product to the customer, even during the collection period. Maintaining good relations with a customer who has been loyal and a prompt payer in the past will go along way towards continuing the business relationship into the future. Of course, an assessment of the future of the debtor must be made to determine if this type of goodwill action is warranted.
When a customer goes delinquent, if your product is the only product that will work for the customer, this gives the debt collector added leverage to collect. If the customer can go elsewhere for a similar product, this may negatively affect the debt collector’s ability to collect. In any payment plan where shipments of product continue, devise the payments so that the payments owed are greater than the value of the shipments. This way, by the end of the payment term, the balance owed will be zero.
Some other things to consider when working through the collection and follow-up process include:
a. It might be a good idea to ask the debtor for a series of post-dated checks. This will eliminate the debtor having to mail the checks. Instead, the creditor can just deposit each check on the day it is due, with little involvement required of the debtor. There is the possibility of a check not clearing the bank, but hopefully the creditor will honor its commitment and will appreciate the ease of the payment process.
b. Some payment plans will include a guarantee from the debtor. If a guarantee or security is part of the agreement, be sure to have the company’s legal department review and approve the agreement.
c. If shipments continue during the payment period, have a strategy predetermined in case a payment is not received or a check doesn’t clear the bank. The company should be prepared to immediately stop shipments if either of these situations occurs.
In any collection situation, consistent follow-up will help ensure that the debt is paid off. Customers need to know that the company is serious about collecting monies owed. Keeping in touch with delinquent customers will help keep the payments coming in.
Click here if you are ready to go on to the final article in this six part series In-House Debt Collection Considerations 6 of 6. Click here if you missed a previous article in the series In-House Debt Collection Considerations 1 of 6.
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.