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How to Collect Debt
| Debt collection is a tricky
problem, and you have no doubt faced it. In your normal business dealings,
you have probably encountered customers who innocently do not pay when
they are supposed to. Clearly, aggressive collection on such customers
will unnecessarily create ill will. In fact, the typical customer will
be embarrassed over not making the required payment on time. Then, there
is the other customer—the one who deliberately avoids or delays
payment. Somehow, you must distinguish between the two, and you must
resolve the debts. In this course, you'll see how to do that. And, you'll learn proven techniques to turn a late-paying customer into a loyal customer. |
Upon
completion of this this course, you will:
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| Debt collection is tough. Most people want to pay what they owe,
but just lack the means. So putting pressure on them to pay up is
generally a waste of time. In fact, it can even be
counterproductive. Yes, there are the deadbeats. People who buy on credit with no intention of paying. On those people, you can exert pressure. But you need to know how to tell them from the more typical debtor, the person who simply lacks the means to pay. Many businesses try to outsource debt collection by assigning the debt to a collection agency. For the deadbeat types, this is the best approach. Instead of wasting your time and energy on these people, you can be servicing your paying customers. But what about the other type of customer, the one who simply lacks the means to pay? Don't send their debt to collections. You might get back pennies on the dollar (or you might get nothing), but for sure you will alienate that customer. Just because they can't pay now doesn't mean they aren't valuable. They can be your best advocates to new customers who can and do pay. And there are many other benefits to working with these people to address the debt they've incurred. By using the constructive methods taught in this course, you will understand how to make the proverbial lemonade. The thing is, you might even get to keep the lemon and use that also.
Table of Contents INTRODUCTION.................................................................................................. 5 DEFAULT AND DELAY: THE WHY.................................................................... 7 E XAMPLE #1....................................................................................................... 8E XAMPLE #2..................................................................................................... 10NO FAULT......................................................................................................... 14 I NNOCENT MISTAKES ......................................................................................... 15C IRCUMSTANCES .............................................................................................. 17C RIMINAL DEFAULTERS ...................................................................................... 19S IGNS OF TROUBLE ........................................................................................... 20R EVIEW............................................................................................................ 21PREVENTING BAD DEBT ................................................................................ 22 B USINESS TO CONSUMER................................................................................... 23Example #1 ...................................................................................................................... 23 Example #2 ...................................................................................................................... 25 Example #3 ...................................................................................................................... 27 B USINESS TO BUSINESS..................................................................................... 31Example #1 ...................................................................................................................... 32 Example #2 ...................................................................................................................... 34 Large orders vs. credit...................................................................................................... 36 C REDIT RATINGS ............................................................................................... 37C REDIT TERMS.................................................................................................. 37N ET INVOICES ................................................................................................... 39B ILL TIMING....................................................................................................... 40E NCLOSURES.................................................................................................... 41R EVIEW............................................................................................................ 42COLLECTION PROCEDURES.......................................................................... 43 D EVELOP WRITTEN PROCEDURES ....................................................................... 44Policies for written communications .................................................................................. 44 Writing right...................................................................................................................... 47 E-mail-specific procedures ............................................................................................... 48 E-mail-specific rules ......................................................................................................... 48 Phone procedures ............................................................................................................ 50 Personal visits .................................................................................................................. 51 C ONDUCT TRAINING........................................................................................... 55C ONDUCT POST-COLLECTION REVIEWS ............................................................... 56R EVIEW............................................................................................................ 57COLLECTION COMMUNICATIONS ................................................................. 58 C OMMUNICATION ATTITUDE................................................................................ 59When a consumer does not pay ....................................................................................... 62 When a business does not pay......................................................................................... 63 B EGINNING COLLECTIONS .................................................................................. 65D OCUMENT IT ALL.............................................................................................. 65Documenting phone calls ................................................................................................. 68 Electronic vs. paper.......................................................................................................... 68 Avoid islands of information.............................................................................................. 69 F IRST STEPS..................................................................................................... 70C ONTINUING THE PROCESS................................................................................ 74C LOSING STEPS ................................................................................................ 75R EVIEW............................................................................................................ 80BAD DEBT ACCOUNT...................................................................................... 81 C LOSE THE BOOKS ............................................................................................ 82M ANAGE BAD DEBT............................................................................................ 83R EGULATORY AND AGENCY ISSUES..................................................................... 84I NVESTORS....................................................................................................... 87R EVIEW............................................................................................................ 89CLOSING THE LOOP........................................................................................ 90 APPENDICES.................................................................................................... 92 L OSS PREVENTION CHECKLIST FOR MANAGERS .................................................. 93C OLLECTIONS CHECKLIST FOR COLLECTORS........................................................ 94Initial contact .................................................................................................................... 94 Follow up.......................................................................................................................... 94 Second contact ................................................................................................................ 95 C OMMUNICATION CHECKLIST FOR PHONE CALLS................................................... 96Pre-call............................................................................................................................. 96 Intra-call ........................................................................................................................... 96 Post-all............................................................................................................................. 97
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