With billions and billions of dollars in debt worldwide, both creditors and collection agencies are feeling the pressure. Debt collectors looking to recover outstanding receivables must employ techniques that will encourage debtors to pay. Successful debt collection and outstanding receivables collection techniques will help the collector get the account settled immediately, while still being mindful of the laws that protect debtors.
Meet Joy Paul
Joy Paul is the dynamic and energetic Marketing Director, In-House Collections Manager and part-owner of TM Building Damage Restoration, a licensed general contractor. Located in Tucson, Arizona for over 30 years, TM offers complete fire, water, wind, hail, collision, vandalism/burglary, and sewage back-up damage restoration and mold remediation. They’re also a dual licensed roofing contractor, with emergency construction, cleaning, and restoration crews on call 24/7.
Issues Faced
As an in-house-collector, Joy encountered many excuses from clients delinquent in paying their invoices. She’d heard everything from, ͞I never received a bill to “my invoice was incorrect”, or ͞TM Building Damage Restoration [allegedly] didn’t do all of the work. Another frustration Joy occasionally faced was when doing work for friends. Seems many times that friends just didn’t pay their bills! She reported that one-third of her cases were downright fraudulent.
Then approximately five years ago, TM Building enlisted the assistance of The Stevens-Lloyd Group, Inc. a corporation specializing in domestic and international commercial debt recovery. Joy teamed up with the Stevens-Lloyd Group and instituted a program which proved successful in recovering nearly all of TM Building Damage Restoration’s outstanding receivables!
The Following are Joy’s Tips for Recovering Outstanding Receivables:
Tip #1 – Document Everything
Joy utilizes an extensive phone log. She keeps detailed call records, conducts research on her customers utilizing TM Building’s database, and even notes the customer͛s last date of payment. Joy reports in clear yet simple terms, and manages her activities to control the territory. Joy notes that verbal skills just aren’t enough. It’s imperative to accurately document each call, thereby being instantly able to retrieve any account. This allows her to whip through skip tracing resources quickly and productively while planning and managing an inventory of many accounts
Tip #2 – Call Weekly On All Accounts Over 30 Days Old
Joy developed a system which consists of calling weekly on all accounts which show it’s been 30 days since the job was completed. She keys in on accounts which are mainly in the $7,000 to $9,000 range. When recovering debt, Joy notes that the phone is ten times more effective than written communications. It’s imperative to get on the phone early and skillfully resolve unpaid accounts. A reminder that the phone is a cost-effective investment that will retain customers who can be saved.
Tip #3– Demand Payment in Full!
When Joy contacts the debtor, she asks for payment in full. Typical responses may be,”Yes, I’ll pay’, “No, I won’t pay”, a vague reply of neither yes nor no, or silence at the end of the phone line. If the answer is, “No, I won͛t (or can’t) pay”, find out why and resolve the situation. Determine if the problem is slow business or accounts receivable issues. If it’s the latter, ask the debtor when he expects his receivables to come to fruition. The debtor’s priorities may be other suppliers he has to pay, outstanding bank loans, or payroll for instance. Make it to number two or three and push it up his priority list!
Put pressure on the debtor. On large amounts owed, you may want to make a demand for a financial statement. You ask for a financial statement if the debtor needs to buy product from your company or if he is requesting a payment plan. Financial statements consist of an operating statement and a balance sheet. Total of assets column equals total of debt net worth column. You want to know if the debtor͛s current flow of cash is sufficient to pay your debt. Pay particular attention to the bottom of the financial statement. If the assets exceed the liabilities, the debtor is in good shape and can pay his debts!
Put pressure on the debtor. On large amounts owed, you may want to make a demand for a financial statement. You ask for a financial statement if the debtor needs to buy product from your company or if he is requesting a payment plan. Financial statements consist of an operating statement and a balance sheet. Total of assets column equals total of debt net worth column. You want to know if the debtor͛s current flow of cash is sufficient to pay your debt. Pay particular attention to the bottom of the financial statement. If the assets exceed the liabilities, the debtor is in good shape and can pay his debts!
On the other hand, a positive response may be,” ͞Thank you for reminding me, I’ll pay you in full today.”But more often than not, you’ll have to nail down the promise. Experienced collectors can tell you that there are plenty of debtors who’ll promise you anything you ask, just to get you off the phone.
When you get a promise to pay, say something to the effect of, ͞That’s great, Mr. Debtor. Let’s see now, today is the twelfth and mail service takes about 2 to 3 days, so if you send it today, I’ll certainly have your check by the fifteenth. I’ll mark my calendar for the fifteenth so I’m sure not to miss it
Tip # 4 – When to Offer Payment Plans
When debtors balk at payment in full, Joy advises, “We’re not a bank; we have to pay our expenses upfront.”
However, sometimes she has to offer payments.* There are a limited number of payment offers if she can’t secure payment in full. The first is two payments. The next, obviously, is three. When she makes these offers, Joy makes it clear that she’s “breaking the rules, this is a one-time offer only.”Therefore, no precedent is being set and she may even risk getting into trouble by offering the option.
*Joy offers no settlements or discount programs on delinquent accounts
Tip #5 – How to Handle Slow Payers and Stalls
Debt Collecting Percentages
Collecting is negotiation. The debtor wants to delay. You want it all now. Collecting is selling. Qualify the prospect, decide whether she’s going to pay, ask probing questions.
Collecting is percentages – the more contacts made, the more money comes in. “Go to bat as often as possible.”
Collecting is a game. The debtor will attempt to manipulate. Confront them and stop the game
oy deadlines the debtor. For instance, Mr. Debtor, pay by October 31st to avoid being charged interest or being turned over for collections
Typical stall tactics Joy comes across are,” ͞The owner is out of the country”, or ͞I never received your bill.”Other “stalls debtor’s use are, ͞I have other bills to pay; I can’t pay anything now”, or “We can pay you when our customer pays us.”And finally, ͞I need an extension on this.”
Joy learned early on in the process the art of saying, “No”
Tip #6 – Role Playing
The Stevens-Lloyd Group showed Joy Paul and TM Building the value of “role playing”. Role playing stars YOU as the debtor. Only two people get to talk. Each person must stay in the rule. The players don’t have to look at each other. Non-playing members actively listen and the group offers evaluations.
Simply stated, if you want to become a great cook, you won’t achieve your goal just by watching a top chef on TV. You have to parlay your knowledge into a state of confidence and proven results. Role playing is a great technique for achieving a consistent level of success in recovering debt!
Tip #7 – Finance Charges
Philosophically speaking, if you add a finance charge or interest, your bill will be paid faster. Without it, time is on the debtor͛s side since it costs nothing to delay payment. There͛s actually a disincentive to pay because an unpaid bill earns interest for the debtor.
To reduce the negative incentive, Joy makes the debtor pay for sitting on her money. Interest, service charge, etc., must be properly disclosed. TM spells this out on their Work Authorization Form.
