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Bad debts can bring a good business down, so be sure to have a good support system when calling to collect.
Cash flow is crucial to ensure your business weathers the current storm. Many a bad debt has brought a good business down. To protect against this, a well-documented debt collection system is mandatory for every business.
When it comes to collecting monies owed, early and consistent follow-up is key. For many, debt collection is difficult, especially in tight times. This is why well thought-out systems are crucial, correctly and consistently implementing them even more so.
A good system should also be able to regularly assess and identify potentially bad debts.
Good terms
Be clear on your payment terms from the very start – they should be firm, not flexible.
Do not make the mistake of being lenient with new accounts under the guise of establishing a good relationship. This sends the message that your payment terms are flexible and gives them permission to take advantage of you. Once an account is overdue, no matter who it belongs to, follow it up.
Some businesses have a client so crucial to their business that they are quite generous with their payment terms. A client should make, not cost money. If you present yourself as a low-priority creditor, they will treat you as such.
Be clear on your terms of payment. If your business is service-based rather than products-based, ensure your service contracts act in your best interests. If possible, secure a deposit followed by a series of progress payments. For example, a deposit of 40 per cent before starting, 30 per cent halfway through the project and the remaining 30 per cent on completion.
Calling collect
Few people enjoy harassing customers for unpaid accounts, but essential telephone skills go a long way to getting payment. A phone call is often the best way to do it. And if you have your script down pat, it’s the best kind of instant gratification there is.
Be prepared. Have all the details in front of you before you make the call – know both the invoice and the delivery details, as well as a list of questions you need answered. This way, you can approach a debtor with confidence, and tick these off as you go through.
Always be sure to speak to the decision maker. Know their name, and use it. If they are unavailable, find out when they will be back in the office and call them then. Leave your name as a courtesy, but don’t leave a message asking them to call you – it’s unlikely that they will. Never leave messages concerning the debt, especially on an answering machine, as this is a breach of privacy (you never know who may be listening).
When you do speak to a debtor, be sure to:
  • Be business-like and courteous, no matter how agitated the debtor might become.
  • Encourage answers by remaining silent at times (see below for more on this).
  • Listen carefully and adapt your approach accordingly.
  • Convey a sense of urgency by making deadlines.
  • When a payment plan is proposed, the debtor's initial offer should always be refused. Confirm the agreed outcome in writing.
Don’t call:
  • At lunchtime
  • On a Friday afternoon (or on a Friday at all!)
  • Too early in the morning
  • After 4pm
If you have a part-time staff member who makes these calls, keep the times above in mind when negotiating the structure of their working week.
You say it best, when you say nothing at all
Professional speakers know the power of the pause and use it to their advantage – it applies pressure through silence.
This is the part of the conversation where you put the burden of conversation on the debtor. For example: “I need your payment no later than Friday”.
Then pause.
Do not speak.
Even if you are tempted, don’t.
Instead, let your debtor fill the silence. This is a great way to get a commitment out of the most reluctant of payers. More often than not, they will give an undertaking to pay.
If you don’t get a bite, ask a direct question: “When can I expect payment?”
Once they’ve responded, be sure to repeat their commitment back to them: “Thank you very much. I’ve made a note that will be paid on Thursday and you’ll email me the remittance details.”
Making history
For each account, you should keep a communication history. Here, you document the main points of your conversation. You can refer to this for future conversations. This also means that someone else can handle the account, as they will have all of the information at hand.
Always be kind and courteous, never patronising or terse. As you get to know the client better, you can ask them questions that will put them at ease. Ask them how their weekend was. This also helps you to establish a relationship, making it harder for them to avoid your calls and your end goal – payment.

It’s important to keep the lines of communication open at all times. Continue with follow-up calls all through the collection process, including when payment has been made, thanking them for their payment.  

Published on: Tuesday, August 04, 2009

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