In these challenging economic times, for many of us a collection call could be right around the corner. The only difference is whether you will be making or receiving the call.
Companies everywhere are trying to do more work with fewer people. If you suddenly find yourself in the position of calling people who are not current on their payments or as your office collections person, you are being asked to bring in more past-due dollars, but success is possible even with no formal collection training. All you need is a little practice and some of these tips.
First, there are laws pertaining to collections, including the Fair Debt Collection Practices Act, that you need to know. For instance, you are not allowed to contact the debtor before 8 a.m. or after 9 p.m. or at work if the debtor's employer does not allow its employees to receive personal calls at work. Also, a collector cannot be abusive or make idle threats. Be sure to check the Internet or the local library for a more in-depth explanation of the laws before making the first call. You can put your foot in worse places than your mouth if you are not careful.
Next, keep in mind your ultimate goal to find a solution that works for the employer and the client. That kind of success requires flexibility. Your collection goal may change with each client. Sometimes you will need to make concessions and accept less than the full amount due. For example, what if a client owes $1, 500 but can only pay $1,300. Your options are to accept the reduced amount or to take legal steps such as hiring a collections company or going to small claims court. This is going to cost more than the $200 difference if you consider the time and money you need to expend to collect the difference. In this case, the best solution is to accept the $1,300 as payment and move on to other business matters.
Another example is a client that owes $8,000. The client is willing to pay in full but needs six months to do so. Again, you need to consider your other cash flows to see whether your company can operate without this payment for the next six months. If it can, it might be better to accept the client's terms, rather than taking legal or other actions. Be sure to confer with your "Higher Power" more commonly referred to as the boss so that you're both in agreement on what is and is not negotiable.
Be sensitive to others' troubles. Many people are struggling to make payments. If you are not one of them, you are in an exclusive club. Take a moment before making the collection call and think of how you would feel if you were unexpectedly out of work and behind on some of your payments. Now, remember that feeling when talking with your client. Help ease their tension by letting them know what your goal is and that you are willing to work with them.
Remember the phrase "You catch more flies with honey than vinegar?" Try personalizing your call. Be empathetic and listen carefully for personal details while your client is speaking. You may be speaking with them again, so remember an interesting detail you can ask them about next time their health, family members or hobbies. Who would you pay first if you only have a limited amount of money to put towards past due bills? Chances are it is someone who treated you with dignity, respect and kindness.
Having a variety of negotiating tools or solutions to offer your client is important. For example, does your company accept payments via credit cards? If so, could you discount the amount of credit card fees usually taken by the credit card company if your client agrees to write a check? Perhaps an even deeper discount could be given if the balance is paid in full by a certain date. How about coming up with a monthly payment plan that will see the client through this rough patch with the understanding of renegotiation once they are back on track financially? Do they have a skill that your company could use? If so could they work off some of the debt in trade? Now is the time to be creative and resourceful. Ask them for any ideas they may have and then work together to reach the goal.
Now let us pretend that you are the one who is past due on your payment. The best thing you can do is telephone the company you owe and advise them of your current situation. By making the call first, you are showing them that you are responsible and interested in resolving your debt. That phone call will go a long way in the negotiation process.
The negotiating tips above work just as well from this side of the telephone. Offer to set up a payment schedule that you can afford and let them know that you are willing to renegotiate as soon as you can. Most companies are willing to accept monthly payments. If you are in a position to pay off the debt, let them know what amount you have and see if they can write off the rest.
If you are afraid to make the first call, know that you will eventually receive the collection call you are dreading. All you are doing is postponing the inevitable. You can still negotiate at this point, but you have lost the advantage of taking that first step.
Remember, this may seem like an adversarial situation, but it is all about teamwork and reaching the goal together. You started out happy to be doing business together; there is no reason it cannot end up that way.
Donna L. Garcia is an analyst with Meridian Business Advisors in Reno. Contact her at dgarcia@mbareno.com.
