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The Five Stages of a Collection Call

And the Seven Deadly Sins Collectors Must Avoid

This article was originally published on December 13, 2022 in Your Virtual Credit Manager, and is being re-published on this site with permission.

Commercial collections is not unlike convincing somebody to buy something, but people with that talent tend to go into Sales. For most people, however, collecting B2B debts is an acquired skill. It is not a task that requires special talents.

People do not aspire to become commercial debt collectors. Those of us who have spent our careers in credit and collections, fell into the profession. Many of us went to college and got degrees in business administration or accounting or even liberal arts and science, but due to the vagaries of providence ended up getting jobs handling credit and collectors. Nobody grows up wanting to be a bill collector.

If your company sells its goods or services on open credit terms, it is almost guaranteed that some customers will not pay on time. In many cases, your new customer credit evaluation will identify those accounts you can expect to pay late, but that is a risk businesses are often willing to take, and reasonably so. Consequently, most businesses need to designate somebody to handle the collection of past due invoices.

It behooves that person to put some thought into what they are trying to accomplish. It’s not hard to collect a simple debt from a customer who is willing to pay, but it is a foolhardy to simply charge ahead without a plan — often times the matter involves complications. There are five stages involved in making a collection call, and understanding each will help you improve your effectiveness as a collector. There are also number of errors you should avoid — the seven deadly sins if you will. A detailed discussion of both the dynamics of making collection calls and mistakes to avoid follows.

1. Establish Communications: Hopefully, contact information for the people responsible for paying your customer’s bills was captured during your new customer on-boarding process and in your credit application. Otherwise, sales may be able to suggest somebody with the customer to act as a starting point, your goal being to establish who handles releasing payments, and their place in your customer’s organization. This is obviously elementary, but it is critical to find out who has responsibility for approving payment, as well as any hierarchy to your customer’s approval process. A bookkeeper or AP clerk, usually your first point of contact, may process checks, but they don’t always have authority to send them. Once you understand how your customers payment process works and who is involved, you can start establishing a good rapport. When making an initial phone call, take time to both introduce yourself and find out a little about your contact. Have they been with the company long? Who do they report to? Over time, you should try to get to know the other party even better. It’s all about establishing open communications, which will make subsequent collection efforts as friction-less as possible beside ensuring the current call goes smoothly.

2. Listen with an Empathetic Ear: Most of the time your requests for payment and the customer’s response will be cut and dry. Where collectors earn their keep is when there is an issue. When an objection comes up, or there is some sort of an issue, you need to listen carefully. You also should be showing an understanding of what they are really saying and not blowing them off. Rephrase or summarize what they have told you, and ask them if your understanding is correct. They may be offering you an excuse, but treat it seriously nonetheless. Being empathetic is really important when the customer is working through internal issues that have caused withholding payment to your firm. By being understanding, you build rapport and gain valuable knowledge about the customer for the next time there is an issue, but that doesn’t mean you should be anything less than firm . You want them to do everything possible to pay you at the earliest possible moment, but that will only happen if they feel you are willing to work with them.

3. Sell your request: If payment isn’t immediately forthcoming upon your request, there are any number of reasons you can give your customer to convince them to pay. Maintaining open credit terms with your company as well as maintaining a good payment history on their commercial credit report (assuming your firm reports payments to one of the credit bureaus) provide soft leverage. Getting subsequent orders released is more convincing, especially if you have one on hold. The more important the customer/supplier relationship, the more leverage you will have to sell your request for payment. It also helps to state your request in straightforward manner (e.g., These three invoices totaling so many dollars are past due. Can you pay today?), and then wait for their response, which leads us to the next point.

4. Negotiate Objections: Many times the customer will make excuses, or otherwise try to further delay payment. Collectors earn their keep by overcoming those objections. If the customer cannot pay in full, can they send you a partial payment now and the balance shortly thereafter? If they cannot pay now, when do they expect to be able to pay? If there is an invoice discrepancy, are they willing to pay the undisputed balance? If not, the collector needs to quickly generate an accurate invoice. The list goes on, and for more insights check out the article we published about payment objections.

5. Follow-up Consistently: When the collection call is over, the collectors job is not done. Collectors need to make sure any payments promised are received as scheduled. If not, a follow-up is required. If a promise was not made, but the customer hoped to have enough funds at some point in the future, the collector needs to follow-up at that point in the future. If the customer needs a proof of delivery, the collector needs to get them a proof of delivery, and then again request payment. Follow-up can take as much or even more time than the actual collection call, but it essential so you don’t waste your initial effort. Collections is a process, and follow-ups are what keep that process going until full payment is received.

Seven Mistakes for Collectors to Avoid

  1. Failure to provide proof of the debt: You need to be able to provide evidence the debt is valid and owed by the business in question. Your invoice needs to be accurate, matching the customer’s purchase order, and backed up by a proof of delivery or signed service ticket. Otherwise, the business may have grounds to dispute the debt and avoid making payment.

  2. Harassing or threatening the customer: With business debts, in most cases you are talking to an employee, not the owner, so keep it professional. Using profanity, making repeated or excessive phone calls, berating the other party, or threatening legal action that is not warranted is counterproductive and can leave you open to legal action. If you tell the customer you are going to turn their account over to a collection agency or attorney, you need to actually do that within a reasonable amount of time.

  3. Sharing information about the debt with outsiders: Don’t disclose information about a business customer's debt to anyone other than its authorized representatives. This is why faxes are problematic if they don’t go directly to the recipient’s work station, the wrong people might intercept the message. The only exception is reporting the customers payment habits to a credit bureau or industry credit group.

  4. Misrepresenting the amount of the debt: Don’t make false remarks about the amount of your customer's debt or the terms of repayment. This can include misrepresenting the interest rate, late fees, or other charges that may be added to the debt. This also includes adding unauthorized fees or charges to the debt, or trying to collect interest or other charges that are not allowed by law or your credit agreement.

  5. Continuing to try to collect disputed debts: If a business disputes a debt, you need to stop trying to collect the debt while the dispute is being resolved. You should insist they immediately provide documentation to prove that the debt should be invalidated. If it isn’t valid, you can resume your collection efforts. If it is valid, and you continued trying to collect, you may open your company up to legal action.

  6. Irregular collection efforts: You collections need to be regular, systematic, and progressively aggressive (here’s more information on an effective collection process). Irregular collection efforts lack the continuity that increases the impetus for the customer to pay. Lapses in time between collection efforts only serve to age the receivable further and increase the likelihood it won’t be paid. Failure to follow-up on a customers promise to pay, is a waste of your time and previous efforts.

  7. Holding onto a debt too long: If you have engaged in a consistent effort to collect a debt over a two or three month period without any payment forthcoming, the likelihood you will collect the debt in the next month or two is slim to none. Don’t continue wasting your time. Instead, turn the account over to a collection agency or attorney.

Some Final Words on Preparation and Persistence… To be an effective collector requires being prepared. First and foremost you must understand what is owed, otherwise you will not be able to communicate effectively should the customer have any questions or raise any issues. Collectors also need to understand the situation if they are to sell the customer on paying what they owe. For example, is an order pending? Is the customer’s credit limit at risk of being reduced due to past behavior?

It’s also vital that collectors be prepared to overcome objections if they are to be effective. There’s a saying that selling doesn’t begin until the customer says no. The same is true for collecting. Top collectors are at their best when customers claim they can’t pay. And that is where persistence also comes into the picture. Successful collectors are prepared to overcome objections and persistent in their efforts without being obnoxious. Ultimately, their professionalism shows through.

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