Calling up a defaulting customer for the amount they are due to pay is never a task you look forward to. As disliked as it may be, collection calls are an integral part of your work when there are delayed payments to be collected. Confidence is key in these communications as you will need to stay in control of the conversation. While there is no foolproof way to make successful collection calls, we do have a few essential tips that could help you achieve better results.
* Be prepared
Before you make the call, ensure that you have all the details of the debt you are calling about. Having a file with all the information on the account will help you speak confidently. This also signifies a level of professionalism and gives you control over the conversation. Make copies of all the relevant invoices, terms and contracts so as to refer if required. Remember to take careful notes throughout the call, in case a future dispute arises.
* Be pleasant but confident
The tone you adopt in a conversation can have an impact on the other person’s response. Speaking in a pleasant and positive tone reflects confidence and professionalism while letting you communicate in a polite manner. The pitch, inflection and speed at which you talk can also have an impact on the listener. Enunciating, pausing more often and smiling while you talk are some techniques you can adopt for a better conversation.
* Stay in control
While it is good for you to stay pleasant during the call, it is imperative to ensure that you are in control as well. Once you confirm you are talking to the right person, address the debtor by name as this shows respect and draws attention. Throughout the conversation, try to validate what the debtor says or show that you can understand his perspective. This keeps them from getting defensive and facilitates smoother communication. Listening carefully and asking open ended questions are often considered other tricks you can try. Make sure to stay focused and bring the talk back to the purpose of your call – getting the overdue amount paid.
* Avoid Confrontation and Manipulation
Debtors might use excuses, anger or abuse as tactics to end the conversation. In such situations, remember to stay calm and remind the other person that screaming or abusing would not help fix the problem. Offering to call back later or even using a few seconds of silence to let the debtor calm down are techniques often suggested. Try to get a sense of whether the person is being honest with you and confirm their excuses for non-payment before you proceed.
* Give options
If a customer expresses issues with paying off the debt, work out possible alternatives that can be considered and are feasible for both parties. This could include anything from paying in installments or by credit card to issuing a cheque or transferring the amount to the specific account. Ultimately, your intention is to get them to pay off the overdue amount at the earliest possible.
* Finalize things
Try to get the debtor to commit to a payment or even a payment date before you end the call. Asking for a good faith gesture like partial payment or some form of collateral is another option you can consider. Summarizing the main points of the conversation is a practical way of reinforcing your final decision. Include specifics such as the agreed date and method of payment while also emphasizing the urgency of the issue. Put this down in writing for future reference and ask for a callback to confirm once the payment has been done. Make sure to keep communications open as some difficult payments may often become possible in the future, if not now.
While these are useful tips to keep in mind while making a collection call, it is always essential to be flexible. Keep in mind that each debtor is different and has to be spoken to with a different approach.
Supposedly first quoted by Benjamin Franklin, the phrase, ‘Time is money’, holds exceptionally true in the case of debt recovery. For, time management is often considered a crucial part of collecting overdue payments.
Considering how the collectability of a debtor keeps decreasing the longer the account is left as outstanding, the process of debt recovery becomes a time-sensitive task. From initial reminders to collection calls, it is essential to ensure that each action carried out follows the time frame associated with the task.
For instance, the objective of debt recovery is to obtain the outstanding payment within the due date. In order to facilitate this, the customer dunning process has to begin way before this set date. Similarly, an accurate and timely method has to be followed while sending reminders to debtors. If you specify a period of three days to receive the payment confirmation, it is imperative that you call the customer right after the three days. This also helps in communicating that you are prompt and serious about following up.
Time management is one of the key skills a debt collector or professional needs to develop before he begins with the procedure. Understanding that time is of essence should encourage you to take a proactive approach towards the process. Staying at the same stage of collection for months will only end up detrimental to your business.
Lax measures and lack of commitment will only lead to further defaulting on the debtor’s part. Being overly flexible gives customers the impression that late payment is not as serious an issue while well-timed raises and professional communication encourages them to pay bills as per the due date.
Deciding on a progression for your collection process is another major aspect involved. Gentle notices before due date to progressively stern reminders help communicate the seriousness of the situation before you move onto formal notices or legal measures.
Using time effectively to recover outstanding amounts not only highlights the business’ credibility but also helps build a healthy bond with the customers, in the long run.
As a commercial creditor, you often face challenges that require you to take productive decisions while ensuring you keep a check on your bottom line and maintain good relationships with your customers. Managing all of it to achieve a successful balance can be easier said than done. Perhaps, one of the most worrying tasks you encounter on a regular basis, as a part of your business, would be the process of debt collection. After all, overdue and delayed payments can have quite an impact on your day-to-day operations, and ultimately, on your business. Identifying some of the common challenges faced in debt collection might help you plan proactively to deal with such problems.
1) Excuses by Debtors
As part of your debt collection process, it is ideal to determine whether a debtor was unable to pay due to real financial problems or falls into the category of “regular defaulters”. This classification can be of help when it comes to handling debtors’ excuses as falling for the wrong excuses and tactics can cause further trouble for your business. While foreseeing possible excuses can ease the issue to a great extent, putting in place a clear set of guidelines and a regulated system reinforces the process of debt collection.
2) Getting Support
The longer an amount goes unpaid, the less likely it is to be collected. Taking this into consideration, businesses have the option to take help of debt collection agencies. This step can relieve you of the extensive efforts you have to take up, instead utilizing the expertise and resources of the agency for ensuring payments are collected on time. The fundamental element, in this scenario, is recognizing the need to get help and the perfect firm to approach for this task.
3) Inefficient Management of Queries & Correspondence
In most cases of debt collection, managing queries and correspondence between the customer and the business is done by manual processes. Apart from being time consuming, this can use up a considerable amount of effort and resource that could be put to better use in other tasks. A feasible solution for this would be automating these processes for smoother functioning. Whether it is query management or sending out past due reminders and emails, automation can prove to be beneficial in the long run.
4) Customer Going out of Business
Another obstacle that you often overlook or not expect as a commercial creditor is the possibility of your customer going out of business. However, it is important for you to keep track of such issues as they can affect the payments due to you. Nevertheless, this can be alleviated by following a rigorous credit application process which includes credit checks and reference verification. Apart from background checks, implementing routine re-verifications and reevaluting credit limits are proactive measures you can adopt to avoid or even foretell such a situation.
5) Failure to update collection strategies
While it can be encouraging to have in place a system that works well, it is necessary for businesses to constantly update or develop new collection strategies in order to keep up with changing circumstances. This also helps refine the process, eliminating complications with every step. The process of updating requires you to have a certain level of flexibility so as to allow the development, testing and application of new strategies that can boost collections.
While there is no foolproof method to avoid bad debts, having a proactive approach can constantly help anticipate challenges in the process of debt collection and find practical solutions for them accordingly.