Debt collection. Two words that can send shivers down the spine of most business owners, whether it’s the phone calls you get (and try not to) or the ones you have to make. Let’s face it, nobody wants to make those calls. You spent a lot of time building a relationship with your customer, they were keen and excited so you did the job, they were happy (or would hope they were) with the service or products with the result… so why haven’t they paid you yet?
I began my journey in the world of debt collection when I was given the task of managing a debtors ledger at a major building supplies store around 2010 (some of you will know which big blue shed I’m referring to!) It was tough learning how to be effective with the task you’ve been assigned, while still being sympathetic enough with the people you have to call and ask for money from, especially with me being a shy, sort of introverted girl who had to learn pretty quick how to sound reasonably confident asking tradies to pay their overdue bills.
There’s no hard and fast rules to debt collection. People have asked me before; “How long do I wait until I ring someone?” The answer is; “It depends.”
It depends on factors such as, what your terms of trade are. What’s the customer’s understanding of the credit they have signed up for? Did they sign up for credit terms at all? What cover do you have as a business owner to take action, should it come to that stage? Can you on-charge collection costs? It all depends on the original engagement of services or supply of product the client signed with you before you started working for them. It’s really important to get this right and in place up front before any work it done.
So, what makes a good debt collector? Here’s some tips for you that I’ve learnt over the years.
1. Be a good Listener.
Often, there is a story behind why your client hasn’t paid you. It’s not that they don’t want to, but maybe it’s got to the stage where they are embarrassed to call and talk to you about it, so are just burying their head in the sand until it goes away (which we all know, it never does). Now I’m not suggesting that you need to spend hours on the end of the phone listening to their life story, but give them the chance to tell you how they got to that point – it might just provide an opportunity to work on an agreement or payment plan.
2. Be Empathetic.
I mentioned above that the client might be a little embarrassed about the situation they find themselves in. Nobody set’s out to not pay their bills. Try to be a little sensitive to their feelings, like the old saying goes; “Walk a mile in their shoes.” How would you like to be treated in if you ever find yourself in that situation? Don’t talk over them or be egotistical about it, show some compassion!
3. Be Calm.
No matter what industry you work in, no one likes a grumpy customer. If someone starts losing their cool at you over the phone, or over promising and under delivering, or continually handing in rubber cheques – take a deep breath and stay calm. Don’t let them know that they are getting to you – you’re a professional! Pick up the phone and try again.
4. Be Methodical.
Sometimes when people are a bit nervous, they can rush through conversations or ramble on in emails that don’t actually get the point across. Slow down. Take your time. Be concise and to the point.
5. Be Prepared.
Know your customer. Make sure you have copies of all the invoices or statement in front of you – a good idea is to use a highlighter and highlight the key points you want to get across, which should generally include;
- Your name
- Your company name
- Your phone number
- The reason for your call (overdue account/amount)
- The amount overdue
- When the account was due for payment / how overdue the account is
If you get the client’s voicemail, leave a message – don’t just hang up hoping they return your call. Even if they don’t listen to your message, make a note of the date and time you called and recorded it.
6. Be Flexible.
Give the client options as to how they can remedy the situation. Offer to break the payments down into smaller, more manageable bites. Work out a plan that fits with both you and your client.
7. Be Repetitive.
If you get to talk to the client over the phone or on site, jot down notes of your conversation – especially promises, such as payment date/s and amount/s. Follow this up in writing to them to advise what they have promised you. If there is a history of broken promises, mark the next date on your calendar then follow them up the day before. And make sure you do follow up when you say you will!
8. Be Mindful.
What if you still don’t get paid? A general rule of thumb I use is if an amount is still overdue at 3+ months, the likelihood of payment being made is fairly slim to none. Identify a milestone (i.e. 90 days if you offer 20th following terms) for your business that you consider to be the last chance you will give clients if they reach this point. Refer again to the initial terms of your engagement, what are the next steps? Do you have a business or contact that can help with collection or recovery action? Notify the client throughout the process that handing over to a collection agency is a real possibility and put some timeframes to it. If they still don’t pay, you will have given them ample opportunity to do so.
9. Be OCD.
Everyone knows I’m a little OCD when it comes to details, but it’s super important to document everything. As I’ve mentioned a few times now, take notes about EVERYTHING. Voicemails, emails, dates promised for payments, just in case there is a future debt dispute. Keep your file notes as up to date as you possibly can.
10. Be Timely.
If you’ve spent a good hour chasing up a customer who hasn’t paid their $20.00 bill, it might be worth remembering how much you value your time. Is it worth spending the time chasing up a small amount, when you could be out making more money? Utilise the reminder function in Xero too, and let the system do the follow up for you!
And my bonus tip, Keep Communicating. Remember; he who shouts the loudest, gets paid first.