How can I collect my past due accounts?

Last Monday, I was invited to a meeting by a friend of a friend who has problems collecting her delinquent accounts. Her accounts are already way past due and are really quite big in terms of amount. The question now is, how can we collect past due accounts? Personally, I believe that almost all past due accounts are caused by either ignorance or negligence. Most businessperson are sometimes inadequate, under exposed, under trained or even inexperienced in the increasing challenges of collection problems.

Collecting past due accounts and/or delinquent debtors can be very challenging and painstaking. More often that not, this can give the company “headaches” and may cause serious cash flow problems. In their attempt to collect these delinquent accounts these companies commonly use the strategy of sending demand letters that somewhat states, “if you will not pay, we will sue you” or to that effect. Unfortunately, this strategy is the most “lame” strategy of them all, as these companies hardly sue anyway. Most delinquent debtors know that this is “just a lip service” and are waiting to be sued. That is why, I always advice my client, not to write anything in their demand letter that they are not even sure if they are willing to do.

For example, if you say, you will “refer it to legal”, make sure, you have a legal unit (whether in-house or outsourced) to handle these delinquent accounts, or if you say, “you will endorse the account to CIBI Information to be posted in our CIBI infonet On-line,” (CIBI’s database of past due accounts for watch listing, that is being accessed by banks, commercial, lending, financing and consumer companies), you must refer them to us. This is what we call proper escalation technique. And the key here is, to do what you promise to do!

Incidentally, CIBI Information is offering extra judicial collection services, under “no collection, no commission” scheme. Anyway, below are three simple steps or you can call “artful ways” of collecting delinquent accounts.

First, offer debtor a clear choice of actions. Most collectors attack is the confrontational approach of: “if you will not pay/settle, we will file a case in court or we will endorse this for legal action; or the most brutal and common is we will just see you in court.... why not instead of stating the obvious, let the debtor be given alternatives and let him choose his/her actions, surely by using diplomacy and tact rather than threat, even though you are serious in pursuing legal action, it will surely not destroy any relationships and/or goodwill.

Second, endeavor to get a reasonable short repayment program because a long one is bound to fail. Sometimes, some collectors just agree on anything just to get a payment proposal. Getting a payment proposal is one thing, but actually being paid is another.

Third, plan a “psychology war” collection effort. Study your delinquent debtor. This is where your credit investigation report, becomes useful. Some “psy war” includes: (a) appeal to justice, fair play, sense of duty and cooperation;  (b) Appeal to “pride” it may refer to vanity, good credit and reputation; never let your own pride to get in the way though; (c) Instill fear by telling debtor first, losing something (i.e. credit reputation) or second avoiding something (i.e. court case record).

Overall, when you do collection, negotiate without fear and never out of fear.

For more credit & collection (C&C) questions, comments and rejoinders you want to share or inquire, you can reach me at 0917-7220521 or at [email protected]