Collecting past due accounts

Collecting past due accounts or delinquent customers can be very stressful. More often than not, this can give the company “headache” and may cause serious cash flow problems. That is why a lot of these companies resort to engaging the services of third party collection agencies to collect for them. Some collection agencies mostly use the strategy: “if you will not pay, we will sue you”.           Unfortunately, this strategy is the most “lame” strategy of them all, as this hardly connects at all. Most delinquent debtors know that this is “just lip service”. That is why, I always advice my client, not to write anything in their demand letter that they are not even sure they will be doing. For example, if you say, you will “refer it to legal”, make sure, you have a legal department, whether it is in-house or per engagement basis.

Personally, I have two (2) surefire strategies that I often use in collecting past due accounts that always bring positive results: Below are these two strategies what I call artful ways of collecting delinquent accounts.

First, make sure you offer debtor a clear choice of actions and to see it your way. 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; 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. This is not very easy; more often than not creditors are the one “begging” to be paid rather than “demanding” to be paid.

In collecting, it is always a strong opening if you could impress upon the debtor to see things your way, such as clearly stating to him the advantages or disadvantages of his actions or non-actions/ non-payment; also it will surely help if you will inform the debtor that by settling the account can positively contribute to either of the following: (a) build reputation as successful businessman/debtor (b) improve credit standing in the credit community (c) establishes a solid trust from supplier/ creditor (d) support self-esteem as a responsible/credible person.

Second, determine if there is/are any weakness or Achilles’ heel and plan a “psychology war” collection effort. Meaning, study your delinquent debtor. Some psychological war tactics include: (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; (c) Instill fear by telling debtor first, losing something (i.e. credit reputation) or second avoiding something (i.e. court case record). Most debtors are vulnerable to something; it is now depending on your keen sense of information and networking skills that will give you an edge to get this kind of very helpful information.

However, when finally a legal action is decided upon to enforce collection, proceed as fast as you can especially now that we have the Small Claims Court (for amount below 100,000). Filing a collection case as soon as possible is very important, because delinquent debtors generally do things inimical to creditor’s interest.

For comments, rejoinders and questions on credit & collection send emails to [email protected].