Is it collection or correction (part 2)

Last June 23, I received an interesting collection problem from one of my column readers. Her email reads: “Good day. Our company had a collection problem. Our invoices and supporting papers are in order but the client had a second thought for the amount and refused to settle the invoice. The previous invoices on exactly the same kind of jobs and exactly same amount were paid but the succeeding invoices were refused due to the amount not acceptable to them.  The invoices are more than one year old. We already advise them to change the amount on their satisfaction but until now the client refused to pick up the phone. Many thanks in advance for your advise”.

As what I have said last week, when your customer is claiming that there is “something wrong with the invoice”, immediately do a problem-solving approach in resolving the issue. There are 3 steps in doing this approach:

Step 1: Establish the point of conflict. As immediate as possible, find out exactly what your customer is disagreeing. Is it the amount, is it the computation, is it the number of hours, is it the kind of testing or what. Even if you cannot or will not be able to accurately pin point it, at least endeavor to have an idea exactly what your customer wants. Many times, it is not about the total amount, but how unconvinced your customer is at how you arrive at the said amount.  

Step 2. Always endeavor to exchange information. After established the point of concern or conflict, find out everything about the facts and even the circumstances that surrounds the situation; don’t immediately jump to conclusion that because it has something to do with the amount, the customer will be amenable “to change the amount on their satisfaction’. This will only prove that there is “something wrong” with the invoice and you are not really confident with the integrity of the invoice. Now, it begs the question, what about the previous invoices? The more appropriate approach to this situation is by informing the customer that you are demanding payment or compliance by the customer of his contractual obligation in accordance to the agreed terms and condition. Then, if there are areas that seem to be incorrect, you can isolate it and reconcile immediately. You can also clearly point out that if there are reason/s why the account or invoice is not acceptable within the terms/ contract, then you are amenable to an adjustment with the amount or compromise settlement, even if it is already outside of the terms and conditions of the contract.

Stage 3. Reach for a Give and Take Position. Only upon completing stages one and two will you be able to arrive at this stage of coming to a compromise because it does not delve into the why of the problem but on the how of the problem/s. When trying to reach for a compromise, look for things that might be seen of importance and/or value that you may be willing to concede or grant in the collection (negotiation) or vice versa; but in giving concession under the “give and take principle” as much as possible, avoid giving the first one and it is always not advisable to give two concessions in a row. The big concessions may be extended later if there is a good positive sign that the compromise will be accomplished; otherwise, hold on to your eagerness to settle.

Overall, if after applying these three steps and still the customer is unwilling to settle the account – then it might be a danger signal that you need to escalate. 

 For comments, rejoinders and questions on credit & collection, Mr. Ed F. Limtingco can be reached at [email protected].