recovering payments from debtors

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R.S.Patwardhan

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Page 1: Recovering Payments from Debtors

R.S.Patwardhan

Page 2: Recovering Payments from Debtors

Skill Enhancement Tools for Executivesresponsible for recovery of outstandingpayments (Receivables) from Debtors

Golden rule in business is to collectmoney owed to you faster than youhave to pay out money you owe toothers to avoid a cash flow crisis

Page 3: Recovering Payments from Debtors

For most people, making collection calls could be a dreadedaspect of their job profile. It takes them out of their comfortzone. They don’t feel confident with the process, due tofear of embarrassment or failure.

“Every artist was first an amateur.”― Ralph Emerson

For most people, making collection calls could be a dreadedaspect of their job profile. It takes them out of their comfortzone. They don’t feel confident with the process, due tofear of embarrassment or failure.

Here’s some good news. You can become morecomfortable and more successful by following a fewtips from collection professionals. While there’s nosurefire method of debt collection, these tips willincrease the chance of success

Page 4: Recovering Payments from Debtors

"Success is where preparation and opportunity meet."

Page 5: Recovering Payments from Debtors

Be Cautious, Be Vigilant …

Chances of recovering a debt - directly linked to age of the debt.

Older a debt - less collectible it is - especially if it is > 90 days

Best debt recovery strategy is to get on top of unpaid invoices as

early as possible and chase them up.

Chances of recovering a debt - directly linked to age of the debt.

Older a debt - less collectible it is - especially if it is > 90 days

Best debt recovery strategy is to get on top of unpaid invoices as

early as possible and chase them up.

Page 6: Recovering Payments from Debtors

Three most common ways of collecting debts are:

Personal Visits

Telephone Calls

Written Communications and Reminders

Personal Visits

Telephone Calls

Written Communications and Reminders

Page 7: Recovering Payments from Debtors

Personal visits / face to face conversations are the mostcostly (in terms of time away from your core activity), butalso the most effective form of debt collection.

A visit to Customer’s establishment creates an opportunityto look and listen to tell-tale signs:-

- Informal chat with receptionists and others can be quiterevealing

- Observing if the business look s busy and well managed- Does the customer avoid you?- Does the customer look trust worthy?

Personal visits / face to face conversations are the mostcostly (in terms of time away from your core activity), butalso the most effective form of debt collection.

A visit to Customer’s establishment creates an opportunityto look and listen to tell-tale signs:-

- Informal chat with receptionists and others can be quiterevealing

- Observing if the business look s busy and well managed- Does the customer avoid you?- Does the customer look trust worthy?

Page 8: Recovering Payments from Debtors

Although a telephone call is not as effective as apersonal visit, it is a direct, fast and more cost-effective method of debt collection.

It is superior to letter writing or reminders becauseit creates an opportunity of making personalcontact and developing a customer relationship.

Although a telephone call is not as effective as apersonal visit, it is a direct, fast and more cost-effective method of debt collection.

It is superior to letter writing or reminders becauseit creates an opportunity of making personalcontact and developing a customer relationship.

Page 9: Recovering Payments from Debtors

Sending letters and reminders of overdue debts is themost common form and easy option of debt collection.But being relatively impersonal, it's also the leasteffective.

The tactic is likely to work with customers who intend topay you anyway and need just a prod to dust off thecheque book), but is relatively ineffective with habituallate payers.

Sending letters and reminders of overdue debts is themost common form and easy option of debt collection.But being relatively impersonal, it's also the leasteffective.

The tactic is likely to work with customers who intend topay you anyway and need just a prod to dust off thecheque book), but is relatively ineffective with habituallate payers.

Page 10: Recovering Payments from Debtors

Arm Yourself with Facts

Exact amount owed Terms of sale Products/services purchased Payment due date Other open invoices, even those not yet past due date Is your business at fault? Were the correct services supplied? Is the invoice right? Have you overcharged? Has the invoice been disputed? Has any colleague spoken to the client (and possibly upset them)? Is the client/customer a regular? Do they usually pay on time or late? Has the customer attempted to reduce the debt already?

Has the customer attempted to explain the situation to another colleague?

Arm Yourself with Facts

Exact amount owed Terms of sale Products/services purchased Payment due date Other open invoices, even those not yet past due date Is your business at fault? Were the correct services supplied? Is the invoice right? Have you overcharged? Has the invoice been disputed? Has any colleague spoken to the client (and possibly upset them)? Is the client/customer a regular? Do they usually pay on time or late? Has the customer attempted to reduce the debt already?

Has the customer attempted to explain the situation to another colleague?

Page 11: Recovering Payments from Debtors

Identify and speak to the actual person responsible for payingthe account. Aim to keep handy a record of the previous conversation,

including any agreed action It is important to let the person feel the urgency of settling the

bills, in a reasonably friendly conversation Do not be harsh. Remember that many businesses are able to

overcome temporary cash flow problems. Assess the situationin advance while planning a customer specific strategy.

Identify and speak to the actual person responsible for payingthe account. Aim to keep handy a record of the previous conversation,

including any agreed action It is important to let the person feel the urgency of settling the

bills, in a reasonably friendly conversation Do not be harsh. Remember that many businesses are able to

overcome temporary cash flow problems. Assess the situationin advance while planning a customer specific strategy.

Page 12: Recovering Payments from Debtors

There is no magic bullet in debt collection.

It is important to realize that every debtor is different.

What works really well with one, may get you nowhere with another.

Contact the right person. Do not let the debtor refer you to other people to engage

you in a fruitless merry-go-round.

Handling difficult debtors requires patience, skill andperseverance. Following Tips would help improve theeffectiveness of the collection calls

There is no magic bullet in debt collection.

It is important to realize that every debtor is different.

What works really well with one, may get you nowhere with another.

Contact the right person. Do not let the debtor refer you to other people to engage

you in a fruitless merry-go-round.

Page 13: Recovering Payments from Debtors

Be proactive: Follow up before due date for payment may help avoid non-payment.

Ask if everything was satisfactory and if the invoice, including the payment due date,

is accurate or if there are any questions.

Be prepared: Gather and have in front of you as much information about the

customer and the debt, including the file and all the invoices. Document everything

including the customer’s feedback, in case there are any disputes. Engage the

customer in a positive dialogue and have that clean piece of paper to scribble notes.

Be nice, but in control. Don’t be manipulated, avoid confrontation.

Stay calm, even if the person called gets abusive. Suggest calling them back at

another time.

Listen to what the customer is or is not telling you.

Be proactive: Follow up before due date for payment may help avoid non-payment.

Ask if everything was satisfactory and if the invoice, including the payment due date,

is accurate or if there are any questions.

Be prepared: Gather and have in front of you as much information about the

customer and the debt, including the file and all the invoices. Document everything

including the customer’s feedback, in case there are any disputes. Engage the

customer in a positive dialogue and have that clean piece of paper to scribble notes.

Be nice, but in control. Don’t be manipulated, avoid confrontation.

Stay calm, even if the person called gets abusive. Suggest calling them back at

another time.

Listen to what the customer is or is not telling you.

Page 14: Recovering Payments from Debtors

Be Ready to handle Excuse/s. Take time to compile a list of common Debtor excuses

matching them with effective rebuttals, like a few examples below:-

Customer: The cheque is in the mail.Collector: Great! May I have the cheque number, amount and date it was mailed , so Ican ensure it is posted correctly?

Customer: I have a cash flow problem right now.Collector: I understand that times are difficult. Can I set you up on a payment plan, orcan you make at least a partial payment today?

Customer: I don't have a copy of the invoice.Collector: I'll fax the invoice over right now. Will you be mailing the check today?

Exchange ideas with colleagues to generate an exhaustive list of excuses andrebuttals.

Be Ready to handle Excuse/s. Take time to compile a list of common Debtor excuses

matching them with effective rebuttals, like a few examples below:-

Customer: The cheque is in the mail.Collector: Great! May I have the cheque number, amount and date it was mailed , so Ican ensure it is posted correctly?

Customer: I have a cash flow problem right now.Collector: I understand that times are difficult. Can I set you up on a payment plan, orcan you make at least a partial payment today?

Customer: I don't have a copy of the invoice.Collector: I'll fax the invoice over right now. Will you be mailing the check today?

Exchange ideas with colleagues to generate an exhaustive list of excuses andrebuttals.

Page 15: Recovering Payments from Debtors

Address the debtor by name throughout the conversation. This shows respect and

commands their attention. Be careful not to over do it to avoid it being annoying.

Be firm, make it clear that you expect payment for the products or service the debtor

has purchased from you. You have fulfilled your side of the contract by providing the

services and goods and you have every right to expect payment for it.

Be focused. The debtor may try to divert you from the problem on hand by

discussing personal stories or making innumerable excuses. You must keep a tight

rein on the conversation at all times, and bring it back to the purpose of the meeting

- to collect payment or get a commitment for the payment.

Address the debtor by name throughout the conversation. This shows respect and

commands their attention. Be careful not to over do it to avoid it being annoying.

Be firm, make it clear that you expect payment for the products or service the debtor

has purchased from you. You have fulfilled your side of the contract by providing the

services and goods and you have every right to expect payment for it.

Be focused. The debtor may try to divert you from the problem on hand by

discussing personal stories or making innumerable excuses. You must keep a tight

rein on the conversation at all times, and bring it back to the purpose of the meeting

- to collect payment or get a commitment for the payment.

Page 16: Recovering Payments from Debtors

Don't eat or drink when you're on the phone

Speak a bit slower and enunciate

Use a lower pitched voice.

Pause more often.

Smile while you talk – During a telephonic conversation, although the person on the

end of the line can't see it, they will hear it; and everyone responds more openly to a

smile than to a scowl

Don't eat or drink when you're on the phone

Speak a bit slower and enunciate

Use a lower pitched voice.

Pause more often.

Smile while you talk – During a telephonic conversation, although the person on the

end of the line can't see it, they will hear it; and everyone responds more openly to a

smile than to a scowl

Page 17: Recovering Payments from Debtors

Tactfully Interrogate the debtor on the excuses made for not paying the debt. Asking

lots of questions forces the debtor to come up with believable answers and in the

barrage of stories, the truth can just slip out. Persistent questioning makes debtors

uncomfortable as they have to keep coming up with more lies to support their

excuses. Avoiding a repeat of such interrogation prompts debtors into settling the

payment.

Nail things down. A collection call that doesn't result in a commitment from the

debtor is a wasted call, if we can't get them to commit to payment in full, get a

promise of something -- a partial payment or a call back with a payment date. Don't

ask, "When can you get back to me on this?" Rather, ask "Will you be calling me by

Wednesday?"

Tactfully Interrogate the debtor on the excuses made for not paying the debt. Asking

lots of questions forces the debtor to come up with believable answers and in the

barrage of stories, the truth can just slip out. Persistent questioning makes debtors

uncomfortable as they have to keep coming up with more lies to support their

excuses. Avoiding a repeat of such interrogation prompts debtors into settling the

payment.

Nail things down. A collection call that doesn't result in a commitment from the

debtor is a wasted call, if we can't get them to commit to payment in full, get a

promise of something -- a partial payment or a call back with a payment date. Don't

ask, "When can you get back to me on this?" Rather, ask "Will you be calling me by

Wednesday?"

Page 18: Recovering Payments from Debtors

Suggested Openings which focus the conversation on the debt problem. Adapt them tosuit your requirements. Be respectful by addressing the person as Sir, Madam orsuitable.

"Just following up on our service while we have a quiet moment. Were the invoices wesent you correct and all of them listed on the statement?(If the Debtor Says “Fine). Can you tell me when we can expect payment?“

"Our ledger shows that you were due to pay us Rs. ------ by last month. I'm sorry totrouble you, but our accountant is asking us to look into all of these matters. Haveyou posted us a cheque, or can I arrange to collect it?“

"You don't often pay this late. How can we help each other? We don't like stoppingyour credit because we value your business, but the company policy has to be met.So, how can we sort this out?”

Suggested Openings which focus the conversation on the debt problem. Adapt them tosuit your requirements. Be respectful by addressing the person as Sir, Madam orsuitable.

"Just following up on our service while we have a quiet moment. Were the invoices wesent you correct and all of them listed on the statement?(If the Debtor Says “Fine). Can you tell me when we can expect payment?“

"Our ledger shows that you were due to pay us Rs. ------ by last month. I'm sorry totrouble you, but our accountant is asking us to look into all of these matters. Haveyou posted us a cheque, or can I arrange to collect it?“

"You don't often pay this late. How can we help each other? We don't like stoppingyour credit because we value your business, but the company policy has to be met.So, how can we sort this out?”

Page 19: Recovering Payments from Debtors

Good systems and procedures prevent debt problems. Actively

manage debt collection.

Take precautions while giving credit to a customer.

Practice a personal approach.

Get on top of problems early - don't let the problem escalate

beyond your control.

Try to maintain a good relationship with the debtor. If you can assist

them through a temporary problem, they are likely to remain loyal

in the future. Persistence is your best weapon.

Remember to write everything down and send a copy to the customers, to

keep track of agreements reached so that you can follow up later.

Good systems and procedures prevent debt problems. Actively

manage debt collection.

Take precautions while giving credit to a customer.

Practice a personal approach.

Get on top of problems early - don't let the problem escalate

beyond your control.

Try to maintain a good relationship with the debtor. If you can assist

them through a temporary problem, they are likely to remain loyal

in the future. Persistence is your best weapon.

Remember to write everything down and send a copy to the customers, to

keep track of agreements reached so that you can follow up later.

Page 20: Recovering Payments from Debtors

“Winning is a Habit. Unfortunatelyso is losing”― Vince Lombardi

Page 21: Recovering Payments from Debtors

This presentation is based on real time experience of the presenter and internetresources