Tips on How to Collect Debt Tips

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What are the basics of collecting a debt?

Ten Tips to Successful Debt Collecting

Tips on how to collect debt:

PREPARE: Review the paperwork on the debtor before making the call. Know the history of the account, credit record, the promises kept/broken. Have all records in front of you, ready for reference.

ATTITUDE: Adopt a straight, professional business-like attitude. You have a contract, you delivered the goods, money is owed, and you have a right to expect payment. Never let it become personal. Don't yell or raise your voice; and NEVER swear. Don't threaten; legal action is your recourse.

CONTACT: Make sure you're talking to the right person. Don't let the individual brush you off with "You'll have to talk to the bookkeeper." Identify the person who will pay the bill. If you can't get through after several calls, tell the secretary that you know your calls are being screened. Indicate the purpose of your call and if necessary give deadlines.

CONTROL: Control the conversation. Keep it focused on the debt and on the repayment schedule. Don't let the customer sidetrack you with personal history, excuses, etc. Remember, the object of your call is to collect money, or get a commitment, not to become buddies with the customer or win arguments.

FLEXIBLE: Be ready to adjust to the situation. Think about the kind of customer you're dealing with and adapt to meet the circumstances. Be prepared to accept a reasonable payment schedule, and a willingness to deal with a customer's circumstances.

NOTES: Keep detailed, accurate notes of every contact with the customer. Probe for further information on the customer. Notes of these contacts will help you in subsequent phone calls, and may be invaluable in litigation. Good notes will also help in further credit decisions, or in cases where skip tracing may be needed.

PRODUCTIVE: Keep contact brief and to the point. This is a business call, not a social one. View your efforts on a ratio of time expended to results achieved. Long conversations probably mean the customer is stalling you, or trapping you in the buddy syndrome.

PRECISE: Never leave a contact open ended, such as "We'll talk next week," or "I'll send what I can." Every contact should result in a commitment to payment, of a specific amount, by a specific date, even the check number the customer is using to pay the pledge.

TIME: The longer an account is held, the less likely it is that it will be recovered. If payment or a payout is not arranged within 90 days, place the claim with a collection agency or start legal proceedings.

PLACEMENT: Use only an agency that is a member of the American Collectors Association OR the Commercial Collection Agency Section of the Commercial Law League of America. This will insure that you're dealing with ethical professionals who are fully bonded to guarantee your remittance.

When learning how to collect debt, what are some common excuses heard by debtors and business owners alike?

Common Excuses Debtors Make

The more questions you ask, the quicker you will get to the truth of the matter. When debtors lie about why they are not paying, they are hoping that you will accept what they are saying and drop the subject. The more questions you ask, the more uncomfortable debtors become. Eventually, sending the creditor a check becomes much more appealing than answering all of your questions and having to come up with one excuse after another. The advantage you have is that most people in debt collecting will accept excuses at face value and will call back at anther time. Here are some of the most common excuses you are apt to hear. Think about how you will respond to these excuses before making those necessary phone calls with your consumers.

1) The computers are down and we are unable to print checks right now.
2) I never received a bill for the product or service. I lost the bill.
3) The check is in the mail.
4) I don't have any money.
5) Hardship (lost my job, illness) and can't afford to pay you right now.
6) Our computer prints all checks at the end of the month.
7) We are having serious cash flow problems.
8) We are expecting a big check in a month, and then we can pay you in full.
9) When I get paid, you'll get paid.
10) The boss is out of town and will not be able to sign the check for two weeks.
11) I'm the controller and I handle the payables.
12) I have a dispute with the invoice.
13) I have a dispute with the product or service.
14) We need proof of delivery before we can pay.
15) We can only pay from original invoices, not faxed copies.
16) Our accounts payable person quit.
17) Our company pays net 90.
18) We're still waiting for approval.
19) My spouse pays the bills.
20) I don't owe anything.

When learning how to collect a debt, what are some ways to improve debt collections?

Ways to Improve Collections

Tips on how to collect debt:

OUTDATED BELIEF #4: Your Best Agents Should Call Your Toughest Customers.
Theoretically it seems logical to assign your best agents to call the toughest accounts, whether for collections or cross-sell. But, if this assumption is wrong, it means your best agents are being wasted on accounts where higher skills (and their associated higher salaries) have little impact.

NEW THINKING: Research with sales agents has shown that agents' skill levels, indeed, have a great impact when talking to receptive customers. Skilled agents can, in these cases, sell more in less time. But the research also showed that highly skilled agents delivered no advantage when selling to the most difficult prospects. The company's counterintuitive finding showed that the hardest prospects were difficult to approach under any conditions. If the call center had followed its intuition without testing the theory, it would have degraded its overall agent performance. This finding translates to your skilled collection agents and delinquent customers and means that your general agent pool will be equally as effective with your toughest accounts as your skilled agents.

BOTTOM LINE: If you are putting skilled agents against your most difficult accounts, you should conduct an unbiased test to find out if this strategy is really paying off.

OUTDATED BELIEF #5: Local Strategy Control is Best.
With multiple call centers, strategy is often left up to each center because there is a belief that each local floor operation and download list is somehow unique. What's more, you may allow strategy to be handled locally because a group of call records is downloaded to one specific dialer and called only from that dialer. There are many problems with this outdated approach: Agents across multiple sites may not be fully utilized, campaigns may not be implemented consistently, and the individual customers are vulnerable to severe weather and other downtime risks.

NEW THINKING: New-generation list management technologies remove these limitations by holding a centralized global campaign and dynamically directing call records from any download to any networked dialer. The result is increased productivity as the workload is leveled across agent resources and as strategies are executed consistently and without interruption.

BOTTOM LINE: The collections operation is more productive with a centralized list management technology keeping all call strategies on track in a single or multiple centers. Mounting consumer debt around the world is a challenge for every company. In today's complex and increasingly risky business world, it is necessary to make every step of the collections process as effective and efficient as possible. Often this requires updating long-held beliefs with the addition of new solutions that solve today's biggest collection problems. Today these five outdated practices are being overcome by companies who've found that intelligent predictive technologies can measurably elevate their collections efforts to a new, significantly higher level of productivity.

About the Author
Lois Brown is Vice President of Marketing at Austin Logistics Incorporated, headquartered in Austin, Texas. She oversees brand positioning, marketing communications, and new product definition for the companies' expanding line of predictive analytic and optimization solutions.

How does the process of debt collecting go?

Settling an Account

If the business owner determines that he/she is going to send a charged-off account to a debt collection agency, the owner must first write a form letter to the agency. Next, by law, once an account has been turned over to an agency, it must send a formal notice to the debtor. In addition to making it clear that the account is now in its hands, it provides an opportunity for the debtor to dispute the debt or a portion of it. Often the debtor will acknowledge the original balance, but balk at paying interest and/or penalties. Your settlement figure will give the collection agency some latitude when it comes to negotiating. Once the deadline for replying expires, active collection activities begin. Bringing an debt collection agency on board makes it clear to the debtor that the account has been taken out of the business owner's hands. This will relieve the owner of a significant amount of time and emotional strain. Debt collection agencies are of great value when teh debtor has skipped, as good collectors are masters at tracking people down. Do not begrudge the agency its commissions. Anything it brings in goes directly to your bottom line, because you as hte owner have already written off the balance. Be flexible when it comes to settlement arrangements. It will increase the likelihood that the debtor will be willing to make a deal and start paying. Once you, the owner, turn the account over to an agency, let it work on it for you. When there is anything to report, it will contact you. And when it collects, it is required to remit promptly.

How should a business go about collecting a debt?

Placing a Business Debt with an Agency

Placing a business debt with an agency escalates debt collection activities somewhat, but it's no guarantee that a debtor will pay up. When learning how to collect a debt, know that the biggest single advantage is that the matter is out of your hands (the business owner's) so the owner is now free to work on more important things.

When collecting debt, what are some common causes a debtor or business owner can sue a creditor for?

Reasons a Debtor Can Sue a Creditor

List of Causes of Action a Debtor Can Sue a Creditor For: fraud, breach of contract, violation of federal consumer credit protection act, discrimination based on race, color, creed, age (over 40), and gender, reverse discrimination, violation of federal and state fair debt collection acts, antitrust violations, bait and switch tactics, infliction of emotional distress, libel (including credit libel to agencies), slander (including credit slander to agencies), and negligence.

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