How do I collect bad debt over the phone?
By: ValidateNow.co
http://inbound.validatenow.co/blog/how-do-i-collect-bad-debt-over-the-phoneThere are a few options available to businesses that find themselves trying to collect on past due accounts. Some can be more effective than others, and not all options will work for you. The reality is that some people are just simply unwilling or unable to pay, and you may spend more time and money to recover a debt that is just simply not recoverable. In order to figure out what kind of customer you are dealing with picking up the phone can be a useful option. So here is the best way to collect a bad debt over the phone.
Contacting the consumer directly should be done as soon as you deem the debt to be past due, most often over 45 days. This is not a time to be adversarial. Picking up the phone and calling a customer can be one of the most difficult things for a business owner to do because of the personal connection to the debt. Many small business owners sometimes feel that consumers who do not pay their bills are somehow making a comment about the service or quality of work that was provided. Although this may be true in some cases it is often times not the case. So for this reason when possible have someone not “emotionally” tied to the debt make the phone call.
You should always call your customers during normal business hours. Presumably, someone in the company who knows nothing about this consumer is making the call, and this is a good thing as it will give them the opportunity to be on a “fact finding” mission. By asking the consumer questions you open up a line of communication with the consumer, and thereby allowing them to be more receptive to working with you. Be friendly and polite at all times, you always get more with sugar than vinegar.
Ask the consumer simple questions like: “have you received our invoice”? This question gives the consumer the benefit of the doubt that they may not be at fault for the delinquency, true or not, at least they do not feel defensive right out of the gates. If they say yes, then follow up with another question, “Were you aware the invoice has become past due”? This again assumes that the consumer is not at fault and that you are there to help not as an adversary. If they say they were unaware, then kindly ask for payment, and give them a few payment options. If they say they are indeed aware that that payment is past due, you now need to become a little more proactive.
Again, you want to remain friendly and helpful, but you also do not want to give the consumer a reason to start making excuses as to why the invoice is not paid. In an effort to get to the root of the matter without giving them an excuse, you can ask something like: “May I ask why the invoice has not been paid as we have not been made aware of any issue with the work.” Notice how there is no “you” in this statement. It is completely neutral in fact; the subject of the sentence is really the “invoice” making it a neutral non-accusatory statement. This would be contrasted with a statement such as: “why have you not paid the invoice”? In a statement such as this, the emphasis is clearly on “you” and it seeks to place blame on the consumer for not paying. Although it is true that the consumer has not paid, putting them on the offensive by accusing them of not paying will not work in your favor. The first method accomplishes the same goal, just in a more consumer friendly manner.
At this point the conversation is going to go in one of two directions. First, the consumer may say there is a problem with the work. This is always a possibility, right or wrong, but the fact of the matter is, you have done the work and the consumer is holding all the chips now because you want their money. In most cases, if you follow the questioning above, the consumer will have difficult time coming up with a legitimate excuse on the spot if none truly exists. If they do however, OR there is indeed a genuine issue on the consumers’ behalf, now is the time to get to ground zero and find a resolution. Listen to the consumers concerns with an open mind and find a way to resolve the issues that will work best for both your business and the consumer. Once you have identified the issues and negotiated a solution, you must also negotiate a settlement for their side of the agreement. Do not resolve the claims of the consumer without also resolving the fact that you are owed money. Make the consumer aware that payment is due in full at completion of the modifications, or some other mutually agreeable arraignment. Do not make a one sided agreement where your business does additional work and you have not made clear and agreeable arraignments for payment.
The problem however, is the spoken word is always so hard to document. So although phone calls can be very effective sometimes, it can be hard to document unless you are recording them. It generally a good idea to document the date, time and what was discussed after you hang up the phone but this is problematic in itself. To call and then document several customers is a very time consuming ordeal. In addition, who is to say that what you document is what the consumer “agreed to” or is the way in which they interpreted the conversation. One thing is always true, there are two sides to every story and most of the time there are variations in both. So although you think you may have reached an understanding, there are times when despite your best efforts to be clear, there still remains some ambiguity in your customers mind.
This is where utilizing third party or outside services can become useful and more productive for your business. Without clear and documented communication, even in the best cases collecting a bad can still be difficult. This is why many small to medium size businesses utilize services like Validate, Experian, and third party invoicing services. Unlike many other services however, we have found Validate to be one of the most cost-effective and user friendly services on the market. Validate is specifically designed for small to medium size businesses allowing them to get to work right away recovering bad debt. The great thing about Validate is that it creates a paper trail that you can easily track and document. One of the nice futures Validate offers is the ability for the consumer to tell you exactly why they have not paid, in writing, in the event there is an issue with the services rendered. Validate also requests payment in 14 days or less, reducing the life cycle of your businesses A/R making you more profitable. Most importantly however, since Validate is not a collection agency, you keep 100% of the money you have earned. Lastly, as a consumer credit reporting agency, Validate makes other businesses aware that this consumer has an outstanding debt with your company for up to seven years. So consider using all the tools available to your business when it comes to collecting outstanding debt, and your business and you will be a lot happier, and profitable.
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