Putting a Wrench in Delinquent Customers' "Systems"
One Nebraska credit manager (who has asked to remain anonymous) splits up collection calls with her assistant. Each takes one half of the delinquents one week and the other half the next week. There are, she contends, definite advantages in not having the same person call the same customers week after week.
"If you work with a customer a lot over a long period of time, you get chummy with that customer," she says. "You almost become phone friends, and they use that. It becomes something of a system for putting off paying. Having someone else call puts a wrench in the system. We've had really good response."
The first call is a friendly reminder. "We say, 'We were going over your account and we noticed there are some invoices outstanding. Have you mailed a check?' If they say yes, we ask what day it was mailed and the amount of the check. Then, all that is documented."
The credit department documents everything even if it's only the date a credit person left a message and the context of the message.
Making Payment Arrangements
On the first call, she may already be holding orders but that depends on the particular customer. If it's a new customer, she tries to nip the past-due problem in the bud.
"New customers have to prove themselves," she says. "If they start out past due that signals something is wrong. I'll work with them the best I can but I won't work with them like I do with older customers. I tell them we need payment on time because they're a new account and they have to get through the probation period."
With longtime customers, action varies. "Half the time, we give them a chance to say, 'The check is in the mail,'or, 'I'll put a check in the mail today,' and we don't put the account on hold. But that's only because these accounts have always followed through. The ones that are always late already know they're on hold when I call.
"I give everybody a chance. If they blow that chance, the next time I wait to see if a check is in the mail before I release the order."
Some customers may also be allowed to continue ordering if they pay half the previous balance or more than the dollar amount of the order. "I always try to work with them," she says. "If they owe $2,000 and they have an order for $500, they may say, 'I can send a payment for $1,000 now and another thousand dollars in three days. Can you release my order?'
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"I'll say, "Once I receive the first thousand dollars, I will release your order because the order is less than the pay¬ment. Then, once that other thousand is paid off, we'll be current.'"
On large orders that put customers over their credit limit, she may request enough funds up front to keep them within their limit. "With a large dollar amount," she says, "I will also push for a personal guarantee. For $5,000 and under, I don't push for a guarantee because there's not a lot of risk.
"We work a little more with older accounts because they do a large volume of business with us, but it really depends on the customer. If customers say they will mail a check today and they really need the order and they always return calls, send a check when they say they will and never lie to me, I'll release orders."
When phone calls don't work, a series of three letters may be sent. The first includes copies of the invoice and state¬ment. The letter is friendly and to the point concerning the past-due amount.
"If we still don't get a response, I usually don't call a third time," she says. "I send a second letter that's a little more demanding. If there's still no response, I will call again. I let them know they have to send payment or I'll send the account to collection. After that, I send the last letter, which says, 'You have 10 days to pay or you will be sent to collection.'
"I rarely have to send accounts to collection. The ones I do, I've worked until I couldn't work anymore. I've tried every angle. By the time I send them to collection, they're 90 to 120 days past due. I let customers know as long as they return my calls and communicate with me, I'm willing to work with them the best I can according to company policy."
Editor's Note: This article originally appeared in the Credit & Collection Manager's Letter.
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