Not long ago I noticed the following job listing on Career Builders for an AR / Collections Specialist:
“Will be responsible for daily warm commercial collection calls via phone and email...” The italics are mine.
Warm collection calls? What the hell are warm collections? Along similar lines, I have seen ads for someone to make soft collection calls. Are companies serious? They want someone who will beg, plead and maybe cry real tears in order to get a payment from a delinquent customer? Are they looking for collectors who speak in tones as soft as a whisper and can make the payment request sound seductive? These are not necessarily bad requirements. No one is going to intentionally hire or ask for a collector who is snarly, cantankerous, confrontational and subject to frequent loss of temper and prone to violence. But come on, when warmth and gentle persuasion fail, you need collectors who can go to a plan B.
I’ve said it before, collections are like sales. Collectors… that is, effective collectors, are very similar to sales people and their techniques are virtually the same. A sales person persuades the customer to buy, while a collector persuades the customer to pay. Yet, when a company is looking to hire a sales rep, the descriptive terms for the ideal candidate are usually, energetic, enthusiastic, highly motivated, etc. Unless the sales rep is pitching Aqua Velva or Victoria Secret, warm or soft sales are not usual sales characteristics in high demand. In fact, the best sales people are probably those creative enough to have a large arsenal of techniques which include warmth and softness and they utilize these as well as aggressiveness, persistence and even some arm twisting; whatever the situation demands. The same is true for effective collectors.
The company looking for warm or soft collections has either had some very bad experiences with previous collectors, or believes that customers are so easily offended they’ll never buy again if the collection call is in any way intimidating or offensive. It has been my experience that whenever a customer complains about a collection call, they describe the caller as rude. However, these complaints most often come from someone who is offended by the nature of the call, rather than the tone and any call asking for payment, no matter how warm or soft, will be viewed as an act of profound rudeness. A confrontational collection style may also be a sign of inexperience. Someone unaccustomed to talking to strangers and feels the need to be bold in an attempt to disguise their uncertainty or lack of confidence will come off as abrupt and possibly adversarial. Sometimes customers will display anger and impatience with a collector and create a reaction from the collector that is equally temperamental. If someone is yelling angrily at you, there is a natural tendency to react defensively in the same manner, resulting in two people shouting at each other.
An experienced collector knows and lives by the old saying, “You can catch more flies with honey than vinegar.” Initial calls to a debtor are most often offers to help and to get information. Does the customer have a payment schedule; do they need anything, is everything all right? How much more warm can the call be? Subsequent calls are always friendly but firm, reminding the debtor of his broken promise or failure to live up to the last commitment. It does the collector no good to get irritable or angry. Once that line is crossed, the debtor is forever alienated. For the most part, effective collectors, like sales reps, create enduring relationships with the customers. Customers will pay someone they like and avoid someone who upsets them.
Companies looking to hire efficient collectors should require experience, creativity and a possession of good follow up skills. They should be looking for people who are competitive and creative, personable, affable and like sales people, back slapping friendly and able to twist a debtors arm so that he’s paying more than he intended.
If you need any help assessing your collectors characteristics, effectiveness and productivity, or if they need instruction as to how to become better collectors without upsetting anyone, contact as at Strategic Credit Management Solutions. We know collections and collectors. See our website at http://powerscredit.com/, or contact us at patrickpowers@sbcglobal.net. Your comments are welcome
Monday, March 30, 2009
Monday, March 23, 2009
Collection Agency or Law Firm, What to Use?
There comes a time during the collection process when you have to face the facts; you are not going to collect it. There are always a few accounts that if they are going to pay, it’s going to take a higher power, or at least some kind of pressure from a third party. Now the question is: do you give it to a collection agency or an attorney?
The seductive appeal of collection agencies is that they do not cost anything, unless they collect something. Their compensation comes out of the amount they collect. Generally, collection agencies take about 20% and give the remainder to the client. If the agency is unable to collect the debt, they sue and the only cost to the client may be up front court costs and filing fees. Of course if the suit is successful, their percentage may go as high as 30%.
Collection agencies appeal to those who believe they have done everything possible and the likelihood an agency will do any better is nil. Likewise, some agencies prey on companies with weak collection staffs, encouraging them not to wait, get the claims in while there is still hope. They cheery pick claims, pursuing the ones with the best chance of paying. It surprises me how often accounts are turned over prematurely and only after a minimal effort.
I have already mentioned the building material supplier who turned over an $80,000 claim to an agency. This after the supplier established their bond rights, but did not know what to do next. The agency sent a forty two cent letter to the bonding company and was soon paid the entire $80,000. Thus, it cost the building material supplier $16,000 because the collection department did not know how to write their own letter.
The justification for using a collection agency should be when all in house steps have been exhausted; the debtor appears to have no known assets and whose whereabouts are unknown. Then it’s up to the agency to employ their crack skip tracing techniques, dig up something valuable and coerce payment. This way they deserve what they get.
Many companies are reluctant to use attorneys to file suit in pursuit of money owed. This is rooted in a general distrust of attorneys and in the belief that it is throwing good money after bad. While it is true that win or lose, the attorneys must be paid, in many cases, if the credit application stipulates attorney fees, the collection costs are added to the judgment. In other words, many times, filing suit will result in payment of not only the original claim, but interest and attorney fees as well. It seems that if the debtor is still in business and appears to have assets, but is simply stubborn about letting them go, the logical step would be to sue.
The key to using attorneys to collect is, using a firm that knows what they are doing. Do not retain the boss’s divorce attorney, or the sales manager’s college roommate who specializes is copy right law. Use a law firm who is committed to driving up the debtor’s costs for defending against your claim so that he’ll come to the table and negotiate quickly. Just as importantly, retain a lawyer that you can talk to. I’ve seen too many occasions where the representing attorney’s ego or arrogance intimidates the client.
In the collection process, there is a place for both collection agencies and lawyers. It is a matter of circumstance. This is where Strategic Credit Management Solutions can help. We have had lots of experience with both collections agencies and law firms. We can help you choose the right ones for your circumstances and we can help you work the accounts, so that you may not need use them unless it is an emergency.
See our website at http://powerscredit.com/. Your comments are welcome.
The seductive appeal of collection agencies is that they do not cost anything, unless they collect something. Their compensation comes out of the amount they collect. Generally, collection agencies take about 20% and give the remainder to the client. If the agency is unable to collect the debt, they sue and the only cost to the client may be up front court costs and filing fees. Of course if the suit is successful, their percentage may go as high as 30%.
Collection agencies appeal to those who believe they have done everything possible and the likelihood an agency will do any better is nil. Likewise, some agencies prey on companies with weak collection staffs, encouraging them not to wait, get the claims in while there is still hope. They cheery pick claims, pursuing the ones with the best chance of paying. It surprises me how often accounts are turned over prematurely and only after a minimal effort.
I have already mentioned the building material supplier who turned over an $80,000 claim to an agency. This after the supplier established their bond rights, but did not know what to do next. The agency sent a forty two cent letter to the bonding company and was soon paid the entire $80,000. Thus, it cost the building material supplier $16,000 because the collection department did not know how to write their own letter.
The justification for using a collection agency should be when all in house steps have been exhausted; the debtor appears to have no known assets and whose whereabouts are unknown. Then it’s up to the agency to employ their crack skip tracing techniques, dig up something valuable and coerce payment. This way they deserve what they get.
Many companies are reluctant to use attorneys to file suit in pursuit of money owed. This is rooted in a general distrust of attorneys and in the belief that it is throwing good money after bad. While it is true that win or lose, the attorneys must be paid, in many cases, if the credit application stipulates attorney fees, the collection costs are added to the judgment. In other words, many times, filing suit will result in payment of not only the original claim, but interest and attorney fees as well. It seems that if the debtor is still in business and appears to have assets, but is simply stubborn about letting them go, the logical step would be to sue.
The key to using attorneys to collect is, using a firm that knows what they are doing. Do not retain the boss’s divorce attorney, or the sales manager’s college roommate who specializes is copy right law. Use a law firm who is committed to driving up the debtor’s costs for defending against your claim so that he’ll come to the table and negotiate quickly. Just as importantly, retain a lawyer that you can talk to. I’ve seen too many occasions where the representing attorney’s ego or arrogance intimidates the client.
In the collection process, there is a place for both collection agencies and lawyers. It is a matter of circumstance. This is where Strategic Credit Management Solutions can help. We have had lots of experience with both collections agencies and law firms. We can help you choose the right ones for your circumstances and we can help you work the accounts, so that you may not need use them unless it is an emergency.
See our website at http://powerscredit.com/. Your comments are welcome.
Monday, March 16, 2009
Murphy's Law
In the spirit of St. Patrick’s Day, I want to pay tribute to the guiding influence of credit, obviously originated by an Irishman, Murphy’s Law, (an arguable point, but it sounds Irish never the less). This is the concept that if something can go wrong, it will go wrong. All credit professionals know this and it is wise to never forget it.
A typical example of Murphy’s Law in the credit environment is the personal guarantee signature. The one time you don’t get one is the time you’ll need it the most. It never fails. The policy is: when a corporation is applying for credit always get a personal guarantee from a principal, preferably from the President. Corporations are formed to protect the individuals from personal liability; obviously they will resist attempts by creditors to make the principals liable for their debts. A prudent creditor will insist on the guarantee unless the applicant can prove to be a stellar credit risk and in today’s world that would be a rare exception. What happens? The one not quite stellar applicant who talks the credit manager out of requiring the principal signature on the personal guarantee will default down the road, file bankruptcy leaving the creditor holding the proverbial bag.
In construction related credit, Murphy’s Law rears its ugly head when in those states requiring a preliminary notice in order to establish the right to file a lien later, the one job that goes sour, doesn’t have a preliminary notice.
A common problem in some departments is the missing credit application. It is a strictly enforced policy to have a credit application on file for every single customer, but when a customer disappears of the face of the map, invariably and inexplicably, no credit application can be found anywhere.
Most government agencies and many large companies require purchases made with a purchase order. Hence, Murphy’s Law strikes again when the one invoice that a usually reliable customer doesn’t pay, doesn’t have a corresponding purchase order.
Probably one of the worse Murphy’s Law scenarios occurs during litigation. You’ve already spent a fortune on what appears to be an iron clad no doubt about it sure thing win when the other side throws you a curve that threatens to derail the entire case. Worse, usually, they’ve discovered something you’ve overlooked.
You cannot beat Murphy’s Law. You can only live with its inevitability. However, Strategic Credit Management Solutions can help you with your systems and policies so that you are better protected from the exceptions. Give us a call or e-mail us at patrickpowers@sbcglobal.net. And see our website http://powerscredit.com/ for more information.
In closing: "In Ireland the inevitable never happens and the unexpected constantly occurs."
~~By Sir John Pentland Mahaffy.~~
A typical example of Murphy’s Law in the credit environment is the personal guarantee signature. The one time you don’t get one is the time you’ll need it the most. It never fails. The policy is: when a corporation is applying for credit always get a personal guarantee from a principal, preferably from the President. Corporations are formed to protect the individuals from personal liability; obviously they will resist attempts by creditors to make the principals liable for their debts. A prudent creditor will insist on the guarantee unless the applicant can prove to be a stellar credit risk and in today’s world that would be a rare exception. What happens? The one not quite stellar applicant who talks the credit manager out of requiring the principal signature on the personal guarantee will default down the road, file bankruptcy leaving the creditor holding the proverbial bag.
In construction related credit, Murphy’s Law rears its ugly head when in those states requiring a preliminary notice in order to establish the right to file a lien later, the one job that goes sour, doesn’t have a preliminary notice.
A common problem in some departments is the missing credit application. It is a strictly enforced policy to have a credit application on file for every single customer, but when a customer disappears of the face of the map, invariably and inexplicably, no credit application can be found anywhere.
Most government agencies and many large companies require purchases made with a purchase order. Hence, Murphy’s Law strikes again when the one invoice that a usually reliable customer doesn’t pay, doesn’t have a corresponding purchase order.
Probably one of the worse Murphy’s Law scenarios occurs during litigation. You’ve already spent a fortune on what appears to be an iron clad no doubt about it sure thing win when the other side throws you a curve that threatens to derail the entire case. Worse, usually, they’ve discovered something you’ve overlooked.
You cannot beat Murphy’s Law. You can only live with its inevitability. However, Strategic Credit Management Solutions can help you with your systems and policies so that you are better protected from the exceptions. Give us a call or e-mail us at patrickpowers@sbcglobal.net. And see our website http://powerscredit.com/ for more information.
In closing: "In Ireland the inevitable never happens and the unexpected constantly occurs."
~~By Sir John Pentland Mahaffy.~~
Monday, March 9, 2009
Need Help? We'll Come To You.
Budgets are tight. You can no longer afford to send your credit and collections group away to a seminar to learn how to collect money or secure lien rights. You can subscribe to a Webinar, but you cannot ask any questions. What to do? Contact Strategic Credit Management Solutions. We’ll come to you.
The pressure is on to collect more money. You need a strategy. Your credit and collections group is doing everything they can, but they need to do more. Management wants to see a plan. What to do? Let Strategic Credit Management Solutions take a look at your situation. We’ll do an assessment of your current trends, procedures and personnel and we’ll identify areas that could use a boost. We’ve had over thirty years analyzing companies’ account receivable processes and we’ve established new ones where it was necessary. We have a proven strategy for bringing down your past due columns and increasing monthly collections. We just might have some answers that will help turn things around.
As a material supplier, you’ve been told to secure everything going to job sites. That is no small task. You can attend some of the seminars and webinars that are periodically offered, but you need expert advice right now. Who can you turn to? Strategic Credit Management Solutions has been setting up credit departments around lien laws for over thirty years. We can help train your personnel in filing preliminary notices, setting up job accounts, getting the information, filing liens and bond claims. And, since we can come to you, we can tailor our training to your specific needs.
It’s a war zone. Your sales department wants you to extend credit to anything with a pulse. They need sales. Your credit department is trying to tighten up and is strangling the sales effort. What to do? Contact Strategic Credit Management Solutions. We have a program designed specifically to help the two sides get along.
Don’t wait for things to get worse, contact Strategic Credit Management Solutions today and we’ll be on our way. See our website http://powerscredit.com/.
Your comments our welcome. Write to us at patrickpowers@sbcglobal.net.
The pressure is on to collect more money. You need a strategy. Your credit and collections group is doing everything they can, but they need to do more. Management wants to see a plan. What to do? Let Strategic Credit Management Solutions take a look at your situation. We’ll do an assessment of your current trends, procedures and personnel and we’ll identify areas that could use a boost. We’ve had over thirty years analyzing companies’ account receivable processes and we’ve established new ones where it was necessary. We have a proven strategy for bringing down your past due columns and increasing monthly collections. We just might have some answers that will help turn things around.
As a material supplier, you’ve been told to secure everything going to job sites. That is no small task. You can attend some of the seminars and webinars that are periodically offered, but you need expert advice right now. Who can you turn to? Strategic Credit Management Solutions has been setting up credit departments around lien laws for over thirty years. We can help train your personnel in filing preliminary notices, setting up job accounts, getting the information, filing liens and bond claims. And, since we can come to you, we can tailor our training to your specific needs.
It’s a war zone. Your sales department wants you to extend credit to anything with a pulse. They need sales. Your credit department is trying to tighten up and is strangling the sales effort. What to do? Contact Strategic Credit Management Solutions. We have a program designed specifically to help the two sides get along.
Don’t wait for things to get worse, contact Strategic Credit Management Solutions today and we’ll be on our way. See our website http://powerscredit.com/.
Your comments our welcome. Write to us at patrickpowers@sbcglobal.net.
Monday, March 2, 2009
Teaching Old Dogs New Tricks
The Birmingham manager was complaining about spending money to pay for someone to scan invoices, delivery receipts and quotes. It seemed like a waste of time and money. If a customer needs an invoice copy or a proof of delivery, they can call the branch and someone, a cashier, a clerk, an order taker, whoever may have some spare time, will go in search for the document. They’re kept in some sort of order in boxes out in the warehouse. Once they find it, they will fax it to the customer and then, put it back.
This is how business was done back before computers, but the Birmingham manager saw no reason to change. Scanning the documents, the credit manager explained, creates an image in the computer so that when a customer asks for it, the collector can bring it up and e-mail it to the customer while they’re still on the phone. The Birmingham manager was dubious and the credit manager was extolling the benefits of “modern” technology. Little did the credit manager know that there are now programs that allow customers to retrieve invoices and other related documents on line, twenty four hours a day seven days a week without ever calling the vendor. These documents are created at the time of billing, so there is no need for a scanner.
Technology is offering so many new possibilities at a rate so fast that it can pass you by in minutes rather than in days or weeks.
Today’s market conditions demand that every credit sale be made. There just are not enough sales possibilities out there to turn any down. Yet the risk of loss is very high. The more controls the credit manager has, the better. However, good controls are not meant to restrict sales, but to manage risk and the better the controls, the more risk that can be taken on. Recent innovations can greatly enhance a credit manager’s ability to control and therefore manage credit.
The businesses that are going to succeed during this recession are the ones that efficiently manage their account receivable and are able to go out on a limb, because the they have the technological resources to do so. Their information about the customer’s debt, payments and credit status will be up to the minute and communication to and from the customer will be instantaneous. They will be no waiting for a check to arrive in the mail, no searching for documents that may not have been properly scanned, no waiting for month end to see recent billing. Credit managers will manage with a complete dash board of data. This allows them to take chances the competition is afraid to take. In today’s world, good credit management is a sales advantage.
Strategic Credit Management Solutions can help you find those resources. Contact us at patrickpowers@sbcglobal.net and see our website at http://powerscredit.com/. Your comments are welcome.
This is how business was done back before computers, but the Birmingham manager saw no reason to change. Scanning the documents, the credit manager explained, creates an image in the computer so that when a customer asks for it, the collector can bring it up and e-mail it to the customer while they’re still on the phone. The Birmingham manager was dubious and the credit manager was extolling the benefits of “modern” technology. Little did the credit manager know that there are now programs that allow customers to retrieve invoices and other related documents on line, twenty four hours a day seven days a week without ever calling the vendor. These documents are created at the time of billing, so there is no need for a scanner.
Technology is offering so many new possibilities at a rate so fast that it can pass you by in minutes rather than in days or weeks.
Today’s market conditions demand that every credit sale be made. There just are not enough sales possibilities out there to turn any down. Yet the risk of loss is very high. The more controls the credit manager has, the better. However, good controls are not meant to restrict sales, but to manage risk and the better the controls, the more risk that can be taken on. Recent innovations can greatly enhance a credit manager’s ability to control and therefore manage credit.
The businesses that are going to succeed during this recession are the ones that efficiently manage their account receivable and are able to go out on a limb, because the they have the technological resources to do so. Their information about the customer’s debt, payments and credit status will be up to the minute and communication to and from the customer will be instantaneous. They will be no waiting for a check to arrive in the mail, no searching for documents that may not have been properly scanned, no waiting for month end to see recent billing. Credit managers will manage with a complete dash board of data. This allows them to take chances the competition is afraid to take. In today’s world, good credit management is a sales advantage.
Strategic Credit Management Solutions can help you find those resources. Contact us at patrickpowers@sbcglobal.net and see our website at http://powerscredit.com/. Your comments are welcome.
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