Collecting past due accounts and/or delinquent debtors can be very difficult especially if you do not know “where is it coming from?” More often that not, this can give the company headache and may cause serious cash flow problems. One of the more common remedies that a company resorts to is engaging the services of a third party collection agency to collect for them. Whether this is the right direction to take, or maybe it is the practical and/or economical solution to the said problem, is up for debate.
Some collection agencies I know mostly use this strategy: “if you will not pay, we will sue you”. Unfortunately, this strategy is the most “lame” strategy of them all, as this hardly connects at all. Most delinquent debtors know that this is “just lip service”. That is why, I always advice my client, not to write anything in their demand letter that they are not even sure they will be doing. For example, if you say, you will “refer it to legal”, make sure, you have a legal unit (whether in-house or outsourced) to handle the account, or if you say, “you will file” a case, make sure you really intend to file it in court. Anyway, below are some simple or you can call artful ways of collecting delinquent accounts.
First, offer debtor a clear choice of actions. Most collectors attack is the confrontational approach of: “if you will not pay/settle, we will file a case in court or we will endorse this for legal action; or the most brutal and common is we will just see you in court.... why not instead of stating the obvious, let the debtor be given alternatives and let him choose his/her actions, surely by using diplomacy and tact rather than threat, even though you are serious in pursuing legal action, it will surely not destroy any relationships and/or goodwill.
Second, plan a “psychology war” collection effort, study your delinquent debtor. Some “psy war” includes: (a) appeal to justice, fair play, sense of duty and cooperation; (b) Appeal to “pride” it may refer to vanity, good credit and reputation; never let your own pride to get in the way; (c) Instill fear by telling debtor first, losing something (i.e. credit reputation) or second avoiding something (i.e. court case record).
Third, look and search for vulnerable area or “Achilles heel." Most debtors are vulnerable to something; it is now depending on your keen sense of information and networking skills that will give you an edge to get this kind of very helpful information.
Fourth, ask for third party assistance within the industry, family or community. In the Philippines we call this “padrino” system. This is much effective if one administering is closer to the “padrino” rather than the debtor to the “padrino”. If the reverse is the scenario, it will surely not be that effective.
Fifth, when finally a legal action is decided upon to enforce collection, proceed as fast as you can. This is very important, because delinquent debtors generally do things inimical to creditor’s interest.
For credit & collection questions and inquiries, call or text 0917-7220521 or email at elimtingco@cibi.net.ph