Always collect the money (Part 3)

First let me say thank you to those readers that sent me kind words thanking me and expressing their appreciation for the collection tips I have written in the past two weeks. To be honest, I am from to time doubting already if there are readers out there interested in what I am preaching, that is why more often than not, I am shifting my topics to discuss economic matters which has a broader topic and caters to more readers.

However, emails from readers and most especially from previous clients who continuously news clips and/or forward to their collectors my articles, gave me the firmer resolve to continue what I love to do: Preach the importance of collecting effectively and professionally without the use of harassment and/or unethical practises.

In my 20 years of collection experience, I have observed that most entrepreneurs, executives and even company officers are still not “artful” enough when implementing collection efforts on delinquent accounts. I have observed that most of their strategies and collection tactics especially when writing demand letters are still heavily relying in making empty threats as in: “if you will not pay, we will endorse this for legal action”. Many times, when I am reviewing collection letters, the most common statement that you would see would be: “if you will not settle this amount within X (no of days), we will file legal action against you. There is nothing wrong here, but almost always, they know (and the delinquent debtor knows) that they will not file it in court – it’s purely an empty threat or a bluff!

My point is that, why not instead of stating the obvious, let the debtor be given alternatives and let him choose his/her actions. I always believe that even though how serious you are in pursuing legal action, by using diplomacy and tact rather than threat, it will preserve goodwill and will be a step closer in resolving the issue. In short, offer the debtor a clear choice of actions. However, always remember that one must endeavor to get a reasonable short repayment program because experience will tell us that a long repayment program is bound to fail. Sometimes, some collectors would just agree on anything just to get a payment proposal. I always said that getting a payment proposal is one thing, but actually being paid is another.

Another “artful” way of collecting is by telling a particular debtor that he could lose something such as access to credit line due to poor credit reputation. Another way of demanding payment without threat is to make the debtor realize that by compromising with you, he could avoid something such as going to court and avoid related expense and time. If your delinquent client is a prominent person or a respected business executive, it is also good to appeal to his honor or “pride”. 

At present, there is another tool that is widely used and very effective as far as consumer credit is concerned. This is what we call use of third party letter. A third party letter must come from an institution that can earn and/or has the respect of both debtor and creditor. However, if all of the tools and techniques you have employed seem to be ineffective or when things are already out of control, don’t be afraid to escalate.

Overall, always endeavor to learn other practical ways and techniques to collect before suing your delinquent debtors.

For comments, rejoinders and questions on credit and collection matters, send email to [email protected].