According to IACC, Here Are the Top 3 Mistakes Collectors Make
What are the top 3 mistakes made when calling on past due accounts? Poor or out of date supporting documentation of the claim, waiting too long to involve a 3rd party collection agency & failing to adequately communicate with the debtor, according to a recent article from International Association of Commercial Collectors, Inc. (IACC).
It should come as no surprise that a well-organized paper trail, including pertinent customer information, will ensure a smooth collection process. Which leads us to the mistake identified in IACC’s article, Top 3 Mistakes Internal Collectors Make with Customers When Attempting to Collect on Delinquent Accounts: failing to keep complete & current documentation. What is the most important document? A well-crafted credit application.
“According to IACC President Greg Cohen… the most important document is a properly constructed and complete credit application that will ensure that the customer understands your terms and that you have the proper legal name of the entity and its corporate address, as well as the names of the principles and officers, and the correct email addresses and phone numbers. The credit application should also be reviewed and updated on a regular basis, particularly with larger and higher risk customers.”
Number 2 on the list is a topic we discuss often – don’t wait to turn the past-due account over to a collection agency. It is a well-known fact, and long studied trend, that the longer an account remains past due, the harder it becomes to collect. Some reports indicate the collectability of an account drops to around 50% after six months and drops below 10% after a year.
Rounding out IACC’s list is communication. “Silence is golden,” said no collector ever. Unreturned calls, unread emails, a disconnected phone number, undeliverable mail & email are all signs of silence. And, when money is owed, silence is never a good thing. How can you combat the silence? IACC recommends finding the communication style that suits your customer & sticking with it.
“It’s important to have a clear understanding of what type of communication your customer best responds to, whether it’s blunt language and a professional but terse reminder of the consequences of not paying on a delinquent account, or whether a softer approach is called for. Also, you need to communicate often and respond to communications quickly in order to express the gravity of the situation.”
How Can You Make the Collection of Past Due Accounts Easier?
This NCS list pops up now & then and never gets old, so I’m going to share it with you once again:
- Monitor open invoices: Routinely review open invoices and as soon as an invoice is past due (e.g. If you bill on 30-day terms, day 31) contact your customer and inquire on the invoice.
- Try multiple mediums: Use phone calls, emails, demand letters, etc. & make sure you keep track of your communications – good record keeping is important!
- Pay attention to cues: Social cues & non-verbal cues are frequently early warning signs that an invoice (or customer) is going to be an issue. When people stop communicating, they are sending a clear signal “I can’t/won’t pay the invoice, and maybe if I ignore you, you will go away.”
- Check status: Note changes with your customer’s business, such as a disconnected phone number, undeliverable mail or email, and changes in their corporate status with the Secretary of State.
- Review credit: Credit reports can provide a wealth of information, especially for payment history, DBT changes, recent collection placements or judgments.
- Cut them off: If you have invoices that a customer isn’t paying, stop extending them additional credit. Debt is like a beast and if you continue to feed it, it will gobble up every last bit and give you nothing in return.
- Know when to let it go: Don’t immediately toss the invoice into the bad-debt-write-off-pile. “Let it go” from your desk and move it to the desk of a specialized collection agency. Collection agencies are trained and experienced, not to mention, a third party is sometimes more effective simply because they are a third party – removed from the situation.