No Change to the Economic Climate
With the year half way through we are not seeing any improvement to the economy. Companies, particularly manufacturing, are beginning to lay off staff or are having staff use their holidays in an effort to reduce operational costs while they wait for the markets to adjust.
We are constantly told that “business must be booming for us in this climate”, but it is far from it. It often takes a downturn in the economy as we are currently experiencing, for companies to take a good look at what they are doing in the credit department. We are finding there is more time for the credit team to collect those overdue accounts, but they are also not being as quick to jump into risky credit situations by assessing their potential customers risk better.
Recovering outstanding accounts is probably three times harder than it was last year when the recession first hit and we don’t see any light at the end of tunnel yet. A long term view is that this is a good time to check your in-house credit systems and perhaps take the opportunity to change some of the company policies while staff see the logic for doing so, particularly where sales staff often override credit department priorities or similar problems that pose any sort risk to the company and its survival.
Now is the time to retain the customers the business has worked hard to win. This will mean a hands on approach to work with those customers that are finding it difficult to make payment in full or on time. Stress to these people that they contact you and let you know what their circumstances are and how it can be worked through. This will enhance the customer relationship not damage it and will build a valuable loyal customer, as well as giving you a better idea about their business, after all they need to survive for your business to survive.
Don’t Write Off Debts You Believe are too Small to Chase
Many clients simply write off debts that they believe to be too small to chase, but over time these amounts do mount up and it can often be quite a shock at the end of the year when the write off is reviewed at the time the yearly accounts are completed for the business.
By writing these debts off you are often sending a message to your customers that any amount under $100 for instance, is not pursued by the business, leaving it open for this policy to be exploited by the unscrupulous.
These debts should at least be listed in the debt database to warn others, so do send these in for collection. Often a letter or contact from our staff at DebtForce can have the offending party reconsider the seriousness of non-payment. It is better to have 75% of something than 100% of nothing and after all we do the work for you.
You don’t have to use the labels if you do not wish to, but you can just use the service, and these labels have been reduced in price to $5.00 per 27 labels.
Any DebtForce client can sign up to the Label & Letter service and it is simply a matter of using the label & letter debt instruction form. By using this service you do not pay a minimum fee for each debt sent in, so there is a saving of the $45.00 closed file fee that applies in the Debt Action service. You do pay a higher commission if payment is achieved but there is absolutely no cost unless we are successful.
The Label and Letter application form can be found on our website.
Collecting Your Debt Earlier and Easier
1. Be prepared to discuss past due balance with debtor/customer
Be prepared when you make the call or speak to the customer in person. Have the debtors file or screen in front of you. If you sound or appear unprepared you will give the customer the impression that the balance due is unimportant to your office and the debtor will not take you seriously.
2. Listen to the debtor/customer
When calling the customer about their past due balance, identify yourself, state the reason for your call and then say nothing allowing the silence to work its magic. The debtor will eventually speak and will continue to speak if you do not feel the need to fill the silence. You will get more information than you need. Use open ended questions. Do not interrupt the debtor, Long pauses are crucial. Repeat back what the debtor has shared with you to confirm your understanding.
3. Never take anything the debtor/customer says personally
When customers are unable to pay their balance they can become embarrassed, fearful and angry. The customer may feel desperate and may lash out, understand that these emotions and their comments have nothing to do with you.
4. Ask for a payment date
Ask the customer when they will be paying their overdue balance . If not immediately ask the customer to call you on the date they have given to confirm payment is being made and how.
5. Establish a payment schedule if necessary
If a customer has a legitimate financial or personal problem that is causing them to be delinquent tell them that you are sorry that they are experiencing difficulty and offer a payment schedule. Explain that despite the problem the balance still needs to be paid and you will be happy to set up a payment schedule.
6. Address disputes
If your customer claims they have not paid due to a dispute, problems with the service, not received the account etc., address their dispute immediately. Be sure to get back to them quickly with a resolution or response. Then ask for payment. If you can’t “fix”
their problem suggest the debtor pay the undisputed amount while you resolve the problem or you could offer a discount to collect the balance quickly and settle the matter then.
7. Stop service
Should the customer become evasive and not work with you to resolve their outstanding balance, Immediately stop supply.
Go back to step 4 and don’t get off the phone until you have all of the information your require. This may be the one and only opportunity to have contact directly with the debtor.
8. Realise when it’s time to place your claim with an agency.
Know when you are beating your head against a brick wall.
Access the balance due versus how much time you have put into your attempts to collect the balance due. A reasonable time frame to place your claim with a collection agency is 90 to 120 days past due. Early placement generally provides greater recovery results.
You have good paying customers to focus on and dealing with your past due receivables takes you away from them and from maintaining the business cash-flow. The older an account becomes, the harder the debt becomes to collect and the less it’s worth.
9. Using a debt collection agency
Agencies offer a lot of advantages and incentives for your debtors to pay their bills that a company themselves can’t give. In addition to delinquent accounts, collection agencies can help an account from becoming delinquent. They can run credit reports to see if a customer may be getting into difficulty or has the ability to pay a long term payment plan.
They also have skip trace resources to find your debtors after they’ve moved
A debt collection agency can instill a sense of urgency with a debtor that the business has difficulty in doing. By direct contact the agency can handle the debtor with a personal and professional manner while all along putting the debtor in the position to act on to resolving their debt and being made aware of their options and the consequences they may face if the outstanding account is ignored.
It’s much harder to for a debtor to ignore an effective collection agent, than it was to throw away the bills. Many debtors fear that once the account has gone to a collection agency that it’s already affected their credit. The debtor gets their first collection agency letter and all of a sudden they’re eager to pay the debt to avoid their credit being affected in a negative manner or as many of the debtors think, to get the credit report cleared. Many agencies, believe if they report to the credit bureau which most good ones do, they don’t do so until their efforts have failed to resolve the account. But many debtors don’t realize that. Let’s keep it that way.
Your debt recovery agency will usually have the ability to report to the main credit bureaus. This may help in the future such as when that young adult who thought they were bullet proof when they were younger and irresponsible, have to now pay for the consequences of their past. Particularly when they want to get a mortgage, car or any type of credit extended to them, they may have to resolve your debt to do so. Some debts have been resolved 5yrs down the line in cases such as this. There is so much that a good agency can provide your business. A good tool is to get signed up with an agency ahead of time, and to forward the delinquent accounts in a timely manner as they come up.
DebtForce appreciates the faith it’s clients places in them when passing files over to us . We realise you have many agencies to choose from but have entrusted the task to us and we will do our utmost to maintain that confidence.
The Distress Warrant
A creditor will often achieve a District Court judgment against its debtor but the amount of that judgment may not make it economical for the creditor to proceed on to Bankruptcy or even Liquidation.
For those smaller judgment debts up to about $3,000.00 a creditor is recommended to look to issuing a Distress Warrant against the debtor.
This enables a court baliff to visit the debtor at their home or business and seize goods to that value
When the seizure occurs at a business the business will obviously have tools of trade. Not all if any of those tools on the premises would be subject to a security under the Personal Properties Security Act. Having a Bailiff seize tools of trade can be extremely effective in having the debt owed discharged.
As long as the debtor is left with the minimum of $500.00 worth of tools of trade, all other tools can be seized.
Seized goods are stored and then sold by public auction, the extra costs of storage and the auction itself being covered by the amount of goods seized.
Should the debtor be reluctant to allow the goods to be seized, they have the option to pay the debt!
Credit Checking: Know Your Potential Customer
Unfortunately the time taken and the ability to conduct accurate credit checks on potential clients is a time consuming process and all to often these are not actually done for the sake of expediency of getting the account open and trading. This is where the risk of ending up with a problem customer can easily occur.
To assist our clients Debtor Management has developed a credit checking process to verify the credit worthiness of any entity applying for credit.
This is not simply based on one data base search and result, but a series of data bases that also confirms the applying entity is actually who they say they are as well as cross referencing entities to ensure associated companies are available for the clients information. All too often is a debtor company placed into liquidation only to find out the same person behind the failed company is applying for credit with you under a different name.
The report provided to the client includes checking credit references provided by the applicant which can require a number of calls to be made to discuss these with the correct person for an accurate and detailed reference.
Having a professional credit person conduct these on your behalf they will often recognise inconsistencies in an application that will need further checking.
This process can be adjusted to an agreed format for your specific purposes.
The costs for each application is $40.00 plus toll calls & GST.
For enquiries regarding this service call Steve 092639111
