Fundamental Errors in Debt Collection

Industry Advisories - Publish Date: October-23-06

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By George Vignola -- Customers do what is in their best economic interest and in general it is in a customer’s best interest to hold onto your money for as long as possible. Some companies will delay payment until the creditor call for payment status. Some companies will schedule invoices from all vendors for payment after a specific number of days beyond the due date.

Collectors can improve their performance by avoiding common collection mistakes including the following.

Ignoring warning signs that a particular customer is in financial trouble including...

NFS checks
Broken commitments
Irritated at collection calls (abusive)
Unusually large order received without offering to clear delinquency
Customer pushing sales to override credit approval on orders
Other creditors asking for a rating on delinquent customers
Change of ownership
Bulk sales notice
Failing to convey a sense of urgency when contacting a delinquent account or resisting telling a customer that their response to your question about the status of a past due balance will determine whether or not an order pending will be released
Accepting the first payment offer made by a delinquent customer…unless that offer happens to be for immediate payment in full
Failing to ask that payment be made by overnight delivery every time a previous payment commitment has been broken.
Failing to request or require additional assurances of payment such as a personal guarantee or an inter-corporate guarantee
Not taking the time to confirm payment commitments in writing
Using dunning notices rather than telephone call as the primary collection tool (telephone is the most effective collection tool)
Failing to understand your company is in competition with every other company for a customer’s time, attention, and cash
Resisting placement of an account with a third party for collection when progress is not being made to collect past-due balance
Not joining one or more industry credit groups to stay current on development involving common customers
Going back to business as usual once an account has paid their past-due balance without first evaluating the account to determine if reducing the credit line or withdrawing open accounts is appropriate

Collection Demand Letters

Result oriented - be positive, confirm a payment vs. disputed situation.
Address letter to the appropriate person. One who draws or signs checks one in authority.
Be specific - names, dates, amounts, invoice numbers, credit memos, etc.
Gain the cooperation of the person you are writing - his or her personal attention, or assistance.
There are numerous ways to infer legal proceedings - nothing can be gained by threats or inflammatory remarks:

Appropriate action
Action to protect our interest
Exercise our rights
Action to protect enforce payment
Take additional measures
Cause inconvenience to your company
Cause additional expense to your company
Proceed with further action

Never threaten a customer in writing or orally that their reputation will be ruined if they do not pay you. In the first place, you are not telling them something they already know, and secondly you could be sued.

“Remember companies owe the debts but people pay the bills”

George Vignola is president of Commercial collection Consultant Massapequa, NY. Voice: 516-420-7441 / Fax: 516-420-7444. Mr. Vignola's firm is a professional commercial collection agency serving electronic clients, which offices in New York, Dallas, Seattle, Atlanta and Los Angeles. www.ccc-worldwide.com

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