5 Easy Steps to Collect Old Bills

S.O.L.I.D. Collection: A 5 Step program to improve the performance of in house debt collection.

A collection program cannot be tentative in nature. It must be direct and it must be obvious. You can't beg for your money. You have to put your cards on the table and call the hand. If you have done a proper job of dealing with the debtor from the start, you have a hand full of aces.

When you reach this stage, you should have signed purchase orders, guarantees, delivery receipts and detailed information on the current financial condition of the debtor. To counter your efforts, the debtor has a variety of psychological weapons which are meant to shift the burden of payment off his shoulders or delay payment indefinitely into the future. The more you have prepared, the less effective these psychological weapons become.

If you are prepared, you have an impressive arsenal of weapons. You have all the evidence you require to obtain a judgment against the debtor and, since you know his bank account number, you can have the sheriff take the money out of it. You have a personal guarantee which will allow you to pursue the debt personally if you can't get paid by the business. You have all the necessary documents signed by the debtor. You are no longer talking to the debtor about if he will pay but when and under what terms the payment will be made.

WHAT MAKES A DEBTOR PAY A BILL?

Al Capone once stated that you will get a better response with a gun and a nice word than with a nice word alone. While the temptation is certainly there to force a debtor to pay, your weapons are limited by laws and common sense. SOLID collection is designed to use those weapons to their best advantage. There is nothing you can legally do to produce a perfect collection record, but SOLID collection will give you the tools to improve the ratio of collections you can make in house.

SOLID collection is based upon an acronym device to make it easier to remember. The program falls into five basic sections: Set-up, Opening, Lead the Debtor through excuses, Insist on a commitment and Don't hesitate. They spell SOLID because we wanted them to spell solid. You will find it easier to remember.

Set-up for the call. Nothing gets a debtor off the hook faster than a caller who is unprepared. You are going to ask for something the debtor does not want to give up. Your conversation should be pleasant, but you are on opposite sides of the fence. Your best interests are contrary to the debtor's best interests. Do not expect the debtor to help you collect. If you don't have your facts straight, the debtor is off the hook. Here is what you need:

Order information. Who said to do the job? You should not only know their name but have their signed order. You should also have them listed on the credit application as one of the company representatives that may place orders.

Approval Information. Who said the specifications were acceptable? This should also be in writing and should also be from somebody the debtor company listed as having the authority to deal with your company.

Shipping Information. Who signed the bill of lading? You should have a copy of the shipper's information so you can snuff out any notion of shipping problems. If there was a problem, it would be on the bill of lading.

Invoice Copy. What was sold under what terms? This document should match closely with the purchase order provided by the debtor. You should know when it was mailed to the debtor and if the debtor has received additional copies of the invoice.

Customer satisfaction information. A good vendor calls customers to verify what is received in writing. You should make notes of these calls, who you spoke to and what they said. Problems that did not exist after two weeks have no right to appear after two months.

Follow up information. When were statements sent out or second and third copies of the invoice? You cannot stop a debtor from pleading ignorance, but you can keep it from being blamed on you.

Now you have a complete picture of the sale. You can not only provide details to the debtor, you can stuff most of the debtor's lame excuses right back in their faces. You have the names, the dates and the activities right in front of you. It will take less than two minutes to review this information, but you will save many phone calls, not to mention money, by preparing for your collection calls.

It would be unlikely that you are the only credit problem facing the debtor. A simple and successful stalling tactic used by many debtors is nothing more than to question some aspect of the debt. This will send you scurrying through your files and may take quite some time. The debtor can work this stall successfully for quite some time and you may not even realize he is stalling. I am not saying that your debtor is intentionally lying. If you make it easy, however, it could take you weeks just to get out of the starting gate.

Open Strong. Don't ask. Don't beg. Don't whimper. Don't whine. Don't request. Above all, don't give hard luck stories. Unless, of course, you want to get involved in a game of I can top that with the debtor. You may get some interesting stories, but you won't get much money. You have to come on strong. Coming on strong demonstrates your sense of urgency and your intent to make this issue a priority. It sends a clear message to the debtor that you mean business. Here's how you do it:

Speak to the right person. One of my favorite scenes from the movie The Pink Panther from United Artists was when Inspector Clouseau, noting a dog sitting near a hotel manager, asked

"Does your dog bite?"

The manager didn't hear and Clouseau repeated the question several times. Finally the manager answered.

"No, Sir, my dog does not bite!"

Clouseau went over to pet the dog who promptly bit him. Upset and angry, Clouseau confronted the manager.

"I thought you said your dog did not bite?"

To which the manager replied with a perfectly straight face:

"Yes, Sir, but that is not my dog."

If you are talking to the wrong person, you are wasting you time. If anything, you are making the collection task more difficult by creating a situation where the debtor can come back at you and demand an apology for your aggressive, harassing behavior with one of the employees.

Give your name and company. Yes, this will alert the debtor and provide an opportunity to avoid speaking to you, but we've already covered how to handle that problem. If you have taken on the debtor before, he will already know that you are not a person to be dismissed. It is not necessary for you to establish fear in the debtor, merely respect and the knowledge that you will not be put off. The debtor should know that, if he will not speak to you now, he will be bothered by your call again in half an hour.

Tell the debtor why you are calling immediately. Don't try to dress this up as a sales call. Dive right in. In an attempt to demonstrate your relationship with the debtor, you may try to establish a rapport through small talk. This not only sidetracks the issue, it provides the debtor with time to consider options such as having to get to another phone call. The longer you delay, the greater the opportunity for the debtor to wiggle out of the call with any number of possible business interruptions.

Tell the debtor you are calling about invoice number XX for XXX dollars, dated XX/XX/XX. Tell the debtor the work was ordered by so and so and approved by what's his name. Let the debtor know you are aware of follow up calls in which whomever said the work was totally acceptable. Note the age of the bill. Send a loud, clear message that you are in control.

You are calling for one single reason: You want to resolve a past due bill. If the debtor tries to move the conversation to another subject, don't be afraid to tell him that, while you understand his desire to discuss this other issue, that is not why you called. You called to discuss his past due bill and you would like to resolve that issue before moving on to another subject.

Insist On All The Money Now! Now that you have clearly demonstrated your knowledge of the debt; now that the debtor is aware that you are a force to be reckoned with; now you begin to negotiate. Very few debtors will want to pay you everything immediately. They would rather pay you very little as late as possible. What you are doing by asking for everything now is establishing one extreme of the negotiations. The debtor establishes the other when he replies.

By going first, however, and insisting on the fulfillment of the debtor's obligation, you are exerting strong psychological pressure on the debtor to give you more than he wants to give. Nothing works all the time, but you will NEVER get more money than you demand. Keep in mind that the debtor's bargaining position is weak.

There are times when you want to retain a customer. In those cases you will be negotiating with the debtor. I will discuss that situation later. In a great many cases, you have already written this debtor off as a bad credit risk. You have everything you need to force the collection of your money. The only question at stake is how and when the money will be collected.

You can expect to wait at least three or four months to get paid through the courts. Usually it takes six months to two years. Keep that in mind when you consider a payment schedule or a settlement offer. Since you hold most of the good cards, you should insist on some form of written acceptance for any payment schedule that includes penalties if the debtor should fail to meet his obligations.

Lead The Debtor Through Excuses. What kind of excuses can you expect to hear? Just about anything you could dream up. You'll hear sad stories and apologies of every conceivable dimension. It doesn't matter. Be polite, because you are still speaking to a customer, but be firm. You understand the problem, but goods were delivered, there was no problem with the quality and the money was due and not paid. The sympathy you may have for the debtor's problem does not reduce the responsibility for the debt to be paid. A good phrase to keep in mind is Yes, I understand but... The bottom line, the 'but' if you will, is that the debtor contracted for what you provided and failed to live up to the contract. If the debtor is unwilling to rectify the situation, breaching the contract in a show of bad faith. There is no reason you can accept for non-payment.

If you have all the signed documents we have mentioned earlier, the debtor's best weapon has been reduced to an excuse or many excuses. Review the section on stalls until you can recognize all of them for what they are. Then, as they arise, cut them down. With no excuses, the debtor is much more likely to move your bill higher in his list of priority payments.

Insist On A Commitment. Now that we have carefully moved the debtor through the maze of excuses and stalls, we can consider the ultimate solution to our problem. The ultimate solution to any stall is to exact a specific commitment from a debtor. After discussing the matter, you may feel that you can accept two half payments, four quarter payments or whatever. You must obtain an agreement with the debtor that the payments will be a specified amount of money paid on a given date. I'll pay something as soon as I can is a terrible commitment that could usually be translated into I'll pay nothing for as long as possible. If you accept that commitment, you are putting yourself on the very bottom of the list of creditors to be paid. There is nothing to guarantee that a debtor will live up to the promise, but you can deal with that problem from a much stronger hand if you get a specific commitment. You can't honestly expect a debtor to come forward and volunteer a quick full payment.

Don't be afraid to say something like I need one thousand dollars on Friday. You can tell the debtor you will send an employee or courier to pick up the check, which will help even more. As a general rule, you won't want to send a salesman. He works too hard being a friend to the debtor and can be more easily manipulated than somebody the debtor doesn't know.

If you are going to set up a payment schedule, make it just as specific. Tell the debtor you expect five hundred dollars every month in your office by the fifteenth of every month starting July fifteenth. Have the debtor called four days before the check is due to remind them of their commitment.

Make sure you tell the debtor to write down the commitment. Let him know that you are also writing down the commitment and intend to follow it up conscientiously. To be certain both you and the debtor are in agreement on this commitment, insist on something in writing such as a note that can be faxed to your office. You have a right to expect compliance with this request and you should treat any attempt to avoid written confirmation as a stall.

Don't Hesitate. If the debtor pays, you start to think in terms of a customer again, but all debtor's don't live up to their word. If you expect a check from a debtor on your desk on July fifteenth and it's July sixteenth and you have not yet received any money, call the debtor. Remind them of their commitment. Tell them of your disappointment. Find out what has caused the delay and then, before you hang up, put the hammer down.

Tell the debtor he is running out of time. It is obvious that he is trying to avoid paying. You have made a payment agreement and he has not only ignored the payment, he has failed to call you and explain the reason for the delay. Unless you receive the payment within five days, you see no alternative but to place the debtor with an outside collection agency. If your professional organization has a local credit bureau program, you can also mention that you will be forced to reluctantly put the debtor's name on that report. You would like to avoid litigation, but the debtor must show good faith and send you the check immediately.

Because it is unpleasant to call somebody's bluff, we often find ourselves giving the debtor a few extra days. We rationalize about slow mail delivery and the debtor's bookkeeper being on vacation and anything else we can think of that will allow us to avoid confrontation. We tell ourselves that we are just giving the debtor the benefit of the doubt. What we are really doing, however, is letting the debtor off the hook.

The debtor had promised to pay you one thousand dollars on Friday. It is Monday and you have not yet been paid. Yes, the check may have been mailed, but the point is you don't have the money. Call the debtor immediately. Now is the time for you to bring out your big guns. He promised and has not delivered. You have no reason to believe he will live up to any future promise. It is now or never, payment or litigation. You may choose to accept a lower payment or a short extension but make certain that the debtor understands that you have reached the end of your rope. That should move you to the very top of his priority payment list. If you don't get paid then, it is likely that the debtor has no means with which to pay and you should send this bill out for collection immediately.

There are some excellent software packages that will help you to keep on top of your debtors. If you have less than two dozen at any given time, you do not need an expensive debt collection system. Rather, you should invest in a system that has a calendar and a means of storing information for follow up. These programs are generally designed for salesman to keep track of their appointments and they are easily adapted to keep track of your debtors when you are working in your SOLID collection system. If you would like my specific opinion on software, send me an e-mail request and I will be happy to reply. My e-mail address is Don@IwantMyMoney.com.

The system should give you the ability to list names and other information relating to the past due bills. It should allow you to take notes concerning your calls and let you enter the next call up date when the program will automatically remind you to contact the debtor. By using a file and pen, you can get by with just a scheduling program and a little extra paperwork.