Disclaimer: The content of these articles is to be used as a general guide only. Professional advice should be sought before taking any action relating to the points discussed in these articles.

HOW TO USE THE TELEPHONE EFFECTIVELY

  If used properly, the telephone can be a very powerful collection tool. It is usually used later in the collection process since if you call too early in the collection process this may not be appreciated by your debtors. After all, in collecting accounts, collecting money is only half of your job, the second part of your job is to build strong relationships with your customers so they will continue to reorder from your company and recommend you to others.
  The times when you may wish to use the telephone early in the collection process is if the account is new, if the account owed is large or if your debtor has a history of paying late. But don't use the telephone any earlier than as a second reminder since you are not only competing with other creditors for your debtor's money but also other suppliers for your debtor's business.
  The telephone is an effective means of collecting overdue accounts but it is generally used less frequently than mail because of the cost. So to reduce the cost it is more economical to collect the majority of your accounts by mail.
  The cost is in the value of your time rather than in the actual call. In many cases, the person you need to speak to is on the phone, is out, is sick, is on holidays, or only works two days a week. If you need to leave a message with another person or on an answering machine, often this person won't return your call so you may need to make at least two or three calls before you get to speak to the right person.
  The first thing you should do when calling to collect money is to speak to the person who placed the order. Ask your customer to acknowledge receipt of the goods you sent or that they are happy with the goods or services you have provided. If you do this, then you are most likely going to get paid.
  Secondly, you need to speak to the person responsible for paying your account. Often, this initial conversation will reveal a lot about your debtor. Invariably, your debtor will tell you why your account has not been paid. In fact, many of them feel quite bad that you have not been paid. Some of the most common reasons for non-payment are;

• the debtor is experiencing cash flow problems.

• the debtor regularly pays most accounts late.

• the debtor is just about to pay those invoices from a particular month.

• the debtor has lost your invoice.

• the debtor assumed the account had already been paid.

• the debtor is disorganised.

• a cheque for this account had been drawn some time ago. (It is possible this cheque was not posted, was posted to the wrong company or has been lost in the mail.)

Whatever the debtor says should be recorded in case further action is necessary. Your next step is to get a promise to pay from your debtor, whether this be today, this week or this month. In most cases you will get such a promise. At this stage it is far better to be friendly as you would expect the account to be paid and your debtor to continue to be a profitable customer of your business for many years to come.
  If the promise has been broken, then further action is necessary, either by mail or telephone. If you decide to make a follow-up telephone call, then you are looking for another promise to pay. Your aim should still be to collect this account without making any threat.
  Patience is a virtue in account collection but if your debtor breaks a second promise to pay you have an important decision to make. Do you persevere with the firm and friendly approach? In many cases, this is the best option if you are quite sure you are going to be eventually paid.
  If you doubt your debtor's intention to pay then you can make two types of threats. Firstly, you can stop supply or stop credit. This may or may not cause inconvenience to your debtor. It is unlikely to cause offence as this is a reasonable step to take on an account which is long overdue.
  Secondly, you can threaten legal action. This has the advantage of being a persuasive method of collection and in some cases your debtor understands that such a threat is quite fair if payment has been delayed for a very long time. However, if legal action is threatened too early in the collection process or without other reasonable attempts to collect the money your debtor may wish to use alternative suppliers in the future. So if you threaten legal action be prepared to lose that customer and secondly, make sure you carry out your threat promptly.
  Finally, the one advantage the telephone has over mail is that it enables you to identify a possible need for immediate legal action. For instance, if your debtor does not intend to pay you at all or worse still, cannot be found then you should take legal action immediately unless the account is very small. You would not have found out this information as quickly if all contact with your debtor was via the mail.
   

This article is reprinted from Rentons' Business Tips No. 2
© Copyright May 1998 ACS