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.

PERSUADING  PEOPLE  TO  PAY

By Peter Renton 

  Webster's Dictionary contains two definitions of the word "persuade":  1.  to induce to believe something, to convince.  2.  to cause to do something, especially by reasoning, urging or inducement.   How persuasive are you?  Do you think that a big stick is all you need to be persuasive?  If that weapon is the only tool of persuasion that you're using, your customers may not last long.  And then where will you be?  There are many tools a credit manager can use to be more persuasive and at the same time build customer relationships.  These tools will ensure you get paid first and that your customers remain loyal and happy.

Account Collection is Like Sales
  The skill used in persuading customers to pay for their goods or services is just like the skill that the sales force uses in persuading the customers to buy in the first place.  In fact, our job is very much like that of the sales people.  If we think of our job as a sales job, the rest of our work fits in quite easily.  Pursue your customers as if you were in sales.  Be friendly and persuasive     never pushy.  We are selling the customer on the idea of paying their account.  We are selling the peace of mind, the self respect, the clear conscience and friendship received in return for payment of their account.
  There is one big difference, however, between collection and sales, a difference that gives you a big advantage.  In sales, a good case can often be made for not buying the product or service at all.  Not so in collection.  Here, you are always right.  The customer has purchased something, and now they should pay for it.  There is no question about it (leaving aside the case when there has been a problem or mistake).  Most often, your customer intends to pay.  It is up to you to persuade that person to pay earlier than they were intending to, and before they pay anyone else.

You Are in the Mail Order Business
   We send statements through the mail.  Most people spend little time or effort in thinking through this process.  "The customers owe money.  Let's just remind them".  A plain, computer generated page with just the invoice numbers and amounts owed is the norm.  Now, let's imagine you are selling a product by mail.  You will give a great deal of thought to the design of your mail piece.  Maybe you will print a glossy brochure that showcases your product and explains the great benefits the customer will receive when they purchase your wonderful product.
  Do you think mail order giants like L.L. Bean or Lands' End would ever send out an impersonal computer generated letter or a plain sheet of paper with just a statement of facts about their products?  Of course not.  This is not to suggest that for your next statement run you do an elaborate four-colour glossy page with photos of the items purchased.  However, whatever you do, it should be well-designed, easy to read and concisely communicate your message.
  There are a number of inexpensive ways to improve the effectiveness of your invoices and statements.  A popular way is to use brightly coloured paper or envelopes.  A better way is to use a bright thank you or collection sticker on your statement.  This gets your message  across in a clear and concise way and attracts the attention of the person opening the envelope.  If you are writing a letter, you could format it sideways so that the page is 11 inches wide.  There are any number of imaginative ways you can use to get your message across in a unique way.

You Are Not Competing With the Debtor for Money
  Imagine the person in charge of accounts payable for one of your customers.  If it is a typical small business, every day the person will receive several (sometimes as many as 20 or more) invoices and statements, which usually will be kept in an "accounts to be paid" file.
  Your customer may be a little short of money that month.  This person now has to decide who is going to be paid first.  There may be 50 or 100 bills due to be paid this week, but only enough money to pay 10 or so.  How do you make sure that your invoice or statement will be among the 10 that are going to be paid this week?  Somehow, your bill needs to be noticed.  So, you see, you are not competing with the debtor for money, you are competing with all the other companies to whom your customer owes money.

Building Customer Relationships Through Collection
  This is probably the most overlooked part of collection.  Many firms view collection as just an added cost of doing business, not as an opportunity to build stronger customer relationships.  In today's competitive business environment, every relationship with the customer is fragile.  We need a good product and excellent service, but we also need more.  Every contact with the customer should be viewed as important, whether it is a sales or collection phone call     or simply sending a statement.  Every contact will either add to or detract from the current relationship.
  It is when we do the unexpected that we are remembered most.  It is considered normal for the sales staff to send a "Thank You" card when they land a big order.  Why not send a "Thank You for Your Payment" card to your customers.  The accounts payable people will be blown away.  You can also put a little "Thank You" sticker on an invoice or statement, or write a hand-written note.  Be innovative.  The whole idea is to build a relationship between people     you as a collection person and the accounts payable person at your customer's company.  It can and will make a huge difference to your business.
  Even if a customer is past due, you can still build on the customer relationship.  If they are only recently past due, remind them of this in a funny way.  Make them laugh.  While other people are probably being mean and nasty, you are being positive and friendly.  You see, the art of collection is to collect money in such a way that the customer will be happy to come back and do business with you again.

The Magic Ingredient
  There is a magic ingredient in account collection.  In the short space here it is not possible to deal adequately with this concept.  Very briefly, the basic idea is the perception that people, especially your customers, are basically good people.  If you hold this perception in mind, it translates into reality and is communicated to others.  It sounds simple, but it is a powerful concept.  It is best illustrated by a real-life example.
  You have a small-business customer who is late paying her account one month.  Now put yourself in her shoes.  She is having a really hard time in business; things have not gone as expected lately and she is fearful of losing her business, her livelihood.  If she can get away with it, she will promise payment next week or next month.  The best idea here is to sit down and have a frank and open discussion. Take her to lunch if you can.  Ask her how everything is, not just the outstanding account.  Treat her as a good person and be understanding     you may easily have a friend for life, instead of a resentful and, perhaps, delinquent debtor.  Just imagine the difference that would make to your business.
  If you didn't know it before, you should definitely know it now     collection is about people.  Be more than just a plain old invoice, a generic collection telephone call.  Be a friend to your customers.  You will enjoy your work more; you will be more successful; and the business world will be a more pleasant place.

This article is reprinted from Rentons' Business Tips No. 1
© Copyright February 1998 ACS