Tips Collection 101

Today’s collections are said to be 95% psychology and 5% muscle. This article is a proven collection of tips, techniques, and thoughts that can help you and your organization collect more money, faster, and for less. Much of the content in this article may be common knowledge and the kinds of things you and your organization are already doing on a daily basis. But there are sure to be several action-oriented ideas and tips that, if implemented, will help you do an even better job with your accounts receivable.

I: Warning Signs of Potential Credit and Collection Problems:

1. Numerous inquiries about one of your accounts.

2. The customer changes banks frequently.

3. Customer who requests clarifications or proof of service more frequently.

4. Changes in customer payment patterns.

5. Partial payments instead of full payment.

6. Problems in the geographical area of ​​the client.

7. Problems in the client’s industry.

II: Warning Signs Your Sales Force May See First:

8. Order levels drop.

9. Empty shelves on warehouse or retail floor.

10. Plant operating at less than capacity.

11. Your client’s main client is in trouble.

12. Loss of key staff members.

13. Major layoffs or reductions in hours.

14. Restricted tours in the areas of the facilities.

III: Warning Signs of Potential Bad Check Problems:

15. Checks with printed numbers less than 300.

16. There is no pre-printed name or address on the checks.

17. Boot checks without printed information.

18. The address on the check and the ID do not match.

19. No photo ID or expired photo ID.

IV: Why collection problems occur:

20. Fear of losing future business (don’t actively pursue late payments for fear of losing future business).

21. Absence of credit and collection policy or unclear policy.

22. Lack of training for collection personnel.

23. Reluctance to use external collection sources at the beginning of the delinquency cycle.

V: Seven reasons to have a formal credit and collection policy in writing:

24. Clarify who does what.

25. Facilitates training.

26. Variable income media.

27. Prevent unauthorized changes.

28. Promotes consistency.

29. Reduce wasted time.

30. Answers 95% of routine questions.

VI: Develop your Credit and Collection “Skills”:

31. Two basic concepts: (1) Time is the factor that most deteriorates the collectability of an account, and (2) You will never have enough resources to collect all your delinquencies.

32. Implement an early cure or remission program to maximize your internal and external recoveries.

33. Early referral programs, in addition to collecting, help you identify and differentiate non-payers from late payers and treat them accordingly.

34. Accounts 60 days or less have more than 80% collectability.

35. Accounts older than 90 days are typically less than 50% collected (internal).

36. Active accounts less than 60 days past due will generally maximize your internal return and recovery. Use a third party for those more than 60 to 90 days past due while focusing internal efforts on the easier slow-paying accounts.

37. Develop and use a “60 Day Follow Up Schedule.”

• Focus all internal efforts in the time frame where they are most profitable.

• Start your offenders early – contact them often in the 60 day period.

• Get progressively stronger as the 60 days go by.

38. Items to be used in the 60-day Tracking Program – copies of account statements/invoices, letters, business visits, phone calls, credit suspension.

39. After 60-90 days, your options are: continue internally with reduced results, cancel the account, use small claims court, an attorney, or a full-service third-party collection agency.

VII: Collection letters:

40. The easiest way to automate to collect money.

41. You cannot resolve problems or determine if there is a payment problem.

42. One-way communication.

43. Subject to misunderstandings.

44. Collection letters maintain a dialogue with the debtor.

45. They are cheap.

46. ​​Set the stage for your next action.

47. Let the debtor know that you have not forgotten about him.

VIII: Other considerations in the use of collection letters:

48. Your bill is not the debtor’s only mail.

49. Your letter competes with professional emails.

50. Change the look of each mailing.

51. You must discourage the debtor from getting rid of his envelope.

52. You should encourage the debtor to open his envelope.

53. Increases the chances of getting positive results from your letter.

54. Give the address of a blank envelope: they will open it!

55. Add “Address Correction Requested” and “Shipping Postage Guaranteed” to the envelope.

56. Mark the envelope to encourage opening: “Urgent”, “Personal”, “Confidential”, “Do Not Fold”, “Personal and Confidential”.

57. Motivate the debtor to want to pay with appeals in your letters:

• “Save financing costs.”

• “Maintain your good credit history.”

• “Continue to be a valued customer.”

• “Avoid a history of delinquency.”

• “Avoid locating an outside collection agency.”

58. Make progressively stronger collection cards.

IX: Telephone Collection Calls.

59. Telephone contact is more expensive, but much more effective.

60. The calls should complement the letters and follow up on what was said in the letters.

61. Being a two-way communication, calls can identify and solve problems.

62. Sell and maintain control over the collection call.

X: Making the collection call:

63. The collection call format:

• Identify the debtor.

• Identify yourself.

• Demand full payment.

• Psychological rest.

• Determine problem or objection.

• Find solution.

• Close the call and get commitment.

64. Collection calls have three phases:

1. Opening Phase.

2. Negotiation Phase.

3. Closing Phase.

Opening phase tactics:

65. Verify the identity of the debtor. (I’m calling for [name]… is he/she?)

66. Verify the debtor’s address.

67. Identify yourself.

68. Indicate the debt you owe (You owe us $567.35…).

69. Indicate the type of action you want. (“I need full payment today”).

70. Pause and let the debtor respond.

Negotiation Phase Tactic-4 Steps (in this order):

71. Step One: “I am due in full today.”

72. Step two: “When can you submit the full payment?”

73. Step Three: “How much can you send today?”

74. Step Four: “When can I expect a payment?”

Closing Phase Tactics:

75. The collector summarizes what is going to happen and when.

76. Payments are always expressed in dollars.

77. Points in time are always expressed as dates.

78. Debtors should confirm that they understand the following action on their part.

XI: Selection of an external agency:

79. Always use a full service agency instead of letter writing services etc.

80. Look for agencies that report accounts to the three major credit reporting agencies.

81. Select an agency that works nationally rather than “local” or “regional” so that debtors are pursued even if they move outside of your local area.

82. Use an agency that has optional litigation services available if a lawsuit becomes necessary.

XII: Twenty more tips, especially for medical practices:

83. Conduct new patient pre-registration (and credit screening) by phone or mail prior to first office visit. This reduces bottlenecks in the office and allows time for a credit investigation.

84. Secure credit bureau reports on new patients with poor credit: Identify and resolve payment issues before services are rendered.

85. Possible “danger signs” on new patient registration forms:

• Address: transitory or just a post office box.

• Telephone: none or not listed.

• Business address/phone: none or the same as your home address.

• Occupation: none.

• Reference: none, “a friend”, “medical society” or “yellow pages”.

• Marital Status – divorced or separated, young, single.

• Age – very young or very old.

• No insurance coverage.

86. Jump doctor (if known).

87. “What bills do you have that are more important than your health?”

88. Collection Rate: 92-95% recovery is average to good for most types of group practices.

XIII: Appeals by debtors of special medical collection calls:

89. “I guess you made several thousand dollars over the last few months, but we’ve only gotten a small payment.”

90. “We helped you in a time of need and, in good faith, expected to be paid in a reasonable amount of time.”

91. “I know you want to protect your credit so you can feel comfortable in case you or your family need to return.”

92. “Add to a current loan (to pay us)…or let go of some other bills like ours has for the past few months.”

Know the law… Debt collection, collection agencies and credit bureaus are highly regulated. Complete copies of the Fair Debt Collection Practices Act (FDCPA), the Fair Credit Reporting Act (FCRA), and a HIPAA-approved sample agreement for health care providers are available at: [http://www.ncsplus.com/regulations]

These are 101 credit and collection tips and techniques that, when implemented effectively, can dramatically improve your cash flow and translate into greater profitability for your business.