The Ins and Outs of Phone Collection

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8The Ins and Outs

of Collection Phone Calls

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1. Selecting who will make the calls

Self-assuredQuick on his feetAssertiveProfessionalA good listenerGood at taking notesFamiliar with your customer’s purchase history and paperwork

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2. Having the debtor’s file at your fingertips

Copies of invoices, statements, POs, credit and debit memos,credit applications, contacts, personal guarantees, financialstatements, notes from prior conversations and any previous anddemand letters.

a. Ease of access is a key to effective communicationb. Having a backup copies at the ready for your customer

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3. Taking notes to capture the moment

Take notes as you talk, starting with:a. Date and time of you conversationb. Name and title of the person you’re speaking with

Pausing between calls to record your recollections will keep you fromgetting “on a roll” and making a rapid series of collection calls.

Standardized your note-taking system. Compile a glossary of commonlyused abbreviations to use in your notes. Handwritten notes must be legible.

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4. Preparing for a bad outcome

You’ll be in shape to confront problems you encounter while you’re on the phone.

Always remember, it’s the debtor who owes you money. Whatever youmay choose to give to a debtor, you don’t owe the debtor a thing. Think ofthe debtor’s abruptness, coldness and defensiveness as a challenge. With yourfirm commitment to collect payment, even calls that start out rough can beturned around and made productive.

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8The Ins and Outs

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1. How to mentally prepare

Warming the person up for a collection demand Fixing the minimum demand in your mind (full payment now/ half down & half

in 30 days, for example).Keeping on an even keel, emotionally, even if your debtor “loses it.”Being persistent if a debtor stalls for timeListening, yet not agreeing with any statements contrary to your collection goals.

2. Choosing whom to call

Follow the guidelines of the Fair Debt Collection Practices Act (FDCPA) anddon’t speak to any third parties about the obligation.

Goal is to confront the debtor himself about paying off the debt.

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4. Honing your listening skillsMaintain control over the conversation also must listen carefully to what the debtor

is saying.

Commonly problems include:Surprise on their endLack of documentationPoor accountingBusiness or personal problems

3. Preparing a script• You identify yourself and request payment from the debtor.

Your script opens with, “This is Jane Smith from the XYZ Company calling forMrs. Jones.” Never disclose that you’re seeking money until you have theintended person on the phone. Make sure that the person you’re speaking withcan authorize payment of your bill. After the debtor answers the phone, repeatyour name, name of your business and make a specific request for money.

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1. Perfecting you “telephone voice”

Develop a “telephone voice”, that is a bit slower, lower and louder than your normal voice.This isn’t to be exaggerated.

It helps you pace the conversation while allowing your debtor to clearly hear every word you say.

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2. Pressing the receptionist for details on business debtorsUse the receptionist’s helpfulness to confirm information from

the debtor’s credit application.

•verify the phone number•address•company name (or listen carefully to the name when the receptionistanswers the phone)•confirm who the owners are to make sure there haven’t been anysignificant changes.

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3. Getting the correct person on the line

a. Use credit application or other information

b. Speak with a person you know to have the actual authority to write a check and put it in the mail right now.

c. After the right person is on the phone, give your name and name of your business and make a specific request for money.

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4. Making proper comments and avoiding the improperNeed to be careful about legal restrictions on when and how you make contact.

Don’t say you’re going to sue the debtor if you don’t actually intend to file alawsuit if you don’t receive payment.

Don’t talk to third parties about the debtor’s account.

Don’t threaten or harass a debtor.

Don’t try to collect debts directly from a debtor who has just filed bankruptcy.

Don’t threaten debtors with criminal chargers if they don’t pay the debt.

Don’t contact debtors directly if you know they’re represented by a lawyer inrelation to the debt you’re collecting.

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5. Listening, yet controlling the conversation

Good listening can help you uncover:

Where the debtor banksWhom the debtor is doing business with (who owes your debtor money)Whether the debtor can borrow money to pay youInformation that explains why you haven’t been paid – and whether

you’re likely to be paid

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6. Silencio! Using a pause

Make a statement or ask a question you want a reply to, such as,“When will you have payment on the account?” Then pause silentlyfor a few seconds. If the debtor fill the pause, it often contains goodinformation or insight in to the person you have on the line.

7. Staying positive

Positive comments and attitude may preserve your stressedrelationship.

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◘ Collection call goals should include:Getting paidVerification of customer dataConveying confidence

1. Playing the cards you’re dealt: Dealing with the debtor’s personality

Debtor’s come in all shape, sizes and personalities. Know how to respondto the most common problem personalities.

•Arrogant debtors- Must respond calmly and persistently, point by point withfacts that refute the debtor’s allegations.

•Debtors with selective memory- By producing a document for every denial,you can successfully overcome the debtor’s lack off memory.

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•Screamers- To remain calm, don’t get angry or hang up. Should make everyeffort to get the debtor to admit the debt and arrive at a firm date and amount tobe paid.

•Criers- Remain calm and composed. Demonstrate that you listened to what thecrier was saying but at the same time continue forward and demand payment.

2. Keeping your temper: The secret to success

Cooler heads get paid. You want to stay professional, regardless of thedebtor’s attitude. Your calm demeanour and collected ability to respond to hisclaimed disputes will serve you well.

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Making a series of telephone calls to different debtors.

Getting on a roll helps you keep a positive mental state, because the calls with positive results deflect the negative ones.

Mix up your calls. So this can help keep you motivated and upbeat as you work through your list.

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9Overcoming Disputes,

Real or Phony

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Admission can be;• Full (“I owe you all of the money you

claim”)• Partial (“I owe you some of the money,

but dispute the balance”)

Admission can come;• Oral statement• In writing• May be implied by the debtor’s action

Admission is a statement from the debtor conceding that he owes you money.

When your debtor admits that he owes you money, you can:

Use the admission in court to help prove the debt Remind the debtor of his previous admission if he tries to raise the same

excuses for delaying payment later: “We’ve already resolved that, and you admitted you owe the money.”

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1. Documenting admissions: Creating a paper trail

a. Documenting oral admissions Note any oral admission in your records. Follow up the oral admission with a note or memo. Send a confirmation of any oral agreements, and ask the customer

to sign and return it.

b. Documenting payments

c. Documenting any disappointment

Overcoming Disputes, Real or Phony

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2. Collecting the admitted balance

Collecting the admitted portion is just part of the resolution. You should continue to try to resolve the disputed portion of the account and set a due date in writing for that as well.

Overcoming Disputes, Real or Phony

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1. Asking, then listening: “What seems to be the problem?”

The customer says: “The salesperson messed up the order.” The customer says: “I didn’t get what I ordered.” The customer says: “Your billings are messed up” or “I’ve been overcharged.”

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2. Consider your debtor’s perspective

Listen carefully to what she’s saying or threatening. Try to make some sense of her statements or threats, even if you

have to stretch your imagination. Maintain communication with the threat-maker, regardless of

how difficult this is. Attempt a calm-after-the-storm approach: Speak more slowly

and calmly and in a lower tone of voice in your conversations with the debtor.

Pretend that whatever happens in this communication will be on tomorrow’s front page.

Remain open to reaching a reasonable compromise.

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3. Addressing the issues, one by one

Is the problem at your end? Is the problem at your customer’s end? Is the problem legitimately at both ends?

• Handling major disputes Disputes that present complicated factual claims that require

investigation. Disputes that raise tricky legal issues, including those outlined in

Chapter 6. Disputes that center upon errors made by somebody within your

company, or by somebody else but under circumstances that make your company responsible.

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• Avoid playing games with minor disputes.A minor dispute is one you can fix on your own, at relatively low cost, or

with a relatively modest concession to the customer. For example:

If your debtor argues that she was overcharged a dollar, credit the dollar. That’s not a sign of weakness. Rather, it’s using good, solid, business decision-making to efficiently resolve a dispute.

Your debtor holds up a payment of $1,000 on invoice #123 because she objects to a $35 interest charge on a prior invoice. You can waive the interest or try to defer the issue (although the debtor may not go for that) in order to get the payment in the door.

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4. Documenting your position

• Support your claims with documents from your file

If a dispute escalates, the documents you and your debtor gather may very well end up being used as evidence in a court case. You don’t want to find yourself in court where the only documents available as evidence are those maintained by the debtor.

In most cases, the person who arrives at a negotiation session or court proceeding with the best paperwork and the best prepared file prevails.

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• What to do when your paperwork falls short

Inaccuracies in billing practices such as double billings Gaps in time No contract to support the invoices No contract terms that would justify interest charges or late fees

appear on your invoices No purchase order matching up to the invoices Inconsistencies between the statements of account and the

invoices. Missing change orders in support of invoices for extras. No replies to the debtor’s letters or e-mails making claims of

problems

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• Responding to common stall tactics

Stall tactic: “I don’t have enough money on hand to pay you in full.”

Solution: Remind the debtor of possible untapped sources of funds: Money can be borrowed from lines of credit, credit cards, advances, or even the old standby, friends and relatives.

Stall tactic: “Even if I had the money, I wouldn’t pay you because I don’t owe you the whole amount.”

Solution: Work toward dispute resolution as discussed in the later section “Negotiating: Planning on Some Give and Take for a Win-Win.”

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Stall tactic: “I have a problem with some of your invoicing; the numbers don’t make sense to me.”

Solution: Review each invoice, or explain how your invoicing system works until you relieve the customer’s concerns.

Stall tactic: “I had a problem with some of your goods and services and my customers are not happy; and because they aren’t paying me, I’m not going to pay you.”

Solution: Break down and resolve the specific concerns behind this statement as discussed in the earlier section “Breaking Actual Disputes into Bite-Sized Pieces.”

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Stall tactic: “Your account is so messed up; I have no idea whether I owe you a penny.”

Solution: This type of statement is a classic attempt by the debtor to make the account “fuzzy” and irresolvable. Keep discussing the specifics until the “messed up” account is un-messed.

• Short-circuiting stall tactics

Make your objectives known. Require that disputes be supported by facts. Quickly resolve any disputes.

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• Knowing why negotiating is a smart move

Preserve goodwill.

Create a win-win result.

Take what you can get.

Know when it’s time to move forward.

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• Preparing to negotiate

Organizing your thoughts

Writing down a list of goals

Prioritizing your goals

Staying flexible

Setting a pace

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• Sharpening your negotiating skills

Know who you are up against Be flexible, but firm. Try not to make the first offer. Ask for more than you really expect to get. Concede some minor points early. Make your sticking points known. Think on your feet. Provide minimal explanation. Put any agreements in writing.

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• Getting legal or business adviceFor example, if a debtor declares bankruptcy

You may not stop all collection efforts after the bankruptcy is filed, and violate the automatic stay.

You may pursue a claim after the debt has been discharged by the bankruptcy court.

*The wisdom of others can help you increase your knowledge and improve your ability to negotiate with debtors. As you act on that advice, also trust your instincts to guide you toward resolution of collections challenges, even those that once seemed insurmountable.

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• Knowing when to take your collection effort to the next level

A simple but vital rule of collections is to never let up on the pressure. As a corollary to that rule, the moment meaningful communication with your debtor ends, you need to move the matter to the next level.

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10Closing the Deal:

Wrap It Up in Writing

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Goal is not only to get the new payment agreement down in writing, but also to have a clear document signed by the debtor admitting the balance owed and confirming the promise to pay it off.

Remember: Written agreements have the effect of modifying prior

agreements, both written and oral.

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10Closing the Deal:

Wrap It Up in Writing

• Composing a letter or e-mail to your debtor

Primary goal is to motivate him to commit to repayment in writing. Reaching an oral agreement is the hardest part of the collections battle, but if you don’t get it in writing, you’ll quickly realize that your victory was only partial.

Immediately after the deal is struck, set the stage for written confirmation. Without any hesitation, and while your debtor is still on the phone, say, “Okay then, we have our deal. I’m sending you an e-mail right now to confirm the details. What’s your e-mail address? Do you have it yet? Reply by typing ‘I agree’ and type your name below.”

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Wrap It Up in Writing

If you sense that your debtor’s cooperation is limited (for example, he’s just playing along to get you off the phone), it’s crucial that you keep him on the line until he has your e-mail or fax. Get something in writing, even if it’s just a one-liner stating something like:

This confirms our agreement made today, [today’s date], whereby you will make payments of $____ per month on a balance owed of $____, starting next Monday, [Monday’s date].

If your agreement is for a lump sum settlement, the payment terms are:

[The total amount owed, to the penny] to be paid in a full, lump sum, by or before [exact date] at [name of your company and address where you want the payment made].

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When you seek written confirmation, remember:

Electronic signatures are legal and enforceable. When a pen-and-ink signature isn’t possible, you can enter into binding agreements through e-mail or by other electronic means.

Speed is key. Use fast methods of delivery, such as an e-mail or fax, so you find out right away — ideally before you’re off the phone, less ideally within the hour — if the debtor is truly motivated to agree in writing to the terms you just negotiated.

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If you find it difficult to type the e-mail to the debtor and talk to him at the same time, have a template available.

Figure 10-1: An agreement for payment.

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If the agreement extends beyond a few payments or involves interest, you may choose to include an amortization schedule.

Figure 10-2: An amortization schedule.

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Wrap It Up in Writing

• Using a promissory note to confirm a deal

A promissory note is a formal contract for payment, typically reciting the balance due, amount of each monthly payment, interest rate, first payment date, last payment date, and possibly providing for late fees.

Your promissory note should describe exactly what you and your debtor agreed on and nothing more. Don’t try to add a new term or condition (such as the addition of interest or late fees) when you didn’t get the debtor’s agreement. Any change you make gives the debtor grounds for dispute, will likely delay payment, and may even frustrate your effort to persuade your debtor to confirm your agreement in writing. Trust works both ways.

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What can you do to improve your odds of getting the first payment?

Even with written confirmation in hand, persistence is key.

A polite reminder may be a good idea.

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10Closing the Deal:

Wrap It Up in Writing

For best results, fax or e-mail your first (polite) reminder before payment is due.

Figure 10-3: A reminder letter.