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When collecting past due accounts, don’t let emotion get the better of you. (Getty Images/Getty Images)
When collecting past due accounts, don’t let emotion get the better of you. (Getty Images/Getty Images)

10 tips for making collection calls Add to ...

It’s one of the most dreaded aspects of running a business: Picking up the phone and asking a customer to pay a delinquent invoice.

As unappetizing as they may seem, collection calls are critical when dealing with accounts receivable and cash flow situations, and small-business owners must follow certain rules when it comes to dealing with unpaid invoices.

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In Canada, debt collection is heavily regulated at the provincial and territorial level. Generally, the regulations place strict limitations on times of day that collection calls can be made and how frequently they are made, and details about money owing must be mailed in advance of late-payment calls.

When collecting past due accounts, don’t let emotion get the better of you, advises the website DebtCollectionSteps.com, which offers free debt-collecting information to businesses. In one educational video on their site, corporate lawyer Eliot Wagonheim stresses that making threatening or harassing calls can get a company looking to collect on debt in big trouble.

“Calling the customer at 2 in the morning and screaming ‘deadbeat’ into the phone at the top of your lungs may be emotionally satisfying, but it will not get you paid and it might get you sued,” he says, adding that it may damage or destroy the debtor’s desire to work with you in making payment on an overdue account.

Another legal issue to keep in mind is that most debts are subject to a limitation period, and when that expires, it’s more difficult to challenge the debt in the courts, says Brad Lohner, president and chief executive officer of Edmonton-based Credit Process Recovery Inc.

“The older a debt becomes, the less collectible it will be,” he warns – especially if it’s overdue 90 days or more.

Today’s up-and-down economy means companies are increasingly worrying about whether they will get paid by their customers – whose reasons for being overdue can include not getting what they’re owed from their own customers in a timely manner.

Mr. Lohner says in general, about 3 to 5 per cent of his client’s business debt goes to collections after 90 days.

Maria Tatangelo, general manager for Balmoral Lumber and Millwork Ltd. in Woodbridge, Ont., says she will get involved in collections when their accounts receivable department can’t nail down payment.

She says about 5 per cent of Balmoral’s business doesn’t get paid on time, but the company can ill afford to just write off outstanding debt.

“When you are a small business and work on small margins, 5 per cent is huge,” she says.

Larger companies are more likely to have their own in-house debt-collection departments, while smaller businesses may have individuals who take charge of that function – but in most cases, well overdue accounts (past 90 days) are most likely handed over to third-party collection agencies because it’s usually most time and cost-effective.

Mr. Lohner explains that Credit Process Recovery Inc. “bills on a no-collection, no-charge basis,” with a 25 per cent contingency fee.

“Most [collection firms]work this way. We want to make sure it’s creating value for the customer.”

While there’s no surefire method of debt collection, these 10 calling tips will increase the chance of success:

Be proactive: Following up after sending products or providing services, or before the invoice payment date arrives, may help avoid non-payment, and keep that personal connection with your customers. Ask if everything was satisfactory and if the invoice, including the payment due date, is accurate or if there are any questions.

Be prepared: Gather and have in front of you as much information about your customer and the debt as you can, including having the file and all the invoices at hand.

Take careful notes: Document everything that is said, including the customer’s feedback, in case there are any disputes.

Don’t jump to conclusions: Mr. Lohner says the initial collection call should aim to confirm the debt has not been paid, so as not to alienate an otherwise good customer. The unpaid invoice “may be a miscommunication, and not a collection issue at all, so you want to be careful. Another member of your sales staff could have made a promise they shouldn’t have; the product may have been shipped incorrectly or the invoice wasn’t sent or received.” Mr. Lohner recommends saying something like, “‘Hi, it’s so-and-so with company so-and-so, I notice you’re behind in this invoice. Was there a problem with it?’ Get the client to start talking. And have that clean piece of paper so you can scribble good notes.”

Be nice, but in control: The tone of your voice can affect the way the conversation may go. If you’re positive and cheery, the person you’re calling may respond better. Ms. Tatangelo suggests starting the call this way, after confirming the person picking up the phone is the one you need to speak to – that is, whoever pays the bills. “Say, ‘Hi, I’m looking through my accounts receivable and notice this is waiting to be paid. Is there anything I can do to help you? Do you need any information or background?’” Showing that you caring or can see the debtor’s point of view may also keep the person you’re calling from going on the defensive. But “you want to remain as detached as possible,” says Mr. Lohner. “If the other party knows you’re under pressure, he may try to negotiate a better deal with you, but the collector’s job is to get the full balance back to the client as quickly as they can” whenever possible.

Don’t be manipulated and avoid confrontation: Try to determine if any excuses for non-payment are legitimate. For instance, if the customer says a receptionist or someone in payroll forgot to make the payment, call the receptionist to confirm that. “You can also tell when someone is being sincere or phony with you over the phone – they may stutter, for instance. Usually your first gut reaction is right,” says Mr. Lohner.

Curtail anger or harassment: Stay calm if the person you called gets abusive. Suggest calling them back at another time. “You have to listen to what the customer is or is not telling you,” says Mr. Lohner. “You can tell when things are turning … but keep dialogue constructive, and let the person feel he’s making headway.”

Give options: Ms. Tatangelo says one option is suggesting that the debtor pay overdue funds in instalments. If the person you’re calling agrees to make a payment by credit card, a business should ensure he or she signs the statement – you can fax over the authorization form and have the person fax it back, or preferably get it signed in person. Mr. Lohner prefers giving the debtor banking information that allows the debtor to deposit the overdue funds into the account. If the person has to issue a cheque, say you’ll e-mail or fax over a pre-authorized withdrawal form (it’s similar to depositing a cheque but faster) or send a courier to get the cheque instead.

Finalize things: Verbally give the debtor a summary of what was discussed on the phone, including how and specifically when a payment will be made, and depending on the payment method, ask the debtor to call back to confirm a payment has been sent.

Keep communication open: Someone who may not be able to pay up may be able to pay down the road, so keep the conversation open, suggests Mr. Lohner. “Learn more about their situation,” he says. “Go through a specific set of steps to get the money back, like, ‘Did you try to borrow the money, how much can you afford to pay.” That way you can help the debtor figure out how to get the debt money without paying exorbitant interest. “It’s like a negotiation back and forth.”

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