Chasing Slow Payers

Daily Sales Outstanding

2011-09-20T10:59:00.000+10:00

The Daily Sales Outstanding (DSO) is a quick and easy way to measure how successfully you are chasing slow debtors. Sometimes called "Debtor Days Outstanding" it's simply a measure of the average number of days taken to collect revenue after a sale has been made. Although the DSO is only a guide, it can be used to determine whether a company is trying to disguise weak sales, or is generally being ineffective at bringing money in. Reducing the DSO, even slightly, can go a long way toward improving the health of a business. Click here or on the picture to calculate yours.

how to improve collections in accountancy firms

2011-09-07T17:11:00.000+10:00

It's time for accountancy firms to muscle up to improve collections. Times are getting tougher. Money is tighter. Business slower. Legal costs are rising. Clients that used to pay on time are now paying later than normal. Out of trading terms. And those that used to pay late are now almost at a standstill. More work needed to chase up payment. Sound familiar?

So. What are the options?

sit it out - keep on doing the same ole', same ole' - hoping that things'll turn out ok, or
take steps to make sure that your firm suffers as little as possible.

I'm opting for #2 and when I visit several of our accounting firm clients over the next few weeks I'm going to suggest that now's the time to make a few changes. It really is time for old paradigms to change, for accounting firms to become much more commercial. Many of the following points, you already know should be being done, but, simply put, in most firms, they are not. Anyway, here are the points I'm going to discuss.

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1: Check out new clients before taking on large engagements.
Why undertake a big job utilising the firms resources and the associated personnel costs if the new client has a suspicious history. For Australian firms, consider becoming a subscriber to Veda Advantage (AU$195 to join, AU$42 monthly subscription) Also useful when collecting payments.
2: Get all instructions in writing
This will NOT always be possible but, from an accounts receivable point of view, and whenever in doubt, absolutely vital. I have personally seen many hundreds of thousands of dollars NOT collected due to lack of proper documentation.
3: Get paid "up front" for long engagements
There are several companies that offer professional fee funding. 100% of a fee raised is paid to the accounting firm and the client "pays it off" over an agreed period. A "win-win" for both. The one we have suggested to Australian clients is FeeLink. There is no cost to the practice whatsoever. There is an interest charged to the client, but why should firms "carry" large debts on the 'never never' and provide an interest-free banking facility for their clients? Why take on new work for a possibly already-financially-strapped client without being confident of payment?
4: Get all arrangements in writing
When a client has a large unpaid debt and wants to "pay it off", it should be policy to get that arrangement in writing (consider using FeeLink here as well). This post explains why.
5: Send a circular to all clients
Advise clients of two changes to policy
a: that "Due to (put in some reasons here - rising costs ... GFC ... over the last nine months many clients have been taking longer to settle their accounts than in the past ...) the firm is obliged to start charging interest on any fees that are not paid within our normal credit facility unless there is an approved payment arrangement in place. (see point 4 above)
b: that a discount of 2.5% will be applied to payment of all fees that are received in the firm before the due date.

see the simple circular

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Always has been, always will be about good communication between firms and their clients. And vice versa. Establishing the intent of the client. It's NOT too "heavy". It's commercially realistic. Sadly, many firms will continue to provide that interest-free banking facility. But, those that don't, will not just survive, they'll thrive.

training debtors to pay

2011-09-06T17:28:00.000+10:00

Training debtors to pay starts before there's any debt!
Several years ago we were asked by a small private secondary school to help them with the problem that they were having collecting payment of overdue school fees from some of the parents. It turned out that the problem was twofold;

the school was not telling parents when each terms fees were supposed to be paid by
if the fees were not paid within a reasonable time, very little real action was being taken (because no procedures had been established) to follow up the parents to chase payment.

We were able to collect the majority of the unpaid school fees by applying the three principles constantly referred to in this blog. But that was not the main problem. The main problem was that the school was not making their credit terms crystal clear to the girls parents from the outset.

The solution
We found out that there were several occasions when the school could let the parents know what the payment terms were before their daughter even started attending that school. We introduced the credit terms to the parents on each of these occasions as follows and parents are now told on 6 different occasions what the credit terms are before their daughter starts her very first term at the school.

The first time - the initial enquiry
Most parents look at several secondary schools about two years beforehand to decide which they think they would prefer to send their daughter to. Parents that look at this school are now sent (along with other literature) a copy of the current years school fees. This has a small paragraph at the bottom which says "Payment of each terms school fees is due and payable by the end of the first week of each term".

The second time - acknowledgment of application letter
In many cases it is over a year before the parents decide which school they prefer. If they select this school and send in the formal application they are sent an "Acknowledgment of Application" letter from the school Bursar. A short paragraph has now been added to the body of this letter which reads ...."We wish to remind you that payment of each terms school fees is due and payable by the end of the first week of each term. If, at any time during your daughters attendance at the school, you find that you are not able to meet this requirement, we ask that you contact our Parent Liaison Officer, Mary Smith, to discuss the matter."

The third time - first interview
If their application is successful, the parents and their daughter are invited to attend an interview with the schools Principal. In this meeting they are again given various bits of literature about the school and, again, a copy of the current years school fees is given to them with the terms clearly displayed in the small paragraph at the bottom.

The fourth time - letter of acceptance
Accepted? The parents then receive a "Welcome to our School" letter and again the credit terms are given a very brief mention ....
"PAYMENT OF SCHOOL FEES
It is a condition of this acceptance that parents agree to settle each terms school fees by the end of the first week of each term. Parents are invited to contact the schools Parent Liaison Officer, Mary Smith, if they believe they will have any difficulty doing so."

The fifth time - orientation day
All the new girls are given all sorts of paperwork on this day to take home to Mum and Dad - rail passes, library rules, etc, etc and .... a separate little handout about the School Fees and when payment is due.

The sixth time - the first invoice
Because the parents have now already been told on five separate occasions what the credit terms are (Payment by the end of the first week of each term) we were able to be quite specific about when payment was due and the phrase on the bottom of the fees now reads as follows ....
"Payment of this invoice is due on or before Friday, (actual date went in here)"

The parents of the children attending that school are now left in no doubt whatsoever what the payment terms are. So much so in fact, that if they cannot pay the fees when they are due, they contact the school to tell them when they can!

At first glance you may think that all of this is a "bit heavy" or "going over the top" and that it may even scare some of the parents off from sending their daughter to this school but that has not been the case. The school is having very few problems now with payment of school fees because they are practicing what they preach - in the way they teach their students. They are teaching by repetition. They are teaching parents what the school credit terms are, by repetition. And isn’t that the core method of any teaching? Repetition?So ... starting the whole process early really does make it easier - for everyone.

More about collecting school fees here

Get our free e-book "Chasing Slow Payers" for more about the principles we applied.

flexible debt collection procedures

2011-09-05T10:37:00.000+10:00

It's important that clients know what a company's credit policy is but NOT what the debt collection procedures are that are used to to implement that policy. The Credit Policy should be highly visible to customers. On all relevant documentation ... engagement letters, terms of trade, quotations, contracts, invoice copies ...

Debt Collection Procedures on the other hand should be clearly documented, circulated to all staff, confidential, yet flexible. A "different" approach is required for those customers who persistently pay late. Some customers, once they get used to your 'routine' (know what your debt collection procedures are) will abuse it.

... to explain
The only people that know how a business really operates are those within it. Same thing with debt collection procedures. The business knows how far they will go to collect payment, but the debtor does not. see Fear Of The Unknown.

But, if debtors know what a business's debt collection procedures are, and if those procedures are not flexible then some of them will delay payment next time. Why? Because they know that they can "get away" without paying for a little longer.

So, after the credit policy has been decided,

Create a step-by-step debt collection procedure.
Document it.
Circulate it to all internal staff.
Do NOT tell customers.
Review it - at least quarterly.
Be prepared to vary it as situations demand.

After all, once you know how something's done or what to expect, it's not so effective the next time. Don't you agree?

want clients to pay their accounts on time?

2011-09-03T14:49:00.000+10:00

If you want clients to pay their accounts on time, these are just some of the things you must do. The checklist below is by no means comprehensive but if all of these are implemented, you're well on the way to getting most of your invoices paid on time.

Create a written-down Collection Procedure; make it readily accessible to all concerned.
Empty WIP and send out fees (interim fees for longer jobs) as soon as work is completed.
Introduce 14-day trading terms (if you don’t have them already).
Don't rely on statements. They don't work as reminders. Send email/letter reminders instead. (click here for suggested wording.)
Classify every account into one into 1 of these 4 categories. Take the appropriate action:

- "The Untouchables

"For Special Consideration"

Just Due for Payment"

"Long Overdue for Payment"

Have a "pay-by" date & the firm’s bank account and BSB details on all invoices.
Chase selected accounts weekly (ie: those that have not responded to standard reminders or where promises to pay have not been kept.
If you have several Partners, don't waste time seeking permission to follow up clients with unpaid fees; switch the onus on them to advise “Accounts” which ones should not be chased. (If they don’t ... out go the standard reminders!)

the importance of getting paid on time

2011-09-02T17:37:00.006+10:00

Figures just released by Dun & Bradstreet combined with the recent hike in legal costs both emphasize the importance of getting paid on time. I was asked to comment about this recently. I've copied a couple of articles below. (The links take you through to the original articles.) These are yet more reasons why applying the Three Principles is so important - because if you don't, it'll cost even more to litigate (that's assuming that your debtor is still solvent!).

Dynamic Business
Figures released by Dun & Bradstreet this week showed 3,000 businesses collapsed in the June quarter, leading experts to urge SMEs to focus on fixing cashflow or risk becoming part of these statistics.
OPS Global Senior Consultant Michael Todd said cashflow need not be so difficult for businesses, if they look at their account management practices. “We all want to help each other out in times of hardship and recovering debts from unpaid customers can be an embarrassing job, especially when you’re closely connected to your customers.”
“Times of crisis, like the GFC, the floods and the recent stock market crash, put pressure on everyone. If you run a medium-to-high-cost professional services business, like an accountancy or law firm, you are likely to get stung by slow paying clients who are also feeling the strain and if this goes on for too long, it can mean the end of your business as you get months behind in payments worth hundreds of thousands of dollars.”
Todd said many business owners belong to industries that connect them personally with their clients, which means accounting practices carry emotional baggage – and “effective management of invoices and debt recovery can easily fail the most savvy business.”
He suggests businesses look at utilising a service similar to what OPS Global delivers, which assists them to recover current and old debts that weigh on cashflow. “Our methods are based on psychological and non-confrontational techniques that can really help struggling businesses. Unfortunately if companies don’t act now to regain control of their accounts, they will continue to see the effects of the recent disasters well into 2012.”

Smart Company
Starting from today, businesses in Queensland will have to pay $5,325 for a four-day trail when they take a debt-recovery case to court worth more than $150,000. Included in this is a $1,000 fee to book a day in court, a hearing fee starting at $450 a day, and a 50% increase in the cost of filing documents to start legal actions.
The measures, published in the Government Gazette last Friday without prior notice or consultation, are expected to raise $3 million to be spent on the Queensland legal system. Claims involving less than $150,000 will be exempt, and litigants could seek hardship exemptions.
The Queensland Bar Association and the Queensland Law Society have both written highly critical letters to Queensland Attorney-General Paul Lucas, according to a report in yesterday's Courier Mail. Queensland Bar Association president Richard Douglas SC said the new fees were "tantamount to a new tax being imposed on Queenslanders in respect of services to which they ought to be entitled in the event that, usually through no particular choice, they are forced to litigate".
Law Society president Bruce Doyle told the newspaper the new fees were "likely to cause substantial inconvenience for litigants." "Access to the Supreme and District Courts should not be limited to those who have the wealth to pay the new fees," he said.
Senior consultant at debt-recovery firm OPS Global Michael Todd says "even if you do get the money back, it still it a huge risk for businesses to take." He says businesses often take outstanding debt cases to court in a bid to become impossible to ignore. "You get to the point with unpaid debt that using the courtroom is a tactic to try and recover you money. But now, the risk is far too high to do that." Todd, whose company specialises in recovering debt without using the legal system, says it is important for companies to pay attention to good account management. "A good business with bad invoicing can quickly turn into no business at all."
"It's important for businesses, especially service-providers, to discuss their trading terms [with clients]. And if any customers baulk at these details that should be a warning sign that they're not comfortable with having to pay for services." Todd was confident that if businesses employed good account managing practices, they could avoid the courtroom unless in the uncommon cases where someone was "beyond reasonable."

Top five tips for avoiding the courts:

Have a good invoicing structure – invoice all customers on time and have strict trading terms that suit your business.
Have a mediator to chase slow payments – having someone else follow up payments will remove the emotional connection you have with your customers.
Don't let your invoicing get behind – if you let two to three months' worth of invoicing pile up, you will end up with no cashflow.
Be very hard to ignore – don't let customers get behind on their accounts. Follow up with nice calls and letters to ensure they don't forget. No one will pay unless they're asked.
Always be the good guy – account management is a psychological process. If you can tap into how you need to approach debtors and the best way to work with them, you will get what you want.

For more on this, see
When is it appropriate to take legal action?

how to get accounts paid on time

2011-08-26T13:10:00.007+10:00

One of the most successful ways to get accounts paid on time is to chase for payment before the due date! Perhaps "chase" is the wrong word; "advise" your client of the amount due and the due date before that date may be a better way of putting it. Easiest way to do this? A simple email merge. Queries can be addressed, invoice copies sent out, amount/s charged / queried before the account even has a chance to become late. Brilliant!! I've applied this many, many times over the years with great success but only when it's been properly and carefully introduced to the client base.

The wording used could be as simple as ...

Dear Customer,

ANDREWS DIRECT- (ANDR13)

Amount Due - $31,104.70

We wish to remind you that at the end of this month the balance of $31,104.70 on your account is due and payable.

As previously advised, any accounts that are not paid on or before the due date will be put on to hold until full payment of the due amounts is received.

Please contact us if your records disagree with ours or if you need copies of any invoices that make up the above balance. If not, we look forward to payment of your account in the near future.

Karen Jones

Accounts Receivable

administration@yourcompany.com

Wording can be 'softened' or made even firmer depending on the sort of business you're in. Send the email out around 21st of the month BEFORE payment becomes due.

IMPORTANT

be sure to gently introduce this change in procedures first with an emailout to the entire client base before sending the first one out. We did this at one of clients a couple of years ago. See the results achieved here. This was just one of many collection strategies introduced but it was certainly a major factor that reduced the 90day+ component of their debtor book by over 50% --- in 2 months.

This has been yet another example of the results that can be achieved by applying the Three Principles!

how to get clients to pay

2011-08-24T16:21:00.007+10:00

This is one way to get clients to pay when you really need them to pay. In October one year, one of our Sydney clients, John Smith, contacted me. He was in trouble. He had a very successful coffee bean importing business. Only a few customers. About 25. But ... each customer spent between $15,000 to over $100,000 with him. Every month!! John’s business turned over around 10–15 Million Dollars a year. The debt we’re talking about here was $90,000.

The trouble was, ABC was a very valuable customer. At $90,000 a month, or over one million dollars each year from this customer alone, John naturally didn’t want to upset them but he did want to, no, he had to get this customer to pay up very quickly. He had to, because his supplier, an overseas company, insisted that their bill to John was paid on time. If not, they’d simply cut off his supply. (John’s monthly bill from them at this time was around one million dollars)

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Situation

ABC was an international company and didn’t have to buy the raw coffee beans from John. They could get them elsewhere if John became ‘heavy’ with them when chasing his monthly account up for payment.
The Accounts Payable person, Mary, at ABC wasn’t really concerned about paying John promptly – she had a “do what I can, when I can and if I feel like it” attitude.
John simply didn’t believe her. (On previous occasions when ABC had been late, John had to almost beg Mary to pay his account so that he could meet his own, much larger, monthly commitment. She had paid each time before, just in time, but was now becoming impervious to his pleas.)
When John called me, his thoughts were to phone Mary and start begging again. If that didn’t work, to phone ABC’s owner. But he knew that he wouldn’t be comfortable speaking to the owner as the owner wasn’t an easy guy to talk to. He just wasn’t a very approachable guy. It’d probably develop into an argument. After all, John was genuinely upset that he was in this position. It wasn’t his fault. And besides that, John didn’t feel that ‘begging’ was the right way to go about it. It wasn’t. So I’ll tell you what we did do in a moment.
The truth is, John didn’t really know what to do. It was a Thursday and he had to have the money - the full $90,000 by Tuesday morning. He was desperate.

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The Usual Option
Most people in this situation believe that a show of strength is the only option to take. A "heavy", don’t you mess with me phone call to someone or

a threatening letter from the boss,
a Debt Collection Company or
a Lawyer.

A personal visit wasn’t an option in this case (with ABC being in Melbourne and John in Sydney) and, anyway, that’d be a very confrontational approach. It would be out of the ordinary and, as such, embarrassing for all around.

So … what would YOU do?

Think about it for a moment.

Once you know what you would do, read on.

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Strategy
We got John to go for the “Can you help me” approach. He wrote to the Owner of ABC. An email. A letter would take too long and a fax would be too ‘open’ for such a sensitive matter. (Anyone in ABC’s office might be able to read it – not desirable).

This is the email that was sent on Thursday afternoon.

It collected the $90,000 in 3 days!!

Dear (first name of ABC's owner),

I'm sending you this email as our overseas suppliers recently reminded us that payment of their account must be made by the due date.

You are a very valuable customer of ours so I wouldn't normally bother you about this but this reminder could have a very negative impact on
* our own cashflow and, ultimately,
* (if they insist on those terms) on product supply
if your account to us ever falls well over our trading terms.

At present, your latest account to us for $90,000 has fallen some xx days past the due date for payment and I'm unclear when we may expect settlement.

Can you help?
I'd greatly appreciate any assistance at all.

Thanks,
John Smith

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Result
At 11.00am on Monday morning, John called me. A Direct Deposit of $90,000 had been made to his bank account that morning. Pleased? You betcha!

No phone calls were made.
Nothing else had to be done.
The “Can you help me” approach had worked.
It normally does in these situations.

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So, WHY did it work?
This is why it worked so well. Please note the principles involved …

It's friendly and chatty and written by the owner of the creditors business to the owner of the debtors business,
It pumps up the ABC bosses ego,
It blames someone else (the overseas supplier) for having to chase the account,
It contains a very veiled implication (not a threat), and,
It doesn't ask for payment anywhere – it asks for help.

So, Dear Reader, as Mary Poppins once sang ....

A lark! A spree! It's very clear to see - that a

Spoonful of sugar helps the medicine go down

...until next time,

Michael Todd.

when is it appropriate to take legal action?

2011-08-23T16:46:00.015+10:00

When is it appropriate to take legal action? Depends on many factors. I was asked this in reply to a recent post in this blog - "How To Ask For An Account Payment". The normal answer, of course, is avoid taking legal action until you absolutely have to. Suing a slow paying debtor is normally very costly.

First things first.

Do everything you possibly can BEFORE having to go to this extreme. Start Everything Early - send your invoices out as soon as possible and follow up any that haven't paid within your trading terms promptly. This is a simple system to follow.

If that doesn't work, try and phone them. Check out Telephone Skills for some help with the what, when and how to do this. (Note: If they're regular "slow payers", chase them up by email before the payment's due!) Writing is always less confrontational.

What now?

If they still haven't paid or made an arrangement to pay with you, don't waste time phoning again and again, it just makes your position weaker. Options available now

Send them a "Personal Appeal" email
Send them a Letter/Email of Demand

Still no success?

Threaten to damage their credit rating
Send a "bluff plaint" letter. This is a genuine court document, fully completed with the plaintiff's and defendants details, costs, etc but NOT filed in the courts. With a covering letter this is a very 'scary' document for the debtor to receive.
Order a Lawyers Letter of Demand. Get a quote from a firm first, give them the details. This'll show the debtor that you really mean business.

All of the above sounds like a very long process,

and it is, but if you DO start everything early,

very few will get this far and the cost is almost

nothing (except for the lawyers letter).

By now, if the debtor still hasn't reacted in any way to all of the above tactics - THIS is the time to sue. But never sue on principle.

Some questions to ask first.

Does the debtor have the capacity to pay?
Do they have assets to cover the debt?
How much will it cost to sue
Are they likely to defend (that'll cost a lot more)?
... other factors?

Another thing to consider is whether to do the paperwork yourself or use a firm of lawyers. Which one? Depends on the time that you have available and the amount of the claim. So to answer the question "When is it appropriate to take legal action?" Answer? Avoid doing so until you absolutely have to. Save yourself the dramas, follow the Three Principles. :)

UPDATE - 30 August 2011
You'll find sections of this book, How to collect business debts (written by Jim Heath) helpful when considering whether legal action is appropriate or not.

ANOTHER UPDATE - 03 September 2011
Some more links that will help
01 September - PRESS RELEASE - Jump in Queensland court fees will make it harder for SMEs to chase bad debts
an earlier post in this blog - a bird in the hand

how to collect payment for overdue invoices

2011-08-22T15:58:00.007+10:00

This series of 8 posts will show you how to collect payments for overdue invoices. Very old invoices! "bob - the builder" is a real, live Case Study.

It happened in 2009. The debt was $60,000 and 8 years old. I recorded what did and didn't happen so that you can see the thought processes behind an effective collection strategy. See how the three principles of effective account collections are applied in real life.

To see all of bob - the builder as it unfolded, click here or on the image above. It will take you to Post #1. You can see the strategies applied that collected payment for this long overdue debt.

Most of the debt is paid now. Only about $6,000 left. "Took a long time to collect" you may say, but the creditor (bob) had very poor paperwork to support the debt and it WAS 8 years old. You can apply the same principles in your own business and achieve the same results.

go to bob - the builder (part 1)

how to ask for an account payment

2011-08-16T17:44:00.007+10:00

Don't ask "Would you?" - ask "How?" The best non-confrontational way to ask about an overdue account is not to say “Would you like to pay the fees today?”.

(If you do, you’re asking them Closed Question. You’re asking them for a “Yes” or “No” reply.)

Far better to say,

“How would you like to pay today -

cash, cheque or credit card?”

Don't give them the option of a yes or no answer. Give them the option of how to pay - today. Put them on the spot. It's not rude. They still have choices, but not paying is simply not one of them!

Remember, we want to make it easy for them to pay and hard for them not to. They didn't expect to be asked; that's what's so beautifully simple about asking in this way. It's easy for the "asker".

Some will say they can’t pay today. That's ok. All we need to know now is when they do intend to pay. Say "No problem. When do you feel you'll be able to?"

Please note the language. The word ‘feel’ is used this time. It's friendlier way of asking. Less confrontational. But it's also very direct. They don't have the option of just wandering off without saying anything concrete.

Note down what they say and let them see.

Last thing. Let the clients see you noting down their reply somewhere. On a piece of paper will do but do it while they’re still with you. It’s little things like that that make the big difference.

Everyone hates confrontation. Embarrassment is one of the keys you can use. (Get your receptionist to use this wording as well. Note how more comfortable she is when asking for payment like this.)

How To get A Debtors Attention

2011-08-12T16:45:00.007+10:00

This is NOT a serious post.

But read on anyway.

Because if you ever did send an email like this, you’d certainly get your debtors attention!

Turn the volume on on your computer.
Go to this link - http://vozme.com/index.php?lang=en. (it's a speech synthesis program; whatever you type is converted into an audio file so that your text sounds like a message from Stephen Hawkins!)
Type (or copy and paste) your message in the field
Select a Male or Female voice.
Click on the "Create mp3" icon
Play back your message on the new window that opens.
When satisfied, click where it says "Download mp3"
Save the url that it sends you to (in the address bar at the top of the webpage)
Open your email programme
Type the following

Dear Customer,
Please click on this link >>
http://vozme.com/speech/en-ml/0e/0e8990869422a1e118168604b18dc3de.mp3

It is self-explanatory.
Regards,
John Smith.

Certain to make YOUR account Hard To Ignore!

Click here to see the YouTube video that the text in the above email was taken from.

debt collection methods

2011-08-12T11:28:00.007+10:00

This is the best debt collection method to adopt if you’re like most businesses who look at their Aged Trial Balance and say “How on earth do I sort all this out?”. If you want to collect all of your unpaid invoices, quickly, try this four-step debt collection method ...

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Step One - Take a completely fresh look.

Print up a copy of your Aged Trial Balance. Take a completely fresh look at it. Become the "new broom". Forget what’s been done before. Start all over again.

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Step Two - Conduct a “YES/NO” review.

Go through all of accounts on the printout, one by one, and simply mark those that you don’t want to follow up right now. It doesn’t matter why. Just note any that you don’t want to follow up.

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Step Three - Classify all accounts into one of 4 categories.

CATEGORY 1 - “The Untouchables”.

These are the “special cases” that you don’t want to follow up for whatever reason (eg genuine hardship / someone who refers a lot of business / a relative (!) / already with a Debt Collector)

CATEGORY 2 - "For Special Consideration".

These are accounts where the amount of the debt is extremely large or where there's a "story" behind the debt.

CATEGORY 3 – "Just Due For Payment".

These are the accounts where the only amounts due are current invoices. Perhaps also include those with only a small remaining older balance, but not those with a largish older balance. (This is where your "fast money" is.)

CATEGORY 4 – "Long Overdue For Payment".

These are accounts where there is more outstanding than just the current fees. (Balances may be small.)

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(Remember, the aim of the exercise here is to collect as many of the outstanding fees as possible with minimal work, in the shortest time, and with no client upset.)

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Step Four - Deal with each category one by one.

"The Untouchables"

- by their very definition, these accounts are NOT to be chased. Diarise to look at these again in one month.

"For Special Consideration"

- look at each account in this classification AFTER you've dealt with the next two categories. (These will take a while to resolve, so that's why they're done LAST.)

"Just Due For Payment"

- send them all an email with wording like this

Dear Sirs,

Invoice for: Camelot Pty Ltd

Invoice No: 67299

Amount: $3,575.00

According to our records, the above amount appears to be outstanding.

If payment has been made, thank you.

If it hasn't, please organise for settlement in the near future.

Please contact me if you have any queries or if I can be of any assistance.

Kind Regards,

Jane Smith

"Long Overdue For Payment"

- send them all an email with wording like this

Dear Sirs,

Re: Outstanding Fee Balance - $450.00

During a recent audit of our accounts it was pointed out that the above balance appears to remain outstanding.

As we are not aware of any queries and this balance is considerably overdue would you please now organise for its settlement by return mail or contact me personally if you would like to discuss the matter.

Kind Regards,

Jane Smith

-----------------------------------

Points to Note:

Try and use a name that's unfamiliar to your debtors, and, if you haven't got someone you can use, make one up!
It works because main effort is put into where the fast money is.
This debt collection approach assumes innocence, and is very non-confrontational
The wording in the emails blames other things (the "records" and the "audit") for following up payment

You'll be very pleasantly surprised at the results you'll achieve by adopting this debt collection method. Like every other post in this blog, it's based on the

Three Principles of Effective Debt Collection.

school debt collections

2011-08-09T16:06:00.025+10:00

School Debt Collections. Schools have debt collection issues as well! I ran a seminar for several schools earlier this year called "Debt Collection Strategies For Schools". (This image has been taken from that seminar). This link will take you to all of the slides shown in that school debt collection seminar. Many of the points made in that seminar are also in this blog.

Here are two more slides from it.

Click on this link to see the full presentation.

You'll notice that, like almost every other post in this blog, that this debt collection seminar was based on the Three Principles.

That's because they ALWAYS work!

credit control management

2011-08-05T15:05:00.009+10:00

Haven’t got any credit control management support staff to help you chase up overdue invoices? Then, make one up. Make up any name you like (Zak Kingston was one we used for a sole practitioner a few years ago ) and appoint him (Zak) to be the person in charge of credit control in your business!

Zak doesn't have to exist to be effective.

It's like the picture above, he's an illusion. The picture isn't moving. (I’m so sorry to be the one to have to tell you that .. !)

Why does this work?
The only people that know the true workings of your business - are those people within it. Zak could be your own external book-keeper as far as your clients are concerned. As a collection tactic it's very unsettling for debtors with outstanding fees to get a reminder email or letter from someone they don’t know. They're out of their comfort-zone. They may know how to deal with you or your staff - but what about this Zak Kingston character?

So, why does this work?
It's using Fear Of the Unknown again. Debtors may have ignored all previous contact attempts but when this Zak character keeps emailing or writing to them, they'll respond. Even if it's only to find out who Zak is! But the point is, debtors will react to Zak's written reminders.

And what can you say when a debtor calls and asks to speak to Zak?
Simply, "He's not in. Can I help?" The purpose is to get debtors to react, to respond. You can even blame Zak for chasing a debtor up when the debtor calls!

This technique's used far more frequently than you may think. A Finance Company I used to work for had such an individual. All reminder letters went out under his name and when a debtor called in reply to one, the receptionist knew it was a call to be put through to the Collection Department - because Zak was never there! How could he be?

Outrageous? Unprofessional? Over the top?

I can only answer this with a resounding No.

Even if your debtors consider your business to be a "soft touch" (someone they’ll pay on a "when-I-get-around-to-it" basis) - Zak may not be! Of course they’ll never actually get to speak to Zak (how could they?) - but they don’t know that. As in any war engagement - this is using the element of surprise.

So please consider engaging Zak if you don’t have many support staff or want to take a fresh approach to account collections. He’s not an additional salary, never takes a day off and will be a great help to you to recover paymemts for overdue invoices. This simplistic (yet very effective) tactic is tremendous. It keeps you as the Good Guy, retains goodwill AND collects overdue payments as well, and he doesn't even exist.

To see how to set up an email alias in Microsoft Outlook

click here.

collecting unpaid accounts

2011-07-26T08:01:00.012+10:00

When collecting unpaid accounts, the first thing to remember is to Start Early. As soon as a payment is overdue, do something. Once a month is useless, weekly, sometimes even daily, action is needed. You simply have to become Hard To Ignore.

So what to do if you've sent a first reminder email AND a second email reminder and your customer STILL hasn't paid? Simple ... "up the ante" (increase the pressure on the debtors to do something, preferably to pay.)

How to do this.
1: Call them on the phone. Confirm they received your emails. Ask about the account. By this stage, if they genuinely intend to pay, they'll tell you. Just listen. The way they talk to you, the words they use, the pauses, the excuse given, you'll know if they're genuine or not.
2: If you can't get them on the phone and all that you can do is leave a message, then send them a third email reminder but THIS time use someone else's name as the sender. Someone perceived to be more important in your business. Try this technique and use the suggested wording, it's extremely effective.

---------------------------------

From: L.Erlott@your-business-email-address
Sent: 28 February 2009 8.44 AM
To: 'your-debtor@bigpond.net.au'
Subject: FY: name-of-your-business

Dear Sirs,
Please contact me.

Kind Regards,
Lance ErlottManager - Accounts Receivable

------------------------------

From: accounts
Sent: 27 February 2009 10.32 AM
To: 'L.Erlott@your-business-email-address'
Subject: FY:FY: name-of-your-business

Hi John,

Can you help? I've sent a couple of reminders to Your Debtor Pty Ltd and tried to get them on the phone but the December invoice is still outstanding.

Thanks,
Gwen Iveer.

------------------------------

From: accounts
Sent: 20 February 2009 9.35 AM
To: 'your-debtor@bigpond.net.au'
Subject: FY: name-of-your-business

Dear Sirs,

The amount below was for a December invoice.
Please advise when you hope to be forwarding this balance or
let me know if you have any queries that I can help you with.

Regards,
Gwen Iveer.

------------------------------

From: accounts
Sent: 10 February 2009 14:39 PM
To: 'your-debtor@bigpond.net.au'
Subject: name-of-your-business

Dear Sirs,

Invoice for: Your Debtor Pty Ltd
Invoice No: 12345
Amount: $1,200.00

According to our records, the above amount appears to be outstanding.
If payment has been made, thank you.
If it hasn't, please organise for settlement in the near future.
Please contact me if you have any queries or if I can be of any assistance.

Kind Regards,
Gwen Iveer.

---------------------------------

Note:
* Jane sent an internal email to Lance Erlott - Accounts Receivable Manager
* The next day, the day AFTER Gwen's phone message, Lance sent his email to the debtor which simply says "Please contact me" - no more. No less. No threat.
* The debtor might ignore Gwen's phone message (as he did her emails) but now another "player" is in the game, Lance Erlott. What's he like?
* Simple to set up - very effective.
* It's also using "Fear Of The Unknown", Lance Erlott!

another debt collection secret

2011-07-22T14:56:00.042+10:00

Many finance providers use this little debt collection "secret" when chasing slow payers to encourage them to pay. (Works really well for "old" debts as well.)

When you apply for finance, whether it be for your business, a mortgage, car ... chances are pretty high that the financier will check you out with a Credit Bureau. They can then look at your credit history – including loan defaults, applications for credit, court judgments and serious credit infringements – to give them an idea of your ability to repay.

Veda Advantage is the largest credit bureau in Australia and New Zealand. It provides credit reporting, credit scoring, and marketing analytics services. They also allow credit providers to "blacklist" clients who have overdue accounts that are at least 60 days past due. These are noted on the public record along with records of lawsuit judgements and bankruptcies.

Although you may not often want to use them to “check out” a new client before doing any work for them you most certainly could use them as a genuine “threat” on rare occasions to encourage account payments where the cost to litigate would be prohibitive. It’s an invaluable extra step. We've used this “tactic” very successfully for some time now and accounts have been paid as a result simply by sending an email or letter with wording like this ...

We refer to the above outstanding balance and note that, despite numerous requests for payment, this matter remains outstanding.

We are now left with no alternative other than to advise you that unless we receive payment for the full balance of this account on or before 2.00pm of Thursday, 04 August 2011 we will be listing you as a default account with Veda Advantage.

For your information, a listed default account on your credit file will adversely affect your ability to obtain finance or credit from most sources for a period of up to five (5) years.

If you wish to prevent this, please contact the undersigned as a matter of urgency or settle your account before the above date.

At the time of this post, the cost to join Veda Advantage is a one-off $195 membership fee and an ongoing monthly subscription of about AU$42.

Again, just as in my last post How to collect old debts, this should only be done after many other attempts to collect have been made. Because if you do have a good system in place and always do what you say you'll do, the debtor will believe you. But if you send an email or letter with this wording "out of the blue", they simply won't - believe you!

------------------------------------

And, in case you're thinking "What a waste of time" - read this.

In June 2006, we listed a debtor on Veda Advantage as a slow payer.

He applied for a business loan in late 2010.

The bank he had applied to saw the default notice.

"Sorry, we can't finance your project unless that default's gone".

We were paid, in full ... WITH interest.

Then, the bank funded his project ... :)

how to collect old debts

2011-07-21T16:29:00.026+10:00

How to collect old debts. The wording below was taken from an email that we sent to our client, a medical practice. The doctor is a specialist. He wanted to collect an old debt - it was 18 months old. The patient was a 25 year old girl whose Father had been stalling and stalling. The doctor, quite simply had "had enough". Please bear in mind though that this is the last step of many. It takes time to get to this stage. But it'll work. I'll explain why at the bottom of this post. This is what we said ...

-----------------------------------------

Hi,

This is a “don’t mess with us” letter!

* It should be sent by REGISTERED MAIL (makes it more meaningful) - for which you will be charged!

* It’s written to Mary as it is she who is your debtor.

* She will be upset and show it to her Father. If he’s any Father at all, he’ll come to her defence and pay it for her.

* If you think the “discount” offered is too much, please change it to suit. Your call entirely.

This is what I suggest we send …

Dear Ms Smith,

We refer to the recent letter received from Mr Martin Smith regarding the debt of $1,832.00 owed by you to this practice. Records of all conversations and correspondence regarding this matter have now been collated. They clearly indicate that this matter has been previously discussed at some length with both Dr Jones and with Mrs Long.

It appears from Mr Smith's letter that between us we may not be able to quickly resolve this issue. So, as the practice is no longer prepared to carry your debt on its present indefinite basis, we now offer you two options:

1. Bearing your situation in mind, and strictly on a WITHOUT PREJUDICE basis, the practice is prepared to accept the sum of One Thousand Two Hundred Dollars ($1,200.00) as full settlement PROVIDED THAT that sum is received by the practice by the same date as our last letter, namely, 2.00pm of Tuesday, 26 July 2011.

2. Do not accept the above offer.

Should you select Option 1, the practice will "write off" the remaining balance of $632.00 and consider this matter fully closed with no more money owing.

Should you select Option 2, the practice will commence legal proceedings against you for the full amount owing - $1,832.00. This will incur additional legal costs and the subsequent judgment obtained against you will be noted on the public record. Enforcement Proceedings will then be taken if the Judgment Debt is not promptly satisfied.

The offer to reduce your account by more than one third will be seen by the courts as more than "reasonable" as the practice is convinced, and records can prove, that our case is more than just. But, please understand, that cleared funds in the amount of $1,200.00 MUST be received by the practice by the above deadline in order for this reduction to apply.

We now leave the future course of this matter entirely in your hands.

-----------------------------------------

So, why will this work?

It was written to the weakest link - the daughter (nasty, I know, but apart from anything else, for legal reasons, you should always address any correspondence to the party that owes the money even if another party is acting on their behalf - most times).
It was sent by Registered Mail - went in a plain envelope, the address was handwritten and the name and the reply address on the back of the envelope are ones that are not known to the debtor (curiosity and the "who's it from, it might be important" factors come into play.
It offers a discount and later on in the letter it advises her that it'll be more than the original debt if she doesn't take up this 'offer' to settle by the deadline.
The deadline is an unusual one - it infers that something's going to happen after 2.00pm of Tuesday, 26 July! (and it won't be nice)
Option 2 tells her "don't take up the offer". This'll sound good to her UNTIL she reads on ...
Paragraph 6 is a cruncher - "legal proceedings", "Judgment", "public record", "Enforcement proceedings" ... all very ugly stuff.
It tells her, twice, that we keep good records. Chances are, SHE didn't. Case closed.
The last paragraph is really saying "what happens next is ENTIRELY up to you".

-----------------------------------------

Bet they do something. :)
Wouldn't you - if it was sent to you?

get it in writing

2011-04-13T18:51:00.011+10:00

If you don't really believe that one of your slow paying debtors will keep to the payment arrangement you both agree to, get that arrangement in writing. Once you do, if he defaults on that arrangement and refuses to pay any more, you can sue that slow paying debtor and cannot fail to win your case.

AS LONG AS
you have that arrangement in writing.

That's because you can sue him on the new contract, the payment arrangement. By signing that arrangement, the debtor is signing a new 'contract' with you, so, you sue him on the broken arrangement. He can't argue about fees raised for your charges, because you're not suing him about them, you're suing him about the broken payment arrangement!

-----------------------------------------------

Just three weeks ago, this happened ...

The Debtor - Mr Jones
The Creditor - An Accountant, Matt
The Debt - $20,000 remaining

Creditor: "But you agreed to pay $5,000 a month Mr Jones."
Mr Jones: "Look, I'm just not happy with the work that Matt did. He charged far too much for what was done. I want a full breakdown of his charges before I'll pay anymore."

Long story short - we sued
(on the broken written arrangement)
We won.

-----------------------------------------------

Q: What if the debtor refuses to sign a written agreement?
A: What does that tell you about his genuine intent (or lack thereof) to pay?

This is another post on this topic.

always ask for "the lot" first

2011-04-12T17:40:00.006+10:00

When you're chasing overdue accounts, always ask for full payment first even if you think they can't afford it. Then you can use the Reciprocal Concession Rule as a subtle persuasion technique to get a better payment arrangement than you would otherwise have got.

Doctor Robert Cialdini in his book, "INFLUENCE", explains it well, essentially saying ... Reciprocal concession is another aspect of the reciprocal principle. A requester makes a request that is extreme and most likely will be rejected. The requester then makes a request that is more likely to be accepted by the receiver of the request.

This rejection and retreat tactic
causes people to say yes more often.

Cialdini cites an example of a Boy Scout who approaches people to buy a ticket to the Annual Boy Scouts Circus. Most people do not have any desire to go to the Boy Scouts Circus so they reject his offer of the $5 ticket. The Boy Scout then asks the person if they would like to buy candy bars at $1 each. Most people believe $1 is a fair price for the candy bar so they purchase several of the bars the Boy Scout is holding in his hand. The Boy Scout accomplished his aim for the fund raiser. This example supports the general rule that a person who acts in a certain way towards us is entitled to a similar return action.

So, ALWAYS ask for full payment FIRST

and then, if you have to offer to offer to accept slightly less later, the debtor is far more likely to agree to your second request, as they've already turned down the first one.

don't phone first - write

2011-04-08T17:23:00.007+10:00

chasing unpaid accounts? Here's another myth ...

The Myth:
The best way to get paid quickly is to phone all clients with overdue accounts.

The Fact:
The best way to get paid quickly is to start collecting early by email or letter and gradually build up to the collection phone call.

------------------------------------------------

There's nothing more confrontational than phoning someone to ask them to pay an account. So - don’t!

At least, not until you absolutely have to. Not until the debtor's ignored your reminder email or letters. The poor paying clients (or those who simply can’t pay now) will identify themselves by not replying to your systematic follow up.

------------------------------------------------

Put the onus on them to respond, not on you to react.

You shouldn’t have to chase them about overdue accounts, they should be contacting you to tell you why they can’t/won’t/haven’t paid yet.

Hey, you’re the Good Guy. You've supplied the service and given them time to pay. They are the Bad Guys who haven’t paid yet. So, set up a collection procedure which starts with a couple of ‘gentle’ reminder emails or letters. And , if they don’t reply to them, what are they telling you?

They’re telling you that:
1. They’re ignoring your account, or
2. They’ve moved from the address have on file, or
3. They’re dead!!

------------------------------------------------

write first, phone later.

And, if you DO have to phone later, you don't even have to ask for the money, just ask if they got your reminders and listen to how they reply. Much less confrontational. Much easier to do.

when YOU need to nag YOU

2011-04-07T17:31:00.007+10:00

Sick of carrying a debtors name forward in your diary again and again? Got one or two slow paying debtors that you want to really keep an eye on? Do YOU need to nag YOU to contact them?

Then try THIS website.

It's called HassleMe, a free service that really lives up to its name!

HassleMe is a tool that nags YOU. It nags YOU via email about things you know YOU should be doing, but which you could well forget in the rush of everyday business.

You set up a rough frequency, but it actually nags you at random times within certain parameters. It keeps you on your toes. Simple. Brilliant. Effective.

How to stop the 'drift"

2011-04-05T14:28:00.016+10:00

Focus on the 'fast money' when chasing slow payers and you'll stop the 'drift' of accounts from 'current' to '90d+' on the Debtors Trial Balance.

These are the sort of results you will ALWAYS get if you do.

Are these figures "freaky"? One-offs?

No way. I came across some old records of ours last week which sort of proves my point.
They're from 7 years ago!

Although everyone looks at the 90d+ figures to see what sort of 'results' are being achieved, it's really the 60d column that tells all. Both tables and graphs show that chasing the 'fast money' is working.
See "turn the taps off".

always chase new debts first

2011-04-02T10:00:00.006+10:00

There are many myths surrounding the effective collection of accounts. This is one of the main ones.

The Myth:
Focus on the oldest and largest accounts first to collect a lot of money quickly.
The Fact:
The "fast money" in ALL practices and businesses is in the current fees and those that are just overdue.

Most people think that to collect as much money as possible as quickly as possible from the Aged Trial Balance you should focus on the oldest and largest accounts first.

WRONG!!

Why? Because ...
the ‘fast money’ always lies in the newest accounts.

Think about it for a moment.

By their very definition, it took your old accounts a long time to get ‘old’. Some clients have got used to not paying your account. It’s almost as if you’ve trained some of them not to pay you because you haven't been following them up to pay! So, it’s going to take you a while to un-train them.

And the largest accounts are - well, how can I put this - LARGE! And this is going to be easy to get these clients to pay you these large and old amounts quickly? I think not. Especially if you’ve already trained them NOT to.

No, the ‘fast money’ is in the accounts that have just fallen due to be paid. And it’s part of the re-education of the client body as well. Training them to pay your account when it’s due. Not someone else before you. So, that’s where most effort should be initially given.

Check the turn the taps off post as well.
Same point.

Another myth.

What’s Going to Happen at One Minute Past Two?

2011-03-31T16:57:00.013+10:00

Give people an unusual deadline in your letters.

It makes them think that your deadline means something.

This table explains it best.

What your letter says

What clients think when they read it

“If this account still remains outstanding at the end of this month …”

Uh huh. Yeh. What-Ever.

“If this account still remains outstanding on 30^th September …”

I wonder if they mean that.

“If this account still remains outstanding at 2.00pm on Wednesday, 16^th September …”

What’s going to happen at one minute past two?

Always works as long as you've been regular with previous follow ups, because you've created a pattern. And they will worry, and, because they're worried, they'll respond and do something. Yet another reason to Start Early.

"I'm your friend, talk to ME"

2011-03-30T16:03:00.009+10:00

Try the "personal appeal" approach when all standard reminders, emails, phone calls (from your "accounts department") and even letters of demand fail to get payment from slow paying debtors.

It ALWAYS works IF the clients "intent" to pay is there. How do you find out if the client intends to pay or not? Simple. If the client doesn't respond to this approach then he either doesn't care, can't or won't pay or you have the wrong address. (Or he died!) His non-response to your personal appeal means that it must be one of those.

Put yourself in the debtors head-space for a moment.
Would this approach influence YOU to contact your
creditor if it was you who owed the debt?".

This is the approach.
By email or letter (speak the good news, write the bad news)

--------------------------------------------------

Hi Matt,
I hope this note finds you well?

I am writing personally to you in relation to the attached outstanding fees as I am being placed in a difficult position by the other Directors who are insisting that some action be taken for recovery. The total amount due is $2,462.00. Our normal policy is that if fees are outstanding more than 90 days, either a mutually acceptable arrangement is entered into for payment or legal action is commenced for recovery.

Considering that the amount is now well overdue, I would appreciate it if you could settle the account as soon as possible. If you would like to pay the amount in 2 instalments, I would be happy to accept this also. I would be most grateful for your return email so that this problem can be resolved and you can advise when the amount outstanding will be settled.

Kind Regards
Margaret Taylor

--------------------------------------------------

This client had invoices outstanding since Oct 2010!
The result of that email is that he agreed to pay half now and half next month.

Why does it work so well?
It

is friendly.
comes from the person that the debtor has a working relationship with
states the facts
blames something else for having to chase up the debt (Always be the Good Guy)
It offers an 'out", a repayment offer, that allows the client to "save face"

Try it, but only after the debtor has been "softened" up by your normal account collection processes first.

A bird in the hand.

2011-03-29T17:10:00.011+10:00

Suing a slow paying debtor is normally very costly both in terms of legal costs (lawyer fees, court costs ...) and time and effort required. Not to mention the time it takes to get to a final decision, which may not even be in your favour.

-------------------------------------------------------
What would YOU do in this situation?
-------------------------------------------------------

Debt - $30,000
Age of Debt - 6 months
Creditor - An Accountancy Firm
Debtor - who says in an email ... I was served notice on the 27/3/2011 and the date starts on the 28/3/2011 where I have 28 days to pay or dispute this claim . Twenty eight days will bring us to the 24/4/2011 , if I inform the court that I want to dispute this on the 22/4/2011 then the court will have to book a court date. The courts are running on 30 to 60 days before we even get to court leaving you still with this debt ...

I am asking for a $5,000 reduction in my bill on my account and if we can come to this arrangement I will pay $10,000 on return of email, hopefully this will be this week when you return an answer to this email. I will then proceed to pay the balance over the next three months.

On "principle" you may say

he's being smart
we've done the work
we can justify it all
sue the "expletive".

But STOP, think about it for a moment.
This was my reply to the Partner in this firm ....

Hi John,
Just read his email to you. He's right about the timing. You said you'd take $3,000 off if he paid today. He's saying take $5,000 off and I'll pay $10,000 by return, balance over 3 months.

I say take it AS LONG AS he signs a Payment Agreement which I can prepare. (He then CANNOT argue later if he doesn't pay any more - you can sue on the broken payment arrangement and CANNOT lose) AND it's “a bird in the hand” - $10,000 - NOW. Legal costs, as you know, if we go down that route, are ridiculously high, a lot of time will be required to prepare papers and time-sheets for court and, even if we won, we'd never recoup all legal costs outlaid.

I say “take the arrangement AS LONG AS WE HAVE IT IN WRITING, bank the $10,000 in the knowledge that he can't argue about the rest. If you agree, I’ll get back to him this week “on behalf of the firm” and put that to him. I suggest that you don’t reply to him though, otherwise it’s not the firm he’s negotiating with, it’ll be you.

Your call though. Let me know?

POINTS TO NOTE:
Although the Partner may not accept my advice, it IS the cold, logical and commercially realistic way to go. If we sue this debtor, it will take time, a lot of money and the case could drag on for ages. Everyone will lose. The debtor may even go bankrupt or put his business into Receivership and escape the debt altogether.

If the Partner can overcome the "it's the principle of the matter" emotion and focus on the facts and "best possible outcome" with all factors considered, then this IS the way to go.

Some things I think I know,
some things I know I know.
This is one of the latter.

Don't you agree?

2011-03-25T15:34:00.005+10:00

"... great. That payment arrangement's ok with us so, if you're ok with it too, then everyone's happy. Don't you agree?"

Regardless of what's being said to you, if the person speaking to you ends with those words, the natural tendency for all of us is to say "Yes". Don't you agree?

Whether you just said Yes or No to my question at the end of that last paragraph is irrelevant; behavior analysis and cognitive psychology suggests that it feels much more comfortable and natural for us to say "yes" than to disagree and say "no" when asked something using those three words. Don't You Agree? (did you just say "yes" again perhaps?)

So, whenever you're seeking compliance or agreement with anyone (such as a slow paying client) use those words. My wife often uses them (when she knows I'm not really listening) and I'm told (often days later) that I agreed when we spoke about .... ??????. Gasp.

three questions for you

2011-03-24T16:41:00.018+10:00

1: Do you know what you'll do if an account doesn't pay within your trading terms?
2: Have you written down your collection procedure?
3: Do you follow up overdue accounts - regularly?

Read these two 'posts' from a website I looked at recently.

Notice what they have in common?

They both have a plan for overdue accounts AND they both know what they're going to do if a customer doesn't pay on time. If you answered "no" to any of the questions at the top of this post, download our free e-book or read this earlier post.

.. when chasing slow-paying clients

2011-03-23T17:10:00.008+10:00

If you're an Accounting Firm and want more clients to pay their fees more quickly, go to our website and click on the word CheckList (left hand side) to check out "just some of the things you must do ..."

first in - first paid

2011-01-19T15:19:00.007+10:00

This is an excerpt from a monthly report to one of our clients.

Follow up is too slow
Please consider allowing reminders to be sent earlier than they currently are.

To explain: The firm grants clients a period of 14 days within which to pay. This is clearly stated on all fees received by clients. A fee raised on 30 January, therefore, should be paid on or before 14 February. Under present circumstances, however, a reminder would not be sent to such clients until 09 March (approx) - 3 weeks later. In other words, 35 days (approx) after the date that the fee was sent. The firm is "training" clients to pay later than we ask!

Please consider accepting the following change:

* 20th of the month following - "Permission Please" emails circulated to all Partners
* 25th - reminders sent (emails or letters)

Where this change has been made elsewhere,

* Few clients noticed any change at all! Those that were going to pay paid anyway but, more importantly, those that were not going to pay were reminded much earlier.
* Partners were still able to withhold permission, several stated on their "Permission Please" email when reminders could be sent.
* This simple change helped to arrest the 'drift' of accounts from current to 90d+ which was reflected in the reported results several months later.

This alteration has always been effective elsewhere because the “fast” money in all businesses is always generated from new invoices raised. Easiest to collect and trains clients to pay more closely to trading terms.

Don't sue "on principle"

2011-01-13T18:20:00.011+10:00

Two things to think about when chasing overdue debts,

1: don't sue unless you're pretty sure that the debtor has the ability or assets to pay. AND,
2: get personal guarantees for business debts wherever possible - you can always say "I can make an exception in your case" for customers that object.

---------------------------------------------

I sent the email below to one of our clients. He was owed $9,000 by a business that has just gone into liquidation. I've included it in this blog to show you our reasoning.

---------------------------------------------

... Yes, you can pursue him personally – your signed Personal Guarantee (attached) is both signed and valid.

Options:
1: send a solicitors letter with the pdf attached telling him that we’re after him personally
2: go straight for the throat and issue legal papers immediately.

The temptation will be to go for 2: The risk though is that he has nothing and may be filing for personal bankruptcy in which case you will be just another unsecured creditor - but one who has paid legal costs.
Option 2: gives you no priority.

I’d opt for #1. If he doesn’t respond, then we can call to find out his intentions and then issue papers if needs be. If he has assets personally, he’ll want to protect them. If he doesn’t, he’s a lost cause anyway.

Your call.
If you sue – it will cost but you WILL get a reaction, if you don’t you can get judgment by default. You WILL win in principle, he has no argument. The clock will be on. he must respond in 28 days.

He HAS to reply. BUT, if he has no money or assets, you will have paid to get papers served AND for the judgment by default. Money down the drain. But, if he DOES have assets, you will get some of those costs back as well as the debt + interest. It’s a gamble.

That being the case, I’d err on the side of caution (if it was my money).
* Solicitors letter – “we’re suing you” - + pdf of the Personal Guarantee.
* Decide “what next” after the 7-days of the sending of that letter to his home address.

---------------------------------------------

SUMMARY:
Don't sue "on principal". You don't have to "win" judgment if it's going to cost you a fortune (in legal costs) to do so and then you don't get paid after all that at the end!

Who you're gonna call? Ghost Busters ...

2011-01-03T12:29:00.012+10:00

How to get slow payers paying more quickly by phoning them and NOT asking them to pay!

There's a guy in the States who puts out some tremendous Sales Training emails. I don't subscribe to many, but I do to his. His name is Bob Oros. (Click here to get a copy of a great, free little e-book he's written called "Dominate Your Market".)

But I digress. He's collating "collection tips" from his email data base and will give a copy of the e-book he'll produce as a result to everyone who sends him tips. In his own words from his email today ... "If you have not emailed your best collection technique or strategy, you still have time. I will be compiling all the responses in a special report and sending it to everyone who gave their input."

This was my contribution ... (I sent this using the name of an alias that we use in our own business - Jane Sands.)

-------------------------------------------------------

Hi Bob,

I am NOT a real person!
BUT, clients who haven’t paid our accounts don’t know this! I’m a “made-up” name. I do not exist.

We do this because it
• makes collecting any unpaid accounts much less confrontational,
• allows the debtor to “save face”, and
• leaves the creditor as someone who’s trying to help, not hassle.

How does it work?
1. Any ‘please-pay’ emails or letters are sent out under my (?!) name as soon as an account is overdue,
2. All that a ‘real’ person then has to say when making a “collection” phone call is
“Hi John. My accounts people are chasing me up about one of your invoices. Can you help?”
3. And then just listen; after blaming ME (!!) for having to make the call.

And I’m not a real person.
Sounds ridiculous, but it works ... extremely well!

Regards,
Jane Sands

-------------------------------------------------------

Try it for yourself - Just once.
You'll be hooked. Promise.

(FYI - JANE is my sisters name.
SANDS is my Mother's maiden name.)

People Do NOT Like To Be Phoned, so ...

2010-08-23T17:26:00.016+10:00

We sent out 45 emails on Saturday last weekend, and today, Tuesday, 5.00pm, 28 of them have responded. Save time and try this neat little "trick" to get debtors to contact you rather than you having to chase them.

If YOU owed money to someone, would you rather that they write to you or phone you? MOST people will do almost anything NOT to have to talk about money owed, so, following along the lines of "Speak the Good News, Write the Bad News” try this technique.

---------------------------
This is what we sent...

Dear Sirs,
We refer to previous reminders regarding the following:-
Invoice for: ABC Services Pty Ltd
Invoice No: 104256
Amount: $6,600.00
We will call you next week to see if we can be of any help, or to attend to any queries that you may have, as payment has now fallen well outside of our normal credit facility and we are unsure why. If payment has recently been sent, thank you for doing so and please accept our apologies for this reminder.
Regards,
Michael Todd.

---------------------------
The reminder before this (sent a week earlier) had said ...

Dear Sirs,
The amount in our last email (below) was for a July balance. Please advise when you hope to be forwarding the amount due or let me know if you have any queries that I can help you with.
Regards,
Michael Todd.

---------------------------
And the reminder before that (which was the first of this series) had said ...

Dear Sirs,
Invoice for: ABC Services Pty Ltd
Invoice No: 104256
Amount: $6,600.00
According to our records, the above amount appears to be outstanding. If payment has been made, thank you. If it hasn't, please organise for settlement in the near future. Please contact me if you have any queries or if I can be of any assistance.
Kind Regards,
Michael Todd

Focus On The Fast Money

2010-07-28T19:25:00.011+10:00

YOU may have already read this story before, I had. But I've included it here because it just RE-EMPHASISED to me just how important it is to focus on the reason for chasing slow payers. Namely to get paid as quickly as you can by your account holders at minimum cost (both time-wise and money-wise) with NO customer upset. And this can be done by focusing on where the fast money is - and that's on accounts that are JUST due. THEY are the golf balls. Enjoy ...

The Mayonnaise Jar
When things in your life seem, almost too much to handle, when 24 Hours in a day is not enough, remember the mayonnaise jar and 2 cups of coffee.

A professor stood before his philosophy class and had some items in front of him. When the class began, wordlessly, he picked up a very large and empty mayonnaise jar and proceeded to fill it with golf balls. He then asked the students, if the jar was full. They agreed that it was.

The professor then picked up a box of pebbles and poured them into the jar. He shook the jar lightly. The pebbles rolled into the open Areas between the golf balls. He then asked the students again if the jar was full. They agreed it was.

The professor next picked up a box of sand and poured it into the jar. Of course, the sand filled up everything else. He asked once more if the jar was full. The students responded with a unanimous 'yes.'

The professor then produced two cups of coffee from under the table and poured the entire contents into the jar, effectively filling the empty space between the sand. The students laughed.

'Now,' said the professor, as the laughter subsided,'I want you to recognize that this jar represents your life. The golf balls are the important things - family, children, health, Friends, and Favorite passions. Things that if everything else was lost and only they remained, Your life would still be full.

The pebbles are the other things that matter like your job, house, and car. The sand is everything else --The small stuff. 'If you put the sand into the jar first,' He continued,'there is no room for the pebbles or the golf balls.

The same goes for life. If you spend all your time and energy on the small stuff, You will never have room for the things that are important to you.

So... Pay attention to the things that are critical to your happiness.
* Play With your children.
* Take time to get medical checkups.
* Take your partner out to dinner.
There will always be time to clean the house and fix the disposal.

'Take care of the golf balls first -- The things that really matter. Set your priorities. The rest is just sand.'

One of the students raised her hand and inquired what the coffee represented. The professor smiled. 'I'm glad you asked'. 'It just goes to show you that no matter how full your life may seem, there's always room for a couple of cups of coffee with a friend.'

This post also explains it well.

Mean it? Then write it ...

2010-07-08T19:04:00.008+10:00

The debt was 2 years old. Over $11,000. The debtor was a friend of the creditor. We applied two of the principles in this blog. We wrote the bad news and blamed other things for having to get "heavier".

3 Days Later the debtor contacted the creditor as he realised that this time, he HAD to do something. This is what we wrote ...

------------------------------------------

Dear John,

I am obliged to write formally to you in relation to the following outstanding fees.

Date Ref Type Original Outstanding

29/02/2008 Fee 12345 Invoice $9,350.00 $9,350.00

30/04/2008 Fee 67890 Invoice $1,650.00 $1,650.00

18/05/2009 Fee 54321 Invoice $297.00 $297.00

Total $11,297.00

My other Directors are now insisting that some action be taken for recovery of the above. Our normal policy is that if fees are outstanding more than 90 days, either a mutually acceptable arrangement is entered into for payment or legal action is commenced for recovery. As you can see, the majority of yours are well over two years old. This is unacceptable.

We hereby demand, therefore, that full payment of this debt is received in our offices on or before the close of business of Tuesday, 06 July.

If it remains unpaid and I have not heard from you by then I will be left with no other alternative other than to place this matter in the hands of our solicitors with instructions for them to pursue recovery on our behalf.

I would prefer not to have to go to such lengths, but, John, under the circumstances, you leave me no choice.

------------------------------------------

Please Note:

The letter blames two things - "My other Directors" and "Our normal policy". This allows the creditor to remain The Good Guy AND the debtor to save face at the same time.

The letter was sent by Registered Mail so that we knew when he'd got it. But, more importantly, we knew that he'd know that we knew that he'd got our letter!

So, if you come across a similar situation, try something similar to get a reaction from your debtor while leaving lines of communication open with your debtor at the same time.

Can You Help?

2010-07-06T18:44:00.006+10:00

People LOVE to help. It's natural. We all do. And, guess what, debtors do too! Try using these three little words when appropriate - "Can You Help?".

Never ceases to amaze me. Works so well. Here are just some occasions when you can use it. There are many, many, many more - just think laterally.

Payment misallocated?

Hi Andrew,

Can you help?

We can't seem to locate the payment you advised was made on ....

Can't locate the deposit?

Hi Andrew,

Can you help?

We can't find the deposit that you advised was made on ....

Accounts payable person not being helpful?

Write to the Owner in this case - click here to see when it's been used before - VERY successfully.

We don't want to sue you but ...

Hi Andrew,

Can you help?

I've been instructed to start legal proceedings to recover ....

This is one of the simplest yet most powerful tactics you can use to get people to WANT to help you. All YOU have to do is ... ASK! Just say ...

Can You Help?

(You may even be reading this post just because of it's title.

We just can't help it. 'cos we're HUMAN!)

Here's ANOTHER Reason Why You Need To Always Be The Good Guy

2010-07-05T20:47:00.012+10:00

When you feel that someone's been intentionally mean to you, it's natural to want to retaliate.

That's why, when you're chasing slow payers you have to be EXTRA, extra careful with the words that you use and the attitude that you show. This delightful true story regarding exams at Cambridge University illustrates the point well.

During an examination one day a bright young student popped up and asked the proctor to bring him Cakes and Ale. The following dialog ensued:

------------------------------------------------

Proctor: I BEG your pardon?

Student: Sir, I request that you bring me Cakes and Ale.

Proctor: Sorry, no.

Student: Sir, I really must insist. I request and require that you bring me Cakes and Ale.

------------------------------------------------

At this point, the student produced a copy of the 400 year old Laws of Cambridge, written in Latin and still nominally in effect, and pointed to the section which read (rough translation from the Latin):

"Gentlemen sitting examinations may

request and require Cakes and Ale."

Pepsi and hamburgers were judged the modern equivalent, and the student sat there, writing his examination and happily slurping away. Three weeks later the student was fined five pounds for not wearing a sword to the examination!!

click here for another example.

Telephone Technique - Don't Be Predictable

2010-06-22T17:55:00.010+10:00

click here to go back to Telephone Skills

In 1970, psychologists conducted several experiments with rats to test stress levels. In one of the tests, two sets of rats were involved. Each set of rats were in separate cages. All of the rats had an electrode placed in their back. There was a buzzer in each cage. Every time the buzzer rang both sets of rats received a small electric shock. Not enough to cause a great deal of pain, but enough to be annoying!

The differing factor was the timing. For the first set of rats the shock came exactly two seconds after the buzzer. But for the second set, the shock came later - at very irregular intervals. Anything from two to sixty seconds later.

The first set of rats quickly became used to the routine. Initially their stress levels went up, but after a few days the levels returned back to normal. The shocks became a part of life. A different story, however, for the second set. The staggered timing of the shocks caused their stress levels to increase quite dramatically - and stay up.

-------------------------------

Question: Now, what have rats got to do with telephone technique? Answer: A lot.

I’m not suggesting here (however much we may want to) that we implant electrodes into late-paying clients and buzz and zap them at irregular intervals until they pay!! What I am pointing out is that you cannot expect to successfully collect payments if you’re on the phone to them on a daily basis. Same time each day'd be worse. Same thing if they know what your next step is.

Think about the number of times that you’ve phoned customers and left messages for them again and again and again? Do some of them keep ignoring you again and again and again? If so, you’re the one at fault. You’re setting a very bad precedent.

-------------------------------

Phone and leave a message twice, no more.

If the customer doesn’t return your second call within a reasonable time, email, fax or write to them. And be sure to mention that you've tried calling in your correspondence. All you're doing is letting them know that you’re on their case and not letting go.

Because, the more messages (electric shocks) that you leave, the weaker becomes their effect. Just like the rats in the second cage, your customer gets used to you calling, therefore, your calls (as a means of getting money paid) have absolutely no effect at all. You’re not increasing their stress levels or pressure on them to pay.

And, if they get to like you and you get to like them, (because you both speak to each other so often!!) worse still, it'll start becoming a social call and you give them a reason not to pay. ‘Cos, if they do pay, you’ll stop calling!

-------------------------------

Compulsive Promisers

It’s exactly the same for “compulsive promisers” - customers that keep promising to pay, but never do. If you keep phoning and they keep promising to pay and don’t – same thing. Write to them, stick to the facts.

-------------------------------

Excerpt from the original report

click here for full report

Four experiments examined the effects of stressor predictability on a variety of stress responses, such as stomach ulceration, plasma corticosterone concentration and body weight changes. Rats that received electric shocks unpredictably showed greater somatic stress reactions and more stress-induced pathology than animals that received the same shocks but could predict their occurrence by a signal. Subjects in the Unpredictable and Predictable shock conditions received shock simultaneously through fixed body electrodes wired in series, thus insuring that shock was always of exactly the same intensity and duration for the 2 groups. The results point up the importance of psychologic variables in affecting stress by showing that consequences of the same physical stressor can be markedly altered by psychologic factors such as predictability.

Telephone Skills - Never Use Emotion

2010-06-21T20:49:00.005+10:00

click here to go back to Telephone Skills

The Number One Rule is always, always, always be pleasant to people when you’re on the phone. This is especially important when you’re on the phone asking someone for money to pay their bill. It's a very sensitive issue, so however steamed up you may be about an overdue account, be pleasant.

If you’re really boiled up inside about the account, there are two options you should consider:

1. Don’t phone – write to them instead, email or letter, no matter. But, stick to the facts and be sure never to use anything that could be mistaken for sarcasm in your letter. Or,

2. If you can, get someone else to phone them on your behalf. Someone who is not emotionally connected in any way at all with the bill. They can be objective and do what you can’t do when you’re in an emotional state about the account - and that is to ...

Deal Only With The Facts

These are the facts:

1. It was the customer who originally ordered stock from you or asked to have some work done.

2. The customer knew that there would be charged for this.

3. You have sent them a bill.

4. They were supposed to pay you within a certain time frame.

5. They haven’t.

You’re right. They’re wrong.

You, therefore, are the Good Guy!! They are the Bad Guys.

Those are the simple facts. No point in being emotional about it. Because, if you do, they will get emotional with you too! And then it’ll be your fault for not being paid. They could say “Well, I’m not paying them their bill until I’m good and ready because … they were rude about it!!!”

So, stick to the facts - keep asking questions.

Try and assess their intent. Is the reason that they haven’t paid you a genuine one or do you think that they’re trying to stall paying you for dishonest reasons?

Are YOU Chasing Slow Payers The Same Way It's Always Been Done

2010-06-20T16:52:00.005+10:00

Start with a cage containing

five monkeys.

Inside the cage, hang a banana on a string and place a set of stairs under it. Before long, a monkey will go to the stairs and start to climb towards the banana. As soon as he touches the stairs, spray all of the other monkeys with cold water.

After a while, another monkey makes an attempt with the same result - all the other monkeys are sprayed with cold water. Pretty soon, when another monkey tries to climb the stairs, the other monkeys will try to prevent it.

Now, put away the cold water. Remove one monkey from the cage and replace it with a new one. The new monkey sees the banana and wants to climb the stairs. To his surprise and horror, all of the other monkeys attack him.

After another attempt and attack, he knows that if he tries to climb the stairs, he will be assaulted.

Next, remove another of the original five monkeys and replace it with a new one. The newcomer goes to the stairs and is attacked. The previous newcomer takes part in the punishment with enthusiasm! Likewise, replace a third original monkey with a new one, then a fourth, then the fifth. Every time the newest monkey takes to the stairs, he is attacked.

Most of the monkeys that are beating him have no idea why they were not permitted to climb the stairs or why they are participating in the beating of the newest monkey.

After replacing all the original monkeys, none of the remaining monkeys have ever been sprayed with cold water. Nevertheless, no monkey ever again approaches the stairs to try for the banana. Why not? Because as far as they know that's the way it's always been done round here.

And that, my friends, is why many businesses DON'T have a Collection Policy - because "that's the way we've always done things"!! If that sounds like you - go to the OPS Global website and see how we can help.

Telephone Skills - Always Get A "Here By" Date

2010-06-18T15:54:00.011+10:00

click here to go back to Telephone Skills

“When did Mr Jones

say he’d be paying

his account?”,

asked the Office Manager.

“He said that he’ll be looking at it straight away”, replied the debtor. Answers like that are absolutely useless.

Phrases like

"I’ll look at it as soon as I can."

"I’ll look at it straight away for you."

"I’ll do what I can for you."

are all pretty meaningless. They’re non-specific.

Most times, debtors do mean what they say and they will look at it as soon as they can. But a myriad of things could distract them from doing so. (Christmas, for example!) If that happens to you, try repeating their "promise" back to them by saying something along the lines of

"Great. Today's Monday, so if

he's looking at it straight away,

we should have it in our Bank Account

on Tuesday, or Wednesday at the latest,

SHOULDN'T WE?"

All they’ve got to say is “Yes” and you have a definite “here by” date. A promise. Measurable and - "chaseable" if not kept.

Write Down What You Want

2010-06-17T16:07:00.007+10:00

This article is BRILLIANT!

I can say this very comfortably, because I didn't write it myself! It was written by Bob Oros. He sends out emails all about SALES. But this one's well worth the read in the context of chasing slow payers. He is really stating, very well and very clearly, the 3rd of the three fundamental principles - Principle #3 - Become Very Hard To Ignore. A wise man. Click here to visit his website.

Anyway, THIS is the article that impressed me so much. It really drives home the point about the importance of knowing what you want, creating a process to get what you want, writing it all out and then being sure to tell everyone about what your rules are - up front, and often. In our case, a collection process.

The rest of this post is copied, completely unaltered, from the email that I received from Bob today. It's titled ...

------------------------------------------------

More Gross Profit

One of the biggest complaints I hear from sales managers is about complacency. They tell me that too many of their more experienced sales people are comfortable and have lost that competitive nature necessary to keep the top line growing.

Let me give you a very simple solution.

I have owned several rental properties in the past. I could write a book about why tenants can't pay their rent. When I first started I wanted to be a nice guy, so I occasionally let the rent slide. Paying back rent is the ultimate "dead horse bill." Until I really got tough insisting that if "you don't pay you don't stay" tenants started paying on time. And if they didn't I simply got rid of them.

I had to learn the hard way. I had one guy that had a pregnant wife and 4 young kids. He had a good job and seemed like a good tenant. But I made the mistake of letting him rent the house without a clear contract of what I expected. After a while he started complaining about his job. He ended up quitting and couldn't pay the rent. He kept telling me that he was working on getting another job but it was story after story. I ended up having to boot him out and he still owes me $3,000, which I will never see.

Here was the solution to my $3,000 lesson.

After that experience I started making it crystal clear what the deal was. The rent is $1,500 a month. If you pay it on or before midnight on the 5th the rent is $1,200. If you pay it one minute past midnight on the 5th the rent is $1,500. If the $1,500 is not paid by the 15th you will be evicted (this is where I show them a copy of an official eviction notice). Then I spell out the rest of the lease requirements. There is NO gray area. They know exactly what is expected of them if they wanted to live in my house. I made it crystal clear that any problem they have is not my problem. This is done is a nice way, but the expectations are very clear and exact.

The next thing I do is to give them the "reason why" paying the rent is so important. The mortgage company, the insurance company and the county tax collector do not care one single thing about me. They want to be paid. People understand this "reason why" explanation. Six months down the road they may be having money problems. They may be sitting around the kitchen table trying to decide who to pay. They know they have to pay me by midnight on the 5th or they will have to pay an additional $300. They know that I will be knocking on the door with an eviction notice if I don't get paid by the 15th. This was not a bluff. So who do you think gets paid? This "reason why" is the most important part of the deal. I helps them understand why I have to be so firm. It puts some backbone into the lease.

Here's how this applies to you...

Poor performing sales people are the same as non paying tenants. Complacent sales people are like tenants who want to give you a partial rent payment. They are taking up space in your marketing area and not paying the rent that is necessary to keep up with the expenses. Some sales people, as well as tenants, just don't get it unless it is clearly explained. If they are not told, tenants don't realize that the landlord has a mortgage to pay, taxes to pay, insurance to pay, maintenance to keep up with, etc. A poorly performing sales person is the same. If it is not fully explained they simply don't seem to feel the pressure of the ongoing expenses the company must pay to keep them in the territory. They don't understand the fact that new business and growth is necessary to keep up with increasing overhead expense.

The same goes for hiring a new sales person and putting them in a new territory. The investment is huge. The estimated cost of hiring and training a new sales person is a minimum investment of $50,000. With this kind of investment it is important that you not only keep the people you invest in, but keep them productive and excited about their career in sales.

Here's what you have to do.

As a sales manager it is your job to give clearly defined expectations and, equally important, a "reason why" these expectations must be met. No gray area. It may be time to re-negotiate the territory lease.

As a sales person it is your responsibility to buy into what is expected and rise to the occasion. It might be necessary to stretch a little. To put in a little extra effort. Make a few extra calls. To learn some new technology. To give up some of the old habits. But it will be worth it. The motivation will come from your own personal "reason why" you are accepting the challenge.

Complacency sets in when you ask yourself "why" and you don't have an answer. If you don't have a really good "reason why" here's what you need to do. Write down a clear contract with yourself that gives you a very specific and personal "reason" for growing your business.

A person who doesn't "want" anything and doesn't have a really good "reason why," is not a good candidate for a sales career. It is simply too easy for them to say: "what the heck, I think I will head to the house."

So, write down your "reason why" and get fired up. Make it a good reason. Make it an emotional reason as well as a logical reason. Make it big. Keep it in front of you as a source of motivation. When you think about your "reason why" it should be so powerful and personal that it sends a chill up your spine.

On the other hand, complacency is like a slow death. If you put your left arm in a sling never lifting anything, while you worked out every day with your right arm, what do you think would happen to your left arm? It would become weak and useless. That is what complacency does to your mind if you don't challenge it.

------------------------------------------------

Good, wasn't it! If YOU want to subscribe to his emails, go to his website at http://www.boboros.com.

It Pays To Be Nice - Literally

2010-06-16T14:11:00.010+10:00

I’ll be blunt, if you don’t mind. Extremely so.

I don’t like chasing overdue accounts!

And, most people are like me. The account collection system we have developed came about out of necessity because I don’t like phoning people about overdue accounts unless I absolutely, positively have to, and I learnt very quickly, that if you make the whole matter of account collections into a system, you can reduce the number of times that you have to - a lot!

To explain.

In 1977 I worked for a finance company. One of my first roles there was to phone and ‘chase’ any customers who had badly overdue accounts. I was literally thrown into the deep end of collections. My instructions were very simple.

"Tell ‘em that if they don’t pay,

you’ll repossess their car!

That’ll put the fear of God into things."

It did. But with one difference. The fear of God was put into the wrong entity. Me!! And I was the Good Guy. Although I’m over six feet tall, I didn’t relish asking someone to pay an overdue account, or telling them that I was going to take their car away from them if they didn’t. I didn’t know how to tell people that. And, anyway, aggressive behaviour and confrontation just isn’t my style.

Repossessions aren’t much fun either. Going to someone’s house after hours. Knocking on their front door while they’re having dinner with their family and watching the evening news on TV. And then telling them that you’re there to take their car. Fun? Nope, I think not.

But, like most things in life, it can be done nicely. Or, not nicely. I quickly found that

by being polite, understanding and tactful,

people were never aggressive towards me.

Maybe it was my height. But, I don’t think so. I firmly believe that by showing them some respect as people, demonstrating that the repossession wasn’t pleasant for either of us, they returned the courtesy.

Some associates of mine weren’t as polite.

But it was they who were verbally abused by the car owners.
It was they who the dogs were set on.
It was they who sometimes got into fist fights with debtors.

Call it self-preservation or woosy if you wish, but I’m here to tell you that not only is being polite a much nicer way of going about the business of getting your accounts paid, it’s much more effective.

It pays (quite literally) to be nice.

But you also have to have a system.

In the mid 1980’s I went to work for a major accounting firm. My brief there was to get the firm’s clients to pay their fees more promptly but, under no circumstances, to upset any of the clients and risk losing their valuable future business. The theory was that my “collection” experience could be put to good use to follow up the firms’ clients with overdue accounts. But what a difference. They had no working system in place at all!

Whereas the finance companies I had worked in had been systematic and tough in their approach with little regard to customer goodwill, my new employers had no system to fall back on and were overly “soft” in their approach to any clients with an overdue account. It quickly became obvious that the ideal way to manage overdue accounts lay somewhere between these two extremes.

So, I developed a very simple, non-confrontational system, based on finance company methods, to achieve my goals. After only 3 months, word started to spread through the professions about the incredible results that this very simple system was achieving. Our clients were paying their fees much more quickly. They even complimented the partners from my employers firm about the way that they were “chased” for payment.

The impossible had been achieved

... the money was coming in faster

... and the clients were happy!

Life was good. I was the hero. but it was the system really, I just didn’t know it at the time.

... and then, my eyes were REALLY opened.

In 1986 I walked through the front doors of a small Catholic School. This was to be my first experience collecting school fees. They were experiencing problems with their cashflow. Main reason? The late and non-payment of school fees by the parents. A few differences were immediately evident:

The school was run by the Sisters of Mercy
The Principal was a Nun. (Her very vocation was to help the poor.)
Their philosophy included caring for the poor and that No Catholic child shall go without education even if the school fees are never paid.

Some of the parents knew all this and were abusing the system. They could afford the fees but weren’t paying because they knew that the school would never “push” the issue of non-payment. The Bursar, a delightful little old lady, was completely run off her feet with 1,001 other duties as well as being in charge of the collection of school fees.

Talk about stacking the deck

...in favour of the debtors!

Not only that but the debts were personal debts, not business to business commitments. Much harder to collect. In schools you are asking Mr and Mrs Jones to put their hands into their back pockets to pay the school fees with money that they could be using to pay the rent or mortgage, the electricity bill or the phone. Business debts are very impersonal. Personal debts of course, by their very definition, cannot be. Anyway, the problem still had to be solved.

The school still had to pay the staff as well as paying the usual other overheads. The money had to be collected. So, I applied the same principles that I’d learnt in the finance companies and adapted for the professional firm environment. Only this time, the new system had to recognise and allow for a shortage of time, and an even gentler philosophy than that used in the professions.

Again, once we had the system in place, it only took a matter of weeks (as had happened everywhere else) before the parents started responding. Parents that had previously ignored all previous attempts to get them to pay started paying. Not only that but the school collected well over double what they usually received during the first week of the next term.

Since my first experience in that first school, I have had the privilege to consult with hundreds of businesses of all types, sizes and philosophies. Same results, every time. Less work needed by staff, no debtor upset and a much improved cashflow.

Our non-confrontational system work everywhere. It always does. Never hasn't. But remember, as P.K. Shaw once said,

"Thoughts are useless

unless followed by action."

To see the principles that lie behind this excellent system, click here and download a copy of our e-book and if you aren't being paid when you want to be paid, contact us. We can help. Promise.

Regards,

Michael Todd.

Telephone Skills - allowing debtors to "Save Face"

2010-06-14T20:48:00.009+10:00

click here to go back to Telephone Skills

When chasing slow payers, treat them as you would like to be treated yourself - at all times. Because IF YOU DON'T allow people to "save face" (retain their pride) when dealing with them - they will do so themselves. The following true story has been included by way of example. (I was another Branch Manager at this company when this happened)

Many years ago, the Branch Manager of a large Finance Company in Mackay, Queensland, had to repossess a washing machine from an overweight, 50 year old mother of five who lived on the top floor of a three storey block of units. Now anyone that's ever lived in a block of flats (I have) knows that everyone knows everyone else’s business - or would certainly like to.

Picture this.

Mackay, Queensland, Australia - sub-tropical climate - mid-January (middle of summer) - high humidity - extremely hot. Manager - wearing a white, short-sleeved shirt - sweating profusely - an unpleasant task to be done. Assistant Manager - same attire - equally hot. They arrive at the units, climb the six sets of steps to get to the top and knock on the door. (Neighbours peeking.)

"Come in. Come in", she said. After the door was closed she burst into tears - couldn't live without the machine - 5 children - dirty clothes, etc, etc. (Repossessions are NOT fun.)

The Manager had no choice, many repayment arrangements had been made but broken and his supervisor had instructed him to take the machine if she didn't/couldn't pay. So, lifting the heavy machine, getting grease on their hands and clean clothes, the Manager and his assistant carefully negotiated the machine down the six flights of steps. (Neighbours still peeking.)

With their now-wet shirts clinging to their bodies they eventually heaved the machine on to the company ute (a truck with a tray that carries heavy stuff!), shut the side-flap and started to get into the vehicle to drive away.

AT THAT PRECISE MOMENT ... as the Manager's left foot was in the vehicle, his right still on the concrete, he heard the woman's voice from above. With a sidelong glance at her nosy neighbours she shouted,

"And next time, don't bring the b----y thing back
... until it's fixed properly".

(She had saved face.)

Telephone Skills - Listening Skills

2010-06-11T12:38:00.012+10:00

click here to go back to Telephone Skills

If you apply these listening skills - and keep accurate notes of your calls – you’ll be able to hear the little intakes of breath, the slightly longer than normal silences as the debtor struggles to give you a reasonable reply to a point raised. It is often such little clues as those that are the best lie detectors of all.

There are ten main points to remember when speaking to a debtor on the phone to help you to really listen to what they have to say. It's often the things that are not said that can give you a clue to the real reason why they are not paying your account. "I haven't got a copy of the bill", could really mean, "I'm waiting for my tax return to come in before I can pay".

The real reasons, then, are often disguised in other words or silences. There is no clear-cut way of finding out the truth, you have to apply intuition and everyday people skills when discussing an account with someone but there are a few guidelines to apply that will give you better odds at finding out what is really being said.

1. Take notes.
2. Do not keep talking.
3. ASK - ask - ask.
4. Use Silence.
5. Forget your own problems.
6. I see ... Yes ... Umm.
7. Never use emotion.
8. Do not respond to baiting.
9. Have an open mind.
10. Listen for reactions.

Take Notes
As you are discussing things with the debtor take notes, albeit brief (you don’t want your note-taking to become a distraction in itself!)

Don’t Keep Talking
You want to hear them, what they have to say and you will never be able to do so if you are monopolising the conversation. So don’t talk, let them fill the silence.

Ask - Ask - Ask
Keep asking questions. If you aren’t satisfied with any points they are making, keep asking questions until you are clear.

One day, I was told that the debtor had only just come back from her holiday and that was the reason that her account hadn't been paid. "I'm sorry, I don't understand", I replied. Her account, it turned out, was over three years old. One could hardly say that our client had been dogged in their pursuit of this debt. And because we’d kept probing, we found out that her excuse, which sounded quite reasonable on first hearing, wasn’t that good either!

Use Silence
This is a killer technique. Whoever talks first, loses. It is one of the most useful telephone techniques around. People generally hate silences and feel that they have to fill the void.

Forget Your Own Problems
How can you give 100% attention to someone else when you are thinking about your own problems? Of course, the answer is - you can’t. So, if something is that important that you can’t forget it – don’t phone. Get someone else to. Get your own problem sorted out as soon as you can or just give it away for the day and come back to it later.

I see ... Yes ... Umm
These simple interjections into a conversation will make the speaker extend what's being said. I suppose it’s similar to using silence without being so uncomfortable. By agreeing with the speaker, or at least appearing to do so by saying such short phrases, he is more likely to "open up" to you and give you the truth - or let it slip out!

Never Use Emotion
The best way not to get to the truth, to the reason why your account hasn’t been paid, is to
► raise your voice,
► use sarcasm,
► laugh at a ridiculous excuse you’re given, or
► abuse the client.

Yet how often is this done when the creditor is chasing payment on the phone? Rules 1 - 10 in collection are all the same -Never use emotion.

Don't Respond to Baiting
If the debtor is rude to you and tries to bait and goad you into an argument, back down. Tell him you will call back later. Try to get back to an adult to adult conversation, but whatever you do, do not be rude back. If you do, you will give the debtor a reason for not paying - he could truly say (in self-justification) that you were rude to him. And that's now why he isn't paying the account.

Have an Open Mind
You will sometimes hear someone tell you what you believe is a ridiculous excuse for not paying your account. Keep an open mind. What seems ridiculous to you may be a quite genuine reason to the client. Hear them out, ask questions and keep probing until you can understand their excuse and then try to help them get over it so you can be paid.

Listen for Reactions
Any of these sound familiar?

Debtors Phone answers

Someone says --- “Hold just a second please”.
In the background you hear “Fred. It’s calling about your account. What do you want me to say?”.
A pause.
A different voice, “Say I’m not in”.
"I’m sorry. is in a meeting. Can I take a message for you?”

Debtor
“Oh, I’m so sorry. I totally forgot to pay. I’ll fix it up today.”

Debtor
“Oh XXXX”

Debtor
“Can I say who’s calling?”
Long pause. Muffled background noises.
“I’m sorry. I thought that was in. Apparently he’s just stepped out. Can I get him to call you back?”

Listen. It’s amazing what you’ll pick up by what you aren’t told!!

There‘s a James Bond movie called "You Only Live Twice". But to the best of my knowledge you can only die once. The very best reaction I have ever had from a phone call was from a woman who had told me that she couldn't pay her account because her father had just died. I sympathised "Don't worry about it right now. I'll call you back in a few weeks. We can discuss it then." I read back through my file notes and as the clips in my file clipped shut I saw that her father had died once before!! At least he had according to the excuse she had given to another guy for not paying her account over 12 months ago. Twice? Me thinks not. I called her back straight away, confronted her and her silence and subsequent arrangement to pay the next day was reward enough.

Telephone Skills - Using Body Language

2010-06-10T18:25:00.011+10:00

click here to go back to Telephone Skills

When are YOU more comfortable talking on the phone?

You can use body language to both feel and be more confident whenever you have to make (or take) a difficult phone call. Although the person on the other end can’t see you, they sure can hear you. And they can also pick up how strong and assertive (or weak and pathetic!!) you are on the phone talking.

So, when ARE you more comfortable?

1. On a mobile phone with an earpiece where you can wander around at will, gesture with your hands, look around as you talk, or

2. Sitting at a desk in a small office all by yourself holding the handpiece to your ear?

If you’re like most other people, you chose the first option.

We regularly run seminars and workshops around the country on Collection Skills and Procedures. In most seminars I illustrate that it’s much easier to talk and be natural (and, therefore, more assertive and less timid) when you can stand up when you’re on the phone in a two-part role-play. This is the role play ...

THE BODY LANGUAGE ROLE-PLAY

This is how to see for yourself what a dramatic impact body language can have on the way we talk and how assertive we can be. Try this role-play and see for yourself.

HOW TO PREPARE FOR THIS ROLE-PLAY

Get a few people together. Don't tell anyone what this role-play is about. To give this role-play more impact and to best illustrate this point, select:

► A tall, mean and tough looking male as the client, and

► A short (should I say “height-challenged”?), frail and timid-looking female as the creditor.

HANDY HINT

Make sure that the man that you pick does not have a back problem or is overweight and that the lady you pick is not overweight, pregnant and, most definitely, NOT wearing a short skirt.

Get them to stand up, facing each other, about two metres apart. Don't tell them that this is a two-part role-play. Simply ask the lady (the creditor, the person chasing payment) to phone the man (the client, the person who owes the money) to ask him, using whatever language she likes (within reason) to pay a fictional debt of, say, $1,000.

Just before they start, interrupt them and ask the lady to kneel on the floor. Surprisingly enough, if you ask her in the right way, she will!

All you have to do now is watch and listen.

When you feel that you’ve heard and seen enough to be a good sample of what she sounds like in this very weak position - kneeling - thank them both and ask the lady to stand.

At this point, while they’re still looking a little stunned, standing up and wondering what point it is exactly that everyone is supposed to have just seen, get the man to lie down on the floor!! Yes, you read that correctly. Get the guy to lie on the floor. On his back, legs down flat, heels on the floor, looking up at the ceiling.

Now, get a fixed-leg chair (not a swivel chair, or one on wheels) and place the two front legs on either side of the man’s knees so that the back legs are on either side of his feet.

Ask the woman to stand on the chair so that she can see his face when she looks down.

Now, get them to the entire role-play all over again. Just as if they hadn’t done it before. All over. Get them to pretend that the last role-play didn’t happen.

Again, all you have to do now is watch and listen.

If you try this and followed the instructions above, you will notice three distinct differences between the first part and the second.

1. The woman’s language is much stronger and she will sound more assertive than the first time.

2. Her body language looks more assertive. Many ladies put one of their hands, for example, on one of their hips while they wait, impatiently, for the client (the man) to reply to one of their questions!

3. Her questioning becomes more direct.

On the other hand, the man, who is now lying on the floor and may have been quite off-hand about the overdue account in part one of this role-play, becomes much more submissive. Many men put one hand behind their neck to try and feel more assertive while lying down there, but this has no effect on the woman who is now very much in control of the phone call. Why? Because she’s dominating the man in a physical sense. (For God’s sake man, she could jump!!)

SO, WHY DOES THIS WORK SO WELL?

This role-play works for one very simple reason. In the first part the lady is in a very submissive position (kneeling down) and the man is in a very dominant position (standing up). In the second part, the dominant positions are reversed. The woman is now in a very dominant position (standing on a chair - above the man) and the man is in a very submissive position (lying down).

Now I know that you can’t pick up the phone when you want to follow up a client with an overdue account and say,

Good Morning Mr Jones.

Would you mind lying down on the floor for a moment?

I’d like to discuss your account with you.

But you can stand up! I mean, think about it. If you’re sitting at your desk making phone calls to overdue accounts, one after another, yada yada, ho hum, ho hum and then you get a very difficult one, an aggressive client for example, you’re going to naturally sit up anyway. Nature pumps adrenalin through your body; your body language naturally changes.

So, use this natural reflex action to your advantage whenever you have to make or take a difficult phone call. Stand up, gestulate, look around, move around if you can. You’ll become much more assertive, more in control of the situation and, although the clients can’t see you, they can detect the difference.

Try it one day for yourself and see.

Telephone Skills

2010-06-09T19:15:00.019+10:00

This picture, taken from our "Telephone Skills" seminar, really says it all. In the next few blogs, I'll expand on these points.

click on these links to read more

Use Body Language

Listening Skills
Allowing Debtors to "Save Face"

Always get A "Here By" Date

Never Use Emotion

Never Leave More Than Two Phone Messages

If You Already Know What They're Going To Say BEFORE You Phone - Don't Phone, Write!

Ask the Right Questions

2010-06-08T17:46:00.012+10:00

click on the slide for a larger image

The human mind is a wondrous thing. If you ask the right questions it will always come up with an answer for you, or try to.

If an overweight person asks himself, “Why am I so fat?” - the subconscious mind will give him an answer. That answer may well be “Because I’m a lazy slob, I eat too much, don’t exercise and watch too much TV”.

But, if this person asks, “How can I lose weight and enjoy the process?” – the mind will give him a very different answer. It may be something like “I can go on regular walks in the morning in the sunshine, listening to my audio tapes and plan my diet better”.

Same problem. But the different question got a much better answer.

Debt Collection is much the same.

Test this for yourself. Answer this. What would you say to one of the clients if they tell you that they can’t pay you the full amount of the overdue fees right now? Which of the following phrases (or similar) are you most likely to use?

1. Well, how much can you pay?

2. I need you to pay at least half.

3. I need the full amount now, nothing less will do.

4. Can we come to some sort of an arrangement?

5. Something else?

Look at this a bit further. Let’s assume that the outstanding fees are $4,000.

1. If you answered, ”Well, how much can you pay?” You’d be like most other people. But consider this, would it sound quite reasonable if the client then offered to send you $500 now and the rest on a weekly basis? It would, wouldn't it?

But by asking the client “Well, how much can you pay”, you’re almost inviting them to make you a low offer. You’re putting the ball into their court and effectively saying, “OK. Well make me an offer”. From a negotiating point of view, that is the worst possible thing to say yet it’s the one that most people reply with!

2. If you answered “I need you to pay at least half,” you’ve just limited yourself to accepting $2,000. But why offer to accept only 50% now, they might be able to afford more?

3. If you answered, ”I need the full amount now, nothing less will do”, your client will think you’re getting aggressive. You’re almost certain to get the client offside which will dramatically reduce your chances of a reasonable negotiation.

4. If you answered, “Can we come to some sort of an arrangement?”, chances are that your client will make you an offer. But it’s very likely to be much lower than you really want to accept because again you’ve verbally shrugged your shoulders and are effectively saying, “OK then, make me an offer”.

The best way to reply to the “I can't pay the full amount right now” response is to ask:

Well - how much are you short?

By replying in that way, you make it much harder for the client to offer to send you, for example, only $500. They have to say that they’re $3,500 short of the $4,000 account.

$500 now doesn't sound too bad when you ask ”Well, how much can you afford?” But, “$3,500.00 short” does in view of the total amount involved. The client will hear themselves sounding unreasonable by asking them in this way and more often than not you’ll get a higher commitment than by asking them in any other way.

We learnt this many years ago in an Accounting Practice and the Debtor blurted out “I’ve only got half” (of the $10,000 bill) when we asked him how much he was short of the full amount. We took it.

Historically this debtor client had paid off his debt at the rate of $1,000 per month.

That’s a 500% increase

just by asking the right question.

Spiderman

2010-06-07T17:14:00.020+10:00

A bit of light humour only!

I take NO credit for this story - just enjoyed it. Thought you would too!!

From: Jane Gilles
Date: Wednesday 8 Oct 2008 12.19pm
To: David Thorne
Subject: Overdue account

Dear David,

Our records indicate that your account is overdue by the amount of $233.95. If you have already made this payment please contact us within the next 7 days to confirm payment has been applied to your account and is no longer outstanding.

Yours sincerely, Jane Gilles

------------------------------------------------------
From: David Thorne
Date: Wednesday 8 Oct 2008 12.37pm
To: Jane Gilles
Subject: Re: Overdue account

Dear Jane,

I do not have any money so am sending you this drawing I did of a spider instead. I value the drawing at $233.95 so trust that this settles the matter.

Regards, David.

------------------------------------------------------
From: Jane Gilles
Date: Thursday 9 Oct 2008 10.07am
To: David Thorne
Subject: Overdue account

Dear David,
Thankyou for contacting us. Unfortunately we are unable to accept drawings as payment and your account remains in arrears of $233.95. Please contact us within the next 7 days to confirm payment has been applied to your account and is no longer outstanding.

Yours sincerely, Jane Gilles

------------------------------------------------------
From: David Thorne
Date: Thursday 9 Oct 2008 10.32am
To: Jane Gilles
Subject: Re: Overdue account

Dear Jane,

Can I have my drawing of a spider back then please.

Regards, David.

------------------------------------------------------
From: Jane Gilles
Date: Thursday 9 Oct 2008 11.42am
To: David Thorne
Subject: Re: Re: Overdue account

Dear David,

You emailed the drawing to me. Do you want me to email it back to you?

Yours sincerely, Jane Gilles

------------------------------------------------------
From: David Thorne
Date: Thursday 9 Oct 2008 11.56am
To: Jane Gilles
Subject: Re: Re: Re: Overdue account

Dear Jane,

Yes please.

Regards, David.

------------------------------------------------------
From: Jane Gilles
Date: Thursday 9 Oct 2008 12.14pm
To: David Thorne
Subject: Re: Re: Re: Re: Overdue account

Attached

------------------------------------------------------
From: David Thorne
Date: Friday 10 Oct 2008 09.22am
To: Jane Gilles
Subject: Whose spider is that?

Dear Jane,

Are you sure this drawing of a spider is the one I sent you? This spider only has seven legs and I do not feel I would have made such an elementary mistake when I drew it.

Regards, David.

------------------------------------------------------
From: Jane Gilles
Date: Friday 10 Oct 2008 11.03am
To: David Thorne
Subject: Re: Whose spider is that?

Dear David,

Yes it is the same drawing. I copied and pasted it from the email you sent me on the 8th. David your account is still overdue by the amount of $233.95. Please make this payment as soon as possible.

Yours sincerely, Jane Gilles

------------------------------------------------------
From: David Thorne
Date: Friday 10 Oct 2008 11.05am
To: Jane Gilles
Subject: Automated Out of Office Response

Thankyou for contacting me. I am currently away on leave, traveling through time and will be returning last week.

Regards, David.

------------------------------------------------------
From: David Thorne
Date: Friday 10 Oct 2008 11.08am
To: Jane Gilles
Subject: Re: Re: Whose spider is that?

Hello, I am back and have read through your emails and accept that despite missing a leg, that drawing of a spider may indeed be the one I sent you. I realise with hindsight that it is possible you rejected the drawing of a spider due to this obvious limb ommission but did not point it out in an effort to avoid hurting my feelings. As such, I am sending you a revised drawing with the correct number of legs as full payment for any amount outstanding. I trust this will bring the matter to a conclusion.

Regards, David.

------------------------------------------------------
From: Jane Gilles
Date: Monday 13 Oct 2008 2.51pm
To: David Thorne
Subject: Re: Re: Re: Whose spider is that?

Dear David,.
As I have stated, we do not accept drawings in lei of money for accounts outstanding. We accept cheque, bank cheque, money order or cash. Please make a payment this week to avoid incurring any additional fees.

Yours sincerely, Jane Gilles

------------------------------------------------------
From: David Thorne
Date: Monday 13 Oct 2008 3.17pm
To: Jane Gilles
Subject: Re: Re: Re: Re: Whose spider is that?

I understand and will definitely make a payment this week if I remember. As you have not accepted my second drawing as payment, please return the drawing to me as soon as possible. It was silly of me to assume I could provide you with something of completely no value whatsoever, waste your time and then attach such a large amount to it.

Regards, David.

------------------------------------------------------
From: Jane Gilles
Date: Tuesday 14 Oct 2008 11.18am
To: David Thorne
Subject: Re: Re: Re: Re: Re: Whose spider is that?

Attached

7 Reasons Why People Pay - and how you can use this knowledge

2010-06-04T12:28:00.043+10:00

Although you may feel like applying some of Mike Tyson's skills when chasing slow payers, truth is, we can't, and, hopefully, don't!

But, knowing the seven main reasons why people pay their accounts is invaluable knowledge. Because when you know why customers pay allows you to apply influence to make them pay more quickly.

So, what ARE these seven reasons?

1 - Need

If you supply electricity to a business,

account collections are easy.

The threat to cut off supply gives you

excellent leverage if needed.

Same for any other basic needs

... food, phone connections, etc.

2 - Honesty, Appreciation and Obligation

These are influencial factors but when

"push comes to shove" and money's short,

they're not much use as a collection tool.

3 - Conscience

You can play with this one, but, again,

if a customer has a cashflow problem ...

4 - Embarrassment

Used wisely, this can be very effectively used.

Click here for an excellent example.

5 - Fear Of The Unknown

We use this reason very successfully

almost every day at every client.

To explain:

The only people that really know what you'll do if an account isn't paid are those people that work inside your business. In other words, you and your staff.

Your account customers don't!!

So, if you wrote and said

"we will be obliged to revert to policy if this is account

is not brought up to date in the near future"

- your customers will have NO idea what that means!

Click here for a more detailed explanation of how to use Fear Of

The Unknown as an effective collection technique.

6 - Physical Safety

Be honest, it's nice to think about doing "something",

especially to some debtors,

but this isn't an approach I'd ever recommend!

....now to the best one of all ....

7 - The “How Do I

Get Rid Of You” Factor

This is where ALL successful credit management

systems begin and end.

Being Hard To Ignore.

Always there, expecting to be paid on time

and simply asking for it if you are not.

So simple, yet so powerful.

----------------------------------

SUMMARY

When you know WHY customers pay, you will know

how you can influence them to pay you within

your own payment terms.

Who Would YOU pay?

2010-06-03T12:14:00.036+10:00

Imagine that YOU have $1,000 in your bank account. Exactly $1,000. No more, no less. You only have two creditors. Each are owed $1,000. One is no more important to you than the other.

----------NOW----------

Take a look at this slide.

There are only really four options available to you. Decide which option is closest to what YOU would do and THEN look at the next slide.

Don't cheat!!

Decide, then look at the next one.

Scroll down when you have.

Look at the table above again. Compare their "Collection Processes". Nine out of 10 people will pay Peter Perfect, just to get rid of him! 'cos if they don't, he'll be back again asking for payment!!

Sheila's done what many businesses do, and, sadly, that's not a lot. Peter, however, has a simple, non-confrontational process in place. Looks more professional. IS more professional. Is ALWAYS much more successful simply because he's being Hard To Ignore.

Don't Say "Can I?" - Get Others To Say "Please Don't"

2010-06-02T13:32:00.011+10:00

Several years ago we consulted to a large legal firm. 25 Partners. 60 other lawyers. 85 Fee Authors in all. They had a full time Credit Manager, Murray, on staff. He was not getting good collection results.

Overdue accounts had completely blown out. So had their overdraft. Why?

We were called in to see what was going wrong. Didn’t take long to find out. Simple maths. There’s only 5 working days in a week. 85 fee authors divided by 5 days = 17 Partners. Murray had to see 17 lawyers EVERY DAY just to get permission to follow up any clients with overdue fees that each lawyer may have! A totally impossible task.

As a result, very few reminder letters were sent out and even fewer phone calls made. So - poor collection results. They weren’t even asking their clients to pay.

The solution
We circulated an internal email to all fee authors advising them that the onus in future was to be on them to request (by email) that no follow up action be taken on any clients that they wanted to have taken out of the normal collection review. In other words, Murray would assume that he was able to action all accounts as soon as they became overdue unless advised to the contrary.

The result
As a direct result of this very simple policy adjustment, results improved exponentially. Within three weeks of that internal email being circulated and additional support from our company that firm of lawyers recovered over 40% of the total fees that had been outstanding.

Please note that all fee authors were free at all times to stop any collection activity at any point, but the onus was now on them to ask Murray to stop (by email), not for Murray to get permission to follow up each individual account.

Principle #3 - Become Very Hard To Ignore

2010-05-28T13:38:00.017+10:00

To be successful when Chasing Slow Payers there are three simple and fundamental rules to follow. We've already discussed the first rule - Start early and tell everyone what you're doing & the second rule - Always Be The Good Guy. Now let's look at the third ... Become very hard to ignore.

--------------------------------------------------

Rule #3 - Become very hard to ignore

When my oldest daughter was nine years old her pocket money was $1.00. Each Friday it was my duty to have the correct money (coins or a note) available as

plans had been made for that one dollar and commitments given. She trained me over a period of one month to have that dollar ready by applying this simple formula:

Friday + no money (correct change) = heaps of trouble for Dad.

If the dollar wasn't ready on Friday, a conversation like this would follow:

"I'm sorry dear I haven't got the right change"

"Why not?"

"I didn't go to the bank yesterday."

"Why?"

"I forgot."

"But Dad, you know it's pocket money every Friday. When can I have it?"

"Ask your mother."

"But she only sends me back to you. Have you got any change in your wallet?"

"I don't think so."

"Where is it - I'll look for you."

... and so it continued.

I knew that I'd been trained when I drove into my driveway at home one Friday night and realised that I didn't have a one dollar coin in my pocket! (I could also see the silhouette of a small person behind our glass front door.) I reversed out of the driveway, drove down to the local shop, bought a litre of milk (that I didn't need) to get the change and returned home victorious to proudly give my daughter her pocket money.

Four weeks. That's all it took. It had now become a habit for me to have the pocket money ready for her each week.

The debtor (me) had to keep giving excuses and it became very obvious, very quickly who was in the wrong and she eventually trained her debtor (me) to pay on time before I was free to get away and do anything else. And she was only nine years old. She was simply applying this third rule. Become very hard to ignore.

--------------------------------------------------

So, are YOU hard to ignore?

Now let's consider what you are doing to apply this rule in your business. It's by far the most powerful rule, the one that really yields results. Yet, it's the one most often not applied because of the fear of the client being upset, if it is.

Do you send out monthly statements?

Put stickers on those that have overdue balances maybe?

Rubber stamp them with something like "Payment Overdue"?

If you do, and that's your collection system, then you are certainly not being hard to ignore because statements are extremely easy to ignore. (Would they affect you if you were a customer with an overdue account?)

They're great for reconciling accounts but pretty useless as "collection tools". And, if most of your clients only get one invoice from you every month, what are they reconciling anyway? One invoice? A couple of reminder letters, an email, a text message to their mobile phone or, at the very worst, a hand-written note on the statement from the person that did do the work would be far more effective.

Much more impact.

More "in your face" - without being offensive.

Harder to ignore.

As the old Chinese proverb goes ...

"It is easy to stand a pain but difficult to stand an itch."

--------------------------------------------------

How to apply this rule

All that you need to do to apply the third rule in any business is to carefully plan a collection system specifically for that business. One that.-

1. Is well documented - set up to be a "No Brainer" so that the answers to all "What do I do next?" questions have already been answered.

2. Excludes any "special" cases - customers that management never want followed up.

3. Takes into account the skill sets of the people nominated to work the system, send the letters, reconcile the accounts, make the phone calls, and factors such as the philosophy and resources of the business.

Once that has been done, you can become very hard to ignore without offending anyone. Just follow your own system. And, if you apply all three rules

1. Start early and tell everyone what you're doing,

2. Always be the Good Guy, and

3. Become very hard to ignore.

You'll get your accounts paid much more quickly. Guaranteed.

Principle #2 - Always Be The Good Guy

2010-05-25T17:28:00.014+10:00

Chasing Slow Payers has three simple and fundamental rules. We've already discussed the first rule - Start early and tell everyone what you're doing.

The second rule is Always Be The Good Guy:

The third is Become very hard to ignore.

------------------------------------------------------

So, to the second rule : Always Be The Good Guy.

If you did the work, you shouldn't be the first person to chase for payment. By having someone else initially following up any overdue accounts you can remain the Good Guy and be paid more quickly at the same time!

Many business owners feel that they should phone their own customers - "in case they have any queries about the account or with the work done". But, why not just assume that all's "A OK" until you're told otherwise?

------------------------------------------------------

Forewarned is forearmed

Some of your customers at some time must have

* queried the product or service or

* feel that they were charged too much.

But, if that customer is phoned by the person that did that work the discussion can easily turn from a very friendly "When do you feel you'll be able to pay your account?" phone call into a defensive

* "This is why it took so long to do the work" call or

* "This is why the charges are higher than you expected" call.

Why? Because before the business owner phoned his customer he had absolutely no idea why his account hadn't been paid. He was unarmed, unprepared for what was coming. He naturally starts defending his bill because he's probably proud of the work done, may have already discounted the account to some extent already and is quite happy that all was "A" OK.

The danger here is that calling unprepared like this, the all-important Customer-Owner relationship is at serious risk. The goodwill.

------------------------------------------------------

Ignorance (of the work done) is power

However, if someone else phones then, if there is a dispute

1: They can note down the details and any queries.

2: They can empathise (when relevant), and

3: They won't go into defensive mode because .... they didn't do the work!

They're best, quite simply, because they're not emotionally involved with the work done. So, if the customer gets excited or the language becomes "colourful" this person won't get too upset. After all, it wasn't their work that was being criticised and they'll still get paid for what they do anyway.

They're simply being information gatherers, performing a simple administrative function. Merely curious why the account hasn't been settled .... yet.

------------------------------------------------------

OK, so the messenger gets shot twice

After this person (let's call him "The Messenger") has made the call, the next thing for them to do is to tell the person that did do the work what the customer had to say. And .... Whammo. The owner will react. It's only natural.

* What a load of rubbish.

* We had to do a lot of extra work ..... He must've forgotten about that.

* I can't believe he said that about me after all the effort I put in.

Does the Messenger really care what the disputing customer said about the owner and the standard of the work done? Maybe. But nowhere nearly as much as the owner.

After the heat's died down, then the owner can then address the situation calmly. From a position of knowledge, not emotion.
Calm.

Well thought out.

Composed.

I'm Your Friend, Talk To Me

Principle #1 - Start early and tell everyone what you're doing

2010-05-25T16:45:00.010+10:00

When chasing slow payers there are three simple and fundamental rules to follow. We all learnt these in the playground.

They are
1 Start early and tell everyone what you're doing,
2 Always be the Good Guy, and
3 Become very hard to ignore.

Babies who use the third rule get fed. Children always use the first one when lending out a toy ("When can I have it back?") Unfortunately most people in business concentrate on the only rule that doesn't get accounts paid more quickly - the second one!

Lip service is paid to the first and the third rule simply isn't applied at all until the debt has become very old. (Of course, by that stage the situation is embarrassing for both parties and often the amount is so large that it's also difficult (if not
impossible) to resolve quickly.

It's the systematic and planned application of all three rules that results in effective credit management in any business.

Rule #1 - Start early and tell everyone what you're doing
You meet someone for the first time. They're pleasant, easy to get along with. You enjoy their company, they enjoy yours. Now imagine how you'd feel if, when you see them again, they were rude and unpleasant. Like most of us, you'd probably wonder ...

* "Why are they acting so differently?"
* "What's so different from the last time? or
* "What've I done to upset them?" (this is the most common reaction.)

BUT - what if they'd been rude and downright unpleasant to you at that first meeting? Would you be worried about them during the second meeting? Of course not ... because cos that's the way they are. You wouldn't be affected at all. That's what they're normally like.

Whatever we like to think,
we're all affected by the way other people treat us.

----------------------------------------------------------

Question:
What's this got to do with account collections?
Answer:
A lot.

If you use start collecting accounts as soon as the payment's due you can use this knowledge of human psychology and be pleasant and become gradually become more assertive (and "colder") towards them later on if necessary.

It's an extremely powerful tool but extremely under-rated. Simple. Powerful. Not applied in many businesses.

Now, ask yourself this.
Do you start collecting as soon as the payment's due?
Really?

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Ask, and you shall receive

Although now somewhat dated, the moral that underpins this true story still applies today ....

I was talking to the Financial Controller of a large legal firm a while ago when the phone rang.

“Excuse me”, he said, and took the call.
To the caller - "Yes. Hang on I’ll check."
To me, while I waited - "Sorry about this. I'll just be a second.”

He opened the top desk drawer, rifled through a pile of cheques (about 20) and returned to the phone call.

"Yes, we do have the account. I thought it'd been paid. But, if it hasn’t been, I’ll get it organised for you today. Straight away."
"Sure. No problems. Bye."
He hung up.

“What was that all about,” I asked.
"That was one of our bigger creditors,” he explained.

“Times are tough right now.
That’s why we’ve got you here.
I’m holding a few cheques back and not mailing them out until they phone.

When they do, I’ll pay.
If they don’t, I'll hang on to them a while longer!"

Motto: Apply Rule #1 - Start chasing accounts as soon as possible.

broken promises

2009-04-14T18:50:00.008+10:00

Try this strategy when you're chasing slow debtors who keep making promises to pay, but don't. It's a recent case study from one of our clients - an accounting firm.

Situation

several very old invoices still overdue in the accounts receivables ledger.
partner previously very reluctant to "push" for payment as client was aggressive when contacted about his overdue accounts.
other partners finally insisted on a payment arrangement so that account is up to date within "a couple of months".

Strategy
We wrote the bad news. This is the letter sent. Note the format:-
------- paragraph 1 - we stated the facts.
------- paragraph 2 - we said what we want the debtor to do.
------- paragraph 3 - we make him a reasonable offer
------- paragraph 4 - we told him what will happen if he doesn't do as requested. (We also applied "fear of the unknown" in this paragraph.)

Dear Mr Debtor,

Outstanding Account

According to our records,
1. The following balances remain outstanding
Debtor Family Trust -------------- $8,225.50
Debtor Superannuation Fund ---- $300.00
2. On 26 November, it was agreed that you would reduce both accounts by way of $1,000 per fortnight.
3. Since that arrangement, three payments have been received.
They are itemised on the next page.

As that arrangement has not been maintained, and as some of the invoices in the balance outstanding were raised some eight months ago, the firm now requires that your account is fully up to date within a reasonable period, say, by Friday, 29 May.

In order to provide you with some assistance to achieve this, the firm is prepared to make a final offer to accept settlement by instalments and further extend their credit facility for the overdue balance by accepting payment in the schedule set out overleaf.

Please, however, be quite clear that if this final offer of a payment arrangement is not honoured, the firm will be left with no other alternatives but to revert to policy and pursue recovery through alternate channels.

Initial Outcome (straight out of our file notes)
14/04/09 - 10.22 - spoke to DEBTOR - paid $1,000 off 35678 ***** 27/03/09 - 10.15 - returned call - wants two invoices re-invoiced - they will be paid in 2 weeks - gave m/card details to pay out SUPER account - a very 'flatline' conversation ***** 27/03/09 - 8.05 - FRED DEBTOR wishes to speak to you - can you call him on 0412 345 678. He has obviously received your letter!****** 25/03/09 - sent LAST OFFER payment arrangement letter

Eventual Outcome
This client's attitude has now changed. He is even being amicable. He recognises that, this time, the firm means business. I also believe that by showing strength, he will show more respect to the firm.

bob - the builder (part 8)

2009-04-04T18:44:00.004+10:00

bob - the builder is a real, live Case Study. I am recording what does or doesn't happen so that you can see the thought processes behind an effective collection strategy and how the three principles of effective account collections are applied in real life.

To see all of bob - the builder as it unfolds/unfolded click here.

Part 8

30 March 2009
The March instalment has not yet been received. It was due today. This is the email we sent to Dave (the debtor)

Hi Jane (Dave - the debtor's wife)

As Bob is away this week, please advise what date you remitted March’s installment.
If you have not done so yet, please advise when you will be.

------------------------------------------

03 April 2009
No reply to our email, so, we sent another one. This time, the only "threat" being used is that we will re-institute the interest component of the debt. We are simply following through. No emotion involved, just "this is what will happen if you don't pay or contact us".

Hi Jane,

According to our records
1: the March instalment has not yet been received, and
2: you have not replied to our last email (below).

In an earlier email of 13 February we advised you that
In view of your recent payment, no interest is being charged on the balance remaining. This will continue to be the case as long as regular instalments continue. However, please be quite clear that if no reduction is made in any one month and you have not advised us accordingly beforehand, the firm will be left with no alternative other than to re-introduce the interest component in protection of its interests.

If we do not hear from you by 2.00pm, Wednesday, 08 April we will be obliged to re-introduce interest to your account. I will advise you of the new balance due on 10 April should that be the case.

Regards,
Michael Todd.

------------------------------------------

What next?
Nothing, until 10 April. We are showing this debtor that we say something, we do something. We follow through.

------------------------------------------

So, what do I expect to happen now?
They will either pay or contact us. If they do neither, we will send them an email with the new balance due (including the added interest). It will be much stronger. I think they'll contact us.

complain or ... shut up and pay

2009-03-29T14:30:00.015+10:00

This is how to stop debtors stalling.

Shock. HORROR!! When you're chasing slow payers, some of them will dispute something, anything in fact, but .... it's only to stall paying you. They really have no problem with your account - they just want to buy time. To pay you later.

One of our clients is a National Accounting Firm. This is how we will get one of their debtors to tell us what their complaint is or to "shut up and pay".

-------------------------------------------

History

Invoice was sent out. Not paid on time. Two Reminder Letters sent out. Phone call reminder made. Client said "fee is wrong". Many emails, letters and phone calls made, not to get the payment but to find out what his complaint was. "I'll email my complaints", said the client several times. He didn't, so ... we have just sent him this letter ....

-------------------------------------------

The letter sent

Dear Mr Bloggs,

Your Account

According to our records, the following invoices are unpaid.
---27/06/2008---Fee 61234---$5,255.00
---30/07/2008---Fee 65678---$1,590.00
---24/12/2008---Fee 69012---$3,550.00

Three months ago, in a phone conversation with John Smith just before Christmas, you mentioned several concerns that you wanted addressed before you would be prepared to settle them. We have contacted you several times since then asking you to set out those concerns in bullet form either in a letter or by email so that we may look at addressing them for you.

In view of the amount involved and the serious ageing of those invoices we are now obliged to formally ask you, for a final time, to set out those concerns in writing so that we are in receipt of them by the close of business of Thursday, 02 April.

Please understand that if your account remains outstanding and we are not in receipt of your written concerns by the above date we will be obliged to revert to policy and pursue payment through other channels.

-------------------------------------------

Why this will work.

1: We are writing the Bad News - See speak the good news, write the bad news
2: We are sticking to the ideal collection letter format that we looked at in bob - the builder (part 3)
------- paragraph 1 - state the facts.
------- paragraph 2 - say what you want the debtor to do.
------- paragraph 3 - tell the debtor what will happen if he doesn't do as requested.
3: In paragraph 2, we gave the debtor an unusual "pay by" date. a Thursday. It infers that something will happen on Friday if he doesn't complain or pay. Much, much stronger psychologically than "by the of the month" or "within 10 days".
4: Fear of the unknown is being applied.
------- "revert to policy" - what's that?
------- "Pursue payment through other channels" -what channels?

it's the way that you say it

2009-03-24T19:46:00.009+10:00

“Thanks a lot … Dad”,

said my oldest daughter when she was 21. But the emphasis was on the words ‘lot’ and ‘Dad’ with a large and overly-exaggerated pause between the two. Her meaning was obvious! (I wouldn’t let her borrow my car to go to one of her very-late-night parties.)

“Thanks ….. Thanks a lot, Dad”,

said my 9-year-old son. This phrase, almost exactly the same as the other one, meant something entirely different. The first “Thanks” was emphasized. That was followed by a short pause and then the rest of the words came tumbling out all at the same speed. It was Sunday afternoon. I’d just played a game of football with him.

Same words, totally different meanings.
The tone and the timing.

Be very conscious of these two factors. It’s such a sensitive issue when you’re on the phone chasing slow payers, asking someone to pay an account. Your tone and timing can so easily be misinterpreted.

oh no! they're going to phone

2009-03-24T05:26:00.014+10:00

When chasing slow debtors, put the words "We will phone you next week to see if we can be of any assistance" in your second or third reminder letter or email and more clients will pay or contact you! That's simply because debtors who genuinely intend to pay don't want to called on the phone.

-----------------------------------------------

To explain: If a debtor has just two invoices to pay - same amount and roughly the same date - and both creditors send a second reminder letter but one of them includes those words, the debtor is far more likely to react to the one that tells him if you don't pay we'll phone you. Try it, just once. Notice the reaction.

-----------------------------------------------

Another neat little trick is to use this wording in a letter.

I am writing this letter, as I was unable to
speak to you on the phone earlier this week
when I tried to call. We are most concerned
that some customers have not yet paid
their accounts and request that all balances
be fully up to date by {specify day and date}.

-----------------------------------------------

This works well for two reasons.
1: It tells the customer that you've already tried to talk to them (whether you really have or have not is not important!)
2: It specifies a "pay by" date.

People normally do not want to talk about an overdue account. They want to save face.

protect yourself

2009-03-19T16:42:00.015+10:00

Business risk on the rise (extract from a recent Dun & Bradstreet Report.)

The number of companies rated a high risk of financial distress or failure in 2009 is up 12% on the previous year and 26% on 2007 figures, according to new research released by Dun & Bradstreet.

The research comes on the back of newly released figures which reveal a 20% year-on-year increase in the number of firms entering insolvency and a 28% increase on 2006 figures. Meanwhile additional D&B data reveals a 40% increase in debt referrals in the past two months and a sharp increase in payment terms which takes debtor days to the highest level since 2001.

We have created a short, 6-page e-book called Chasing Slow Payers. It explains how to apply the three fundamental principles that underpin all successful credit management systems. It can be downloaded and printed so that it can be circulated to others in other formats. There is no charge & we don't ask for your contact details! Click here to download a copy.

payment agreements

2009-03-19T15:22:00.008+10:00

Did you know that a signed payment arrangement is a new contract? And, if that new contract is not honoured, you can sue and you will win judgement every time?

That means that if the debtor continually defaults on the payment arrangement made (and you've finally "had enough") and decide to sue, then you can sue them on the defaulted arrangement and you will win judgement every time!

You cannot lose.

The debtor cannot dispute any of the work done or anything about the service or product you supplied because you're not suing them about any of those, you're suing them for not keeping to the new contract - your payment agreement. In other words, they have negated their right to argue about the service or product supplied by signing a new contract - to pay you X dollars every week/month.

----------------------------------

IMPORTANT
* Include a stamped, self-addressed envelope and a copy of the your payment arrangement letter with the original of the letter.
* Put something like this at the bottom of the copy
I, Dave Debtor, agree to the above payment arrangement.
Signed By: ------------------dated:
Dave Debtor ----------------___ March 2009
* Send it by REGISTERED MAIL.

Some debtors won't sign and return this letter. But the ones that do intend honouring the arrangement will. And this acts as an idicator about their intent to pay. Their non-compliance to your request could indicate that they're only "stalling".

Click here to see some wording that you can use.

dealing with complaints

2009-03-12T12:11:00.014+10:00

When you are chasing slow debtors, sometimes mistakes happen.

A client gets upset. It happens. We're all human.

This post explains a simple 4-paragraph method to respond.

(Remember speak the good news, write the bad news?)

--------------------------------------------

This is the complaint received at one of our clients recently.

Dear Andrew,

Please note that Invoice #12345 is an account for Mrs Jane Sands.
It was only sent out from your offices and received by me in late February. A cheque was drawn and hand delivered to your firm on 09/03/09 together with my signed tax return.

This account has nothing to do with Mr John Sands or any of his affairs. John Sand's account was paid on 16/10/08.

This is not the first time that I have had to complain that:
. the invoice for my affairs has been incorrectly addressed to my husband
. that demands for payment have been received by me for accounts which were received late and were obviously not sent out at the original date of the invoice.

Could you kindly look into this matter.

Regards,
Jane Sands.

--------------------------------------------

This is the formula for dealing with written complaints always works. Just 4 short paragraphs.

1: Thank the client and confirm payment received.
The 'thank you' puts reader in a good frame of mind and 'payment is here' is another positive.

2: Explain what happened and apologise.

3: Describe what was done as a result of their complaint.
This demonstates to the the complainant that the mistake(s) should not occur again.

4: Thank the client, be grateful and apologise again.
All of this has been said at least twice before in the reply. Repeating them all again confirms to the client that you are genuine.

--------------------------------------------

This is the reply sent to the complainant on behalf of our client using the formula.

Dear Mrs Sands,
Thank you for your email and for the payment of Invoice 12345. It has now been receipted.

Your fee was incorrectly "coded" to Mr John Sands account instead of to yours. Please accept my apologies for this repeated mistake.

As a direct result of your email I've changed a couple of processes
1: to do with the matching of invoices to the correct "code", and
2: the other to do with the matching of fee dates to the actual mailing out of those fees.

So, thank you, for letting me know what had happened. I'm very grateful and apologise for any upset that may have been caused.

Regards,
Andrew White

--------------------------------------------

Why It Works:

It acknowledges that a mistake was made.
It explains how the mistake occurred and apologises for the first time.
It shows the complainant that their complaint has had a positive result. This is also a subtle, silent "thank you" - a second 'thank you'.
The repetition of 'thank you', 'I'm grateful' and apology ends the reply on a very positive note for the complainant.
The response is not sent by the person who did the work. It is also applying the good cop - bad cop technique described in an earlier post.

bob - the builder (part 7)

2009-03-12T08:11:00.008+10:00

To see all of bob - the builder as it unfolds/unfolded click here.

Part 7

Monday, 02 March 2009
Success! The next $10,000 received.
This email was received by Bob as a result of the email we sent on Friday, 27 February.

Hi Michael,

Please refer to my fax sent this morning to the number below.
The short month crept up on me.

Regards,
Jane (Dave the debtor's wife)

------------------------------------------

09/03/09
After confirming the money was now in cleared funds and waiting a few more days - timing is important - we sent this short email to Dave's wife

Hi Jane,

Thanks for last month’s payment.

The balance remaining is now down to $40,000
now that interest is suspended.

The next one will become due in three weeks,
on Friday, 27 March.

Regards,
Michael Todd

------------------------------------------

What should we do now?
Nothing, until just before the next due date. Just as we did in part 5 of this series.

Points To Note
It looks like Dave has allocated future payments of this debt to his wife. That's a very good sign. If he did not intend to pay the rest he would not have done so.

So, what do I expect to happen now? I think the next payment will be made just before the due date. Why? Because, generally speaking, people don't like to be contacted about overdue accounts. They like to save face.

collection stickers

2009-03-06T21:36:00.011+10:00

Puh-lease!! Would a sticker like this one get you to pay an overdue account? Collection stickers are just the lazy man’s way of getting attention to an overdue account. They don't work.

(If you ﬁnd that they work for you, then, please, continue to use them. But they have absolutely no emotional impact on the debtor, so they don’t normally work. I mean, would they affect you?)

A short hand-written note in red ink on the statement (or a copy of the invoice), however, does have an emotional impact on debtors. Especially if it's been written by someone that does know the customer personally. It means that someone has taken the trouble to write on your statement. It’s personal. A simple phrase such as “Please contact me on receipt of this statement” is all that’s needed. Much, much more effective if you do have to use statements.

-----------------------------------------------

I saw a very funny collection sticker a while ago. It was so funny that the Partner in the Patent Attorney ﬁrm I was consulting to showed it to me. Then he took it home to show his wife.

We never saw it again!

Did it work?………………………………………Nope.
Would a hand-written note on the statement have been taken home?……………………Nope
Would the one with a hand-written note on the statement be sent down to the Patent Attorneys Head Ofﬁce for payment?………………………Probably

Certainly worth considering, don't you think?

do doiunctss wrok?

2009-03-05T17:04:00.007+10:00

Do discounts work?
Short answer?
An emphatic ... YES.

Aoccdrnig to a rsscheearch at an Elingsh Uinervtisy, it deosn’t mttaer in waht oredr the ltteers in a wrod are, the olny iprmoatnt tihng is taht frist and lsat ltteers are in the rghit pclae. The rset can be a toatl mses and you can sitll raed it wouthit porbelm. Tihs is bcuseae we do not raed ervey lteter by it slef but the wrod as a wlohe.

So, in the same vein, read the article below. It describes one person's success chasing slow payers by using discounts as an incentive to reduce overdue accounts. (The article below was scrambled by courtesy of Word Scramber and can be found at http://rtfmtips.com/?p=10).

----------------------------------------

One of the msot sstfreusl prtas of any job uesd to be sdeinng in the ivocine and witinag the 30 dyas it wulod tkae for my cnielts to (huleolpfy) sned me a cehck. It got wsroe as the 30 day mrak got cleosr and I srttaed rinnung throguh seniaorcs in my head taht aalwys resteuld wtih me “gnmdiadne” my meony. To be heonst, it was rrae taht snoemoe wluod pay me ltae, and tshoe taht did are cetilns I no lngoer wrok for. Etlanlveuy I cmae up wtih a 10% dinocust if the clniet piad on derlveiy of the iioncve (anwlilog for a day or two to cut the ccehk). To tihs day, alsmot all of my ctnlies tkae me up on the dcusonit. I konw 10% sudnos lkie a lot of menoy (and soemteims it can be) but waiitng 30 dyas is aslo a lnog tmie and i’ts mcuh eeisar for me to pay any dtebs taht may hvae atlemauuccd oevr the cursoe of the pocrejt if I get piad as soon as the j’bos dnoe.

----------------------------------------

In my experience, they have always worked well and many accounts pay sooner, rather than later when discounts are offered. Can you introduce them?

collect debts quickly or ...

2009-03-05T16:46:00.006+10:00

Collect all overdue accounts now ... while you can!

The prospects of collecting an account diminish greatly as each day passes. When an account is 14 days old, the client may be solvent, easy to find and be prepared to pay their account when asked to do so. However, when your account reaches 90 days, there have been 76 extra days during which the clients may have moved or closed his or her business.

In business, if you are paid at 60 days, the sales dollar has lost 10% of its value. If your profit margins are 10%, you have lost all profit from the sale. At 180 days, you have made a 23% loss on that sale. That is, you are paying your clients to use your services.

The graph at the top of this post (prepared by MAUS Business Systems) shows how the chance of collecting a debt diminishes over time.

The Moral .... Start Early.