Tips 101 Collection




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

I: Warning signs of potential credit and collection problems:

1. Numerous inquiries about one of your accounts.

2. The customer changes banks frequently.

3. Customer requesting clarification or proof of service more frequently.

4. Changes in customer payment patterns.

5. Partial payments instead of full payment.

6. Problems in the client’s geographic area.

7. Problems in the client’s industry.

II: Warning Signs Your Sales Force May See First:

8. Reduction of order levels.

9. Empty shelves in warehouse or retail floor.

10. Plant operating at less than capacity.

11. Your client’s main customer is a problem.

12. Loss of key staff members.

13. Large layoffs or reductions in hours.

14. Restricted visits in facility areas.

III: Warning signs of possible incorrect verification problems:

15. Checks with printed numbers less than 300.

16. No name or address pre-printed on checks.

17. Initial checks without printed information.

18. Check address and ID do not match.

19. No photo ID or expired photo ID.

IV: Why collection problems occur:

20. Fear of losing business in the future (do not actively pursue delinquency for fear of losing business in the future).

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

22. Lack of training of collection personnel.

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

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

24. Clarify who does what.

25. Facilitates training.

26. Support actions.

27. Avoid unauthorized changes.

28. Promote consistency.

29. Reduce wasted time.

30. Answer 95% of routine questions.

VI: Develop your credit and collection “skills”:

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

32. Implement an early referral or healing program to maximize your internal and external recoveries.

33. Early referral programs, in addition to charging, help you identify and distinguish unpaid payments from slow payments and treat each accordingly.

34. Accounts that are 60 days old or less are more than 80% collection.

35. Accounts older than 90 days are typically less than 50% of what can be charged (internally).

36. Accounts that are less than 60 days past due will typically maximize their internal performance and recovery. Use a third party for those more than 60-90 days past due while concentrating internal efforts on the easier slow pay accounts.

37. Develop and use a “60 Day Pursuit Program.”

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

• Start with your offenders early; contact them often within the 60-day period.

• Get progressively stronger as the 60 days pass.

38. Items to use in the 60-Day Search Program: copies of statements / invoices, letters, sales calls, phone calls, credit suspension.

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

VII: Collection letters:

40. The easiest automated way to collect money.

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

42. One-way communication.

43. Subject to misunderstandings.

44. Collection letters maintain dialogue with the debtor.

45. They are inexpensive.

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

47. Informs the debtor that he has not forgotten about them.

VIII: Other considerations in the use of collection letters:

48. Your invoice is not the only mail from the debtor.

49. Your letter competes with professional senders.

50. Change the appearance of each shipment.

51. You should discourage the debtor from throwing away your envelope.

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

53. Increase the chances of positive results with your letter.

54. Hand address in a blank envelope, they’ll open it!

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

56. Mark the envelope to encourage opening: “Urgent”, “Personal”, “Confidential”, “Do not fold”, “Personal and confidential”.

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

• “Save financing costs”.

• “Maintain a good credit history.”

• “Remain a valued customer.”

• “Avoid a bad debt history.”

• “Avoid setting up an outside collection agency.”

58. Progressively strengthen collection letters.

IX: Telephone collection calls.

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

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

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

62. Sell and keep control of the collection call.

X: Making the collection call:

63. The format of the call for collection:

• Identify the debtor.

• Identify yourself.

• Demand full payment.

• Psychological rest.

• Determine the problem or objection.

• Find a solution.

• Close the call and get a commitment.

64. Collection calls have three phases:

1. Opening phase.

2. Negotiation phase.

3. Closing phase.

Opening phase tactics:

65. Verify the identity of the debtor. (I’am asking [name]… is this him / her?)

66. Check the debtor’s address.

67. Identify yourself.

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

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

70. Pause and let the debtor answer.

Steps in Tactic 4 of the negotiation phase (in this order):

71. Step one: “I must have the full payment today.”

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

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

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

Closing phase tactics:

75. Collector recaps what is going to happen and when.

76. Payments are always expressed in dollars.

77. Points in time are always expressed as dates.

78. Debtors must confirm that they understand the next action on their part.

XI: Selection of an external agency:

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

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

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

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

XII: Twenty more tips, especially for medical practice:

83. Perform pre-registration (and credit analysis) of new patients by phone or mail before the first office visit. This reduces bottlenecks in the office and allows time for a credit check.

84. Secure credit bureau reports on new patients with poor credit history – Identify and resolve payment problems before services are rendered.

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

• Address: transitory or just a PO box.

• Telephone: none or not on the list.

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

• Occupation: none.

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

• Marital status: divorced or separated, young, single.

• Age: very young or very old.

• No insurance coverage.

86. Doctor jumping (if known).

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

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

XIII: Debtor Appeals for Special Medical Collection Calls:

89. “I assume you made several thousand dollars in the last few months, but we have only received a small payment.”

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

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

92. “Add it to a current loan (to pay us back) … or let go of some other bills like you have in the last few months.”

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

That’s 101 credit and collection tips and techniques that, when implemented effectively, can dramatically improve your cash flow and translate to higher profitability for your business.

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