By Peter Renton
What a difference a year makes. Just go back and look at the business section of any newspaper from February or March last year. You’ll read about new dot-com deals, stock market euphoria, record economic growth and just general business and consumer optimism. Everyone was spending freely as millions of people felt wealthy from the good economy and the heady stock market gains of the past several years.
In credit and collections we were just humming along like the rest of the country. Sure we kept a close eye on some of our problem customers, but we knew times were good and there were no signs of this changing any time soon. Now here we are in 2001, and times have changed. The economic news is rarely good, and I have noticed a sharp upturn in the number of companies going into Chapter 11 or Chapter 7 bankruptcy. After so many years of good times, it appears the economic tide has now turned.
Whether we go into a recession or not remains unclear, but what is clear is that the business climate has changed. Collecting money will most likely become a little harder than it was last year, and we need to prepare for this. To help you not only survive but thrive during this economic slowdown, I have prepared a little checklist for you to help ensure your continued success. This is an excellent time for a little “collections check-up”.
- Relationships More Important Than Ever: Nothing will ensure your long-term success more than becoming friends with your customers. I truly believe this should be the cornerstone of any credit and collection policy. Often it is just not possible to get to know all your customers personally, but you can do little things that add a personal touch. This way your customers will know they are not dealing with an impersonal corporation, but rather with someone who cares about their success.
- Persuade Your Customers: To Pay. In more difficult times you might need to use all your powers of persuasion to get your customers to part with their hard earned money. Are you doing everything you can to persuade your customers to pay? Think of your job in collections as a sales job, because that is what it really is. You are selling your customers on the idea of paying their account, so they will pay you before they pay anyone else, and they will pay happily. Think about your monthly statements, invoices, reminder letters and anything else you send your customers regarding their account. Could you be doing more? You should never just send a plain vanilla statement with just a generic computer generated message–that is what most people do. Make sure you are doing something to help you stand out from everyone else. And remember unless your customer has gone bankrupt, someone is going to get paid–you need to position yourself to maximize the likelihood that someone is you.
- Be A Problem Solver: When it becomes obvious that your customer has a serious problem, re-orient yourself and become the “problem solver”. Never take a combative stance, this will only alienate your customer–instead, lend a sympathetic ear. You should position yourself as the person who can help solve your customer’s problem. You should focus on coming up with a payment plan that is acceptable to both you and your customer. No doubt others are hounding your customer so if you can treat them with respect and help them get out of this difficult situation, they will really appreciate your efforts. And when your customer comes through this, you could well have a loyal customer for life.
- Detect Any Problems Early: Look closely for any change in the patterns of your customers. If a customer has paid on time for a long time and is late this month, check with your operators to see if they have noticed any changes with your customer. If you think it’s appropriate, call the customer just to check in, making sure it is a friendly, non-threatening phone call. Then if it looks like there is a problem you can become the “problem solver” as discussed in the previous point.
- Be Creative and Different: Here is your chance to really shine and differentiate yourself from your customers’ other creditors. There are really two types of creativity I am referring to here. First, you can be creative from a financial perspective. This can mean talking with a past due customer and agreeing to waive any interest on past due balances or extend an early payment discount. Secondly, you can be creative in a more unique way. The use of color can be very effective. Why not try sending your statements out in a bright, yellow envelope. Or mail a little gift item in with your statement.
There is one business who sends a nail file with her past due accounts with a little message “next time you file, please remember us.” The idea is to get attention and if you make the person receiving your bill laugh or smile then you have greatly increased your chances of being paid first. If times really do get tough, you will need to try a little harder just for the same results. The ideas here will help you navigate the potentially stormy times ahead.
Peter Renton publishes Renton’s Quarterly newsletter. He can be emailed at email@example.com.
[From Connection Magazine – May 2001]