In collecting money from delinquent accounts receivable accounts there is right way of doing it if we want our collection efforts to be successful. We want to practice what I call the three “P’s”: We want to be Professional, Pleasant, and Persistent.
1. Professional. Collecting money legally is what being professional is all about. It means that we must be familiar with federal and state collection laws. Federal laws like the Fair Debt Collection Act and the Fair Credit Reporting Act. And for health care providers the Health Insurance Portability Act (HIPPAA) as it applies to obtaining payment for health care.
State collection laws vary state by state. And you should not only be familiar with the laws of your state but also the laws of the state where your debtor resides. However, I can tell you after presenting collection seminars in all 50 U.S. states, the principles of collection law are the same in all states.
2. Pleasant. The interesting thing about collection law is what is legal is usually what is effective in collecting money. And what is illegal is usually ineffective and you would not want to do it even if you could.
What I mean by that is hard ball, aggressive collection techniques don’t work. I realize that a lot of collectors use them, but they are not effective.
There are some things you can do that may help you coerce payment from your debtors. Like turning them over for collections. Or taking them to court. Or reporting them to a credit reporting agency according to the Fair Credit Reporting Act. But when all is said and done debtors will pay the creditors they want to pay.
And they will tend to pay the ones who are being pleasant with them — creditors who are trying to see it from the debtor’s point of view. Stephen Covey, the author of The 7 Habits of Highly Effective People, says the fifth habit of highly effective people is they seek first to understand before they are understood. So if you will seek first to understand it from the debtor’s perspective, it puts you in a much better position to be understood yourself.
Debtors also tend to pay creditors who are trying to get the problem solved. So I urge you to never think of yourself as a collector. Instead, think of yourself as a problem solver. If you can get your debtor to think of you as a problem solver you will collect a lot more money.
I’ll give you an example. When I was collecting money I used to say things like this: “Bill, you have been a customer of ours for several years now. During that time we have mutually benefited from our relationship. I know together when can get this problem solved.”
Do you see what I did? I first established some common ground with the customer. In my case a business relationship of some standing. In your case it may be you both like gardening. It does not matter what the common ground is. But when you can establish it, it is a good idea to do so.
Then I reminded the customer that we have both benefited from our relationship; not just me but the customer as well. If we don’t remind our customers of that, they forget it. They do benefit as well.
And then I used that to segue into setting myself up as a problem solver by simply saying, “I know together we can get this problem solved.” Now the debtor is no longer thinking of me as a collector. He is thinking of me as a problem solver. We are no longer adversaries. We are working on the same side of the table to try to get the problem solved.
3. Persistent. And the third “P” is we want to be persistent. It means that after the initial contact with the debtor is made, we must keep additional contacts on strict schedule. And it means we must have a good follow-up system. I’ll address the issue of effective follow-up systems in a future article.
So remember that debtors pay the creditors they want to pay. And they will usually pay the creditors who are practicing the three P’s: Professional, Pleasant, and Persistent.