Tips Collection 101

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 raise more money, faster, and for less. Much of the content in this article may be common knowledge and the kinds of things you and your organization are already doing on a daily basis. But there are sure to be several action-oriented tips and ideas that, if implemented, will help you do an even better job with your accounts receivable.

I: Warning signs of potential credit and collections problems:

1. Numerous inquiries about one of your accounts.

2. The client changes banks frequently.

3. Customer who requests clarification or proof of service more frequently.

4. Changes in customer payment patterns.

5. Partial payments instead of full payment.

6. Problems in the geographical area of ​​the client.

7. Problems in the client’s industry.

II: Warning signs your sales force may see first:

8. Order levels are reduced.

9. Empty shelves in warehouse or retail floor.

10. Plant operating at less than capacity.

11. Your client’s main client is in trouble.

12. Loss of key staff members.

13. Large layoffs or reductions in hours.

14. Restricted tours in the areas of the facilities.

III:Warning Signs of Potential Bad Check Problems:

15. Checks with printed numbers less than 300.

16. There is no name or address preprinted on the checks.

17. Startup checks without printed information.

18. The address on the check and the ID do not match.

19. No photo ID or expired photo ID.

IV: Why collection problems occur:

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

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

22. Lack of training of collection personnel.

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

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

24. Clarify who does what.

25. Facilitates training.

26. Equity media.

27. Avoid unauthorized changes.

28. Promotes 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 collectibility of an account, and (2) You will never have enough resources to collect all your delinquencies.

32. Implement a remission or early cure program to maximize your internal and external recoveries.

33. Early referral programs, in addition to collecting, help you identify and differentiate non-payers from late payers and treat them accordingly.

34. Accounts 60 days or less are over 80% collectible.

35. Accounts older than 90 days are typically less than 50% collected (internal).

36. Active accounts with less than 60 days past due will generally maximize your internal return and recovery. Use a third party for those more than 60-90 days delinquent while focusing internal efforts on the easiest slow paying accounts.

37. Develop and use a “60 Day Follow-up Program.”

• Concentrate all internal efforts in the time frame where they are most profitable.

• Start with your offenders early: Contact them often in the 60-day period.

• Get progressively stronger as the 60 days go by.

38. Items to be used in the 60-day Follow-up Program – copies of statements/invoices, letters, business visits, phone calls, credit suspension.

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

VII: Collection letters:

40. The easiest way to automate to collect money.

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

42. One-way communication.

43. Subject to misunderstanding.

44. Collection letters maintain a dialogue with the debtor.

45. They are cheap.

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

47. Let the debtor know that you haven’t forgotten about him.

VIII:Other considerations in the use of collection letters:

48. Your bill is not the debtor’s only mail.

49. Your letter competes with professional couriers.

50. Change the look of each mailing.

51. You must discourage the debtor from disposing of their envelope.

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

53. Increases the chances of getting positive results from your card.

54. Address a blank envelope – they’ll open it!

55. Add “Address Correction Requested” and “Postage Guaranteed Shipping” 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”.

• “Keep your good credit history.”

• “Keep being a valued customer.”

• “Avoid a history of delinquency.”

• “Avoid locating an outside collection agency.”

58. Make progressively stronger collection cards.

IX: Telephone Collection Calls.

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

60. The 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 resolve problems.

62. Sell and keep control over the collection call.

X: Making the collection call:

63. The collection call format:

• Identify the debtor.

• Identify yourself.

• Demand full payment.

• Psychological rest.

• Determine problem or objection.

• Find solution.

• Close the call and get 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’m calling for [name]… is he/she?)

66. Verify the debtor’s address.

67. Identify yourself.

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

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

70. Pause and let the debtor respond.

Tactical Negotiation Phase-4 Steps (in this order):

71. Step one: “I must receive payment in full today.”

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

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

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

Closing phase tactics:

75. The collector summarizes 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 following 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 reporting agencies.

81. Select an agency that works nationally rather than “locally” or “regionally” so that debtors are pursued even if they move outside 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 practices:

83. Conduct new patient pre-registration (and credit check) by phone or mail prior to first office visit. This reduces bottlenecks in the office and allows time for a credit investigation.

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: temporary or just a post office box.

• Telephone: none or not listed.

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

• Occupation: none.

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

• Marital status – divorced or separated people, young people, single.

• Age – very young or very old.

• No insurance coverage.

86. Jump doctor (if known).

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

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

XIII: Special Medical Collection Call Debtor Appeals:

89. “I guess you’ve made several thousand dollars over the past few months, but we’ve only received a small payment.”

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

91. “I know you want to protect your credit so you feel comfortable in case you or your family need to come back.”

92. “Add to a current loan (to pay us)… or let go of some other bills like you have ours for the past few months.”

Know the law… Debt collection, collection agencies, and credit bureaus are highly regulated. Full copies of the Fair Debt Collection Practices Act (FDCPA), the Fair Credit Reporting Act (FCRA), and a HIPAA-approved model agreement for health care providers are available at: []

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

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