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It's Hard to Ignore a Bill When the Collector Is Looking Right at You
Excerpts from How To Collect Debts (And Still Keep Your Customers)

There's a story about a man who one night is on his hands and knees searching for something on a street corner. A bystander asks if he can help. The man explains that he's dropped his watch and can't find it. The two of them stoop down and look for the watch until finally the bystander becomes frustrated and asks the man exactly where he lost it. The man replies that he dropped it across the street, but since there was more light under the street lamp, he was looking there.

We are reminded of this story every time we hear about collectors who continue to send collection mail even after it's obvious that additional letters aren't going to be effective. If two or three letters don't work, why should four, five or six be successful? There is no problem with collection letters per se; the problem is too many collection letters.

We were once hired by a business owner who was having major accounts receivable problems. We met with the owner, comptroller, and credit manager. The comptroller complained that his average days outstanding were growing monthly, and he was becoming increasingly concerned.

We asked the credit manager how he handled his delinquent accounts. He said that when a bill reached thirty days past due, his computer automatically sent out a past due statement. Then an additional statement was sent each month for five more months. If there were still no payment, the credit manager reviewed each account and then sent two personal letters demanding payment.

The account was then turned over to a letter service (a collection agency that only sends collection mail). A series of five additional letters was generated. This means that the debtor was sent thirteen collection notices over a period of about a year. It's no wonder that the company had collection difficulties.

Collection mail can play a major role in your collection process. By sending letters you avoid more time-consuming and expensive methods. The secret, however, is to know when to quit and try something else.

PERSONAL VISITS: MOST EFFECTIVE, LEAST USED. Most people would prefer not to confront their debtors face-to-face. However, as Martin demonstrates by the following story, it is the most effective method of collection.

I received a frantic call from a business friend of mine. One of her customers was several weeks past due on a bill for $80,000, and she didn't know what to do. Her debtor was located nearby, so I suggested that she go see him in person. She reported back to me a couple of days later.

The customer was surprised to see her, but was very nice. He bragged about how his business had grown and took her on a tour of the factory. He explained that his fast growth had caused him to be short of cash, but promised to mail her a check within a week or two.

I recommended she make a follow-up note for two weeks later, and if he didn't pay as promised, she should go back and see him again. She groaned, but said she would.

She called me a few weeks later and was as excited as if she had won the lottery. In a sense she had. He didn't pay as he had agreed, but she followed my advice and went back to see him. He wrote her a check for the full amount on the spot. Was it worth $80,000 to personally visit the man? You bet it was.

Sometimes it's best to surprise your debtor. Other times, you might want to call in advance. If you are unable to contact your debtor ahead of time, you might consider leaving a message specifying the date and time you will visit. Make sure you bring all the proper documentation with you so you can prove exactly how much is owed.

We asked the executive director of a local charity that raises a lot of money to rate the different ways he solicits funds. He said that by far his most effective method is to have solicitors meet face-to-face with their prospects. Telephone solicitation is second. Mail campaigns are third. This professional fund-raiser could just as easily have been talking about collecting past due accounts.

We want to leave you here with the story of an unconventional technique used by a client of ours. He owns a photographic and printing company, and he had a customer who was several months overdue. After writing and getting no response, he called, but could not get the customer to come to the phone or return his calls. Finally, he went to the customer's office, but the gentleman refused to see him.

In desperation and frustration our client went back to his office and had a sign printed in big red bold letters that screamed: I COLLECT BAD DEBTS. Then he returned to his customer's busy waiting room, placed the sign across his lap for everyone to see, and waited.

He collected his money.

[Author's note: We would definitely not recommend this aggressive collection technique.]

David and Martin Sher own and operate AmSher Receivables Management, based in Birmingham, Ala. David is president of the International Association of Commercial Collectors, and Martin is past president of his state unit of the American Collectors Assn. He is also a certified collector and certified instructor for the ACA. This book was inspired by the Sher brothers' seminar, Championship Collections.

Reprinted and excerpted with permission from How to Collect Debts (And Still Keep Your Customers)
By David Sher and Martin Sher
Copyright 1999, David Sher and Martin Sher
All rights reserved
Reprinted with permission of Amacom, a division of the American Management Association International, New York, N.Y.
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