How to Collect Debt from a Delinquent Commercial Account

Written by Lee VandenHeuvel

At Ross, Stuart & Dawson, our staff has over forty years of experience handling commercial and b2b debt collection. If you're having difficulty collecting on an unpaid claim, you may contact us to speak to a debt collector in Michigan today. You may also borrow some of the "tricks of the trade" we have learned and perfected over the years. Below is the first in a series of blogs where we explain what typically keeps clients from paying their bills and the most effective methods for collecting on outstanding debt before having to turn to a professional collection agency or attorney for assistance, which, of course, represents an additional expense for your company.

First: Determine the Reason for Non-Payment
Where to start when you have a client who is past due on an invoice? First, it is crucial to determine the exact reason for nonpayment as soon as possible. All bad debts typically come down to two things: CAN’T PAY or WON’T PAY. Your job is to determine which one it is and respond accordingly.

CAN’T PAY - Lack of funds or belief that there is a lack of funds. Most non-payments result from real or imagined lack of cash flow. Seasoned collection pros recognize that when they hear “poor cash flow” it means they will invariably be looking to structure a payment plan with the customer to help them with their cash flow issue. The key here is to first understand that ‘can’t pays’ are the easier of the two to deal with. It is very important to come across to your customer as a problem solver and showing empathy is the best way to accomplish this. You need to convey to them that you are partners and only want to help them. You can still be fair and firm and make sure the pay plan you come up with works for both parties. Once a pay plan has been agreed to, put it in writing and get your customer to sign it or even respond to an email will suffice. Remember to document everything! Then it comes down to follow-up every month to ensure that they honor the plan. Remind them a week before the due date and be prepared to call them the day after the due date if no payment shows up to hold their feet to the fire.

WON’T PAY – If your customer adamantly states they won’t pay or just refuses to pay, this is where experience and savvy negotiations come into play. ‘Won’t pays’ typically mean there is a real or imagined dispute of some kind; belief that your product/service was not satisfactory, breach of contract, never authorized service, no-shows, an over-zealous sales rep who oversold them, etc.

The key here is to LISTEN to what they have to say without interrupting, even if you know they are full of beetle dung. When it’s your turn to speak, IF the dispute is valid, you can be the hero and assure them that you will fix the problem to their satisfaction as long as they agree to pay in full. Then do it and hold them to their promise.

If the dispute is not valid (most aren’t), politely tell them so and why. At that point, if you find yourself in a stalemate, you can consider offering them a settlement for less than the full balance as an inducement to save money and resolve the issue without the need for further actions. Settlement negotiations can be a very effective tool, if used properly, and you don’t have to give away the store to do it. Have a number in mind of what you would be willing to live with, and then start with a higher number, which gives you some wiggle room to back down to your pre-approved number. Tip: NEVER accept their first offer! This is settlement strategy 101: they can always go a little higher than their opening offer. Remember, they are doing the same thing you are.

Debt Collector Michigan

Lee VandenHeuvel is President/CEO of Ross, Stuart & Dawson, Inc., a commercial collection agency certified by the Commercial League of America. Lee has been helping creditors for 30 years to review and improve their credit/collection processes and is a frequent speaker at industry conferences.

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