In "How to Collect From Anyone (Even Enron)," staff writer Ilan Mochari taps a panel of veteran collectors for their 30 best strategies for pulling in payments. On Inc.com, some of those panelists share their opinions on the collections techniques every business owner should avoid.
Nettie Morrison, accounts-receivable specialist for Foresight, a 50-employee software developer in Dublin, Ohio
Don't delay making that first phone call. "If the payment is due in 30 days and you don't get it, you really should be calling on day 31. Don't delay. If it's late Friday, don't give them the weekend. Don't worry about whether you're being a pest -- instead, you can view it as a chance to make a courtesy call. Because maybe they've sent the check, and you can just say, 'Gee, thanks,' and that's it. If you don't hear back from them, call again in a week. If it's a large dollar amount -- for me, over $30,000 -- then check every two or three days."
Don't lose patience with your contacts. "What you want to do is continue with your contact as an ally. You want it to be you two against the world. I can't tell you how many times I've had people thank me, in writing, for my patience. I try to be like Chinese water torture: Always there, only gradually increasing the pressure."
Tracy Wald, CFO of Leonhardt Fitch, a $10-million branding consultancy in Seattle
Don't try to resolve too many issues at once. "When a customer owes on many invoices or accounts, discuss and/or collect them one at a time. When you lump many together often a small problem on one invoice or account can hold up everything. Pick off the easy ones first. Just like sales, it is easier to get more business from a customer who is already giving you some than to get business from a customer who is giving you none."
Don't call decision-makers directly. "When trying to get to decision makers -- CFO, controller, owner -- try to get transferred internally. Call the accounts-payable clerk and have them transfer you, rather than calling the switchboard. Direct calls are, far more often than not, screened out."
Rick Kadet, management consultant at the Brenner Group, a CFO-for-hire company in the San Francisco Bay area
Don't forget to ask for the money. "Sometimes collection people pussyfoot around and don't really act as if the money is important to them. It is my experience that if you want to be paid, you have to be up-front. Treat the money as a matter of right: A partnership is two-sided, and customer's obligation is to pay. I have never found that a customer you wanted to keep objected to being asked for money."
Don't wimp out behind letters. "I find that writing to a large customer for payment is generally not worth the time. In fact, it may make the problem worse because of the delay while you wait in vain for a reply. Monthly statements and nice collection letters are frequently just set aside. The telephone is still the best approach, despite the march of technology. Personal visits can also help when the customer is nearby."
Rolf Albers, CEO and founder of Albers Manufacturing, a $12-million electronics-manufacturing company in O' Fallon, Mo.
Don' t give up. " We have sometimes collected two years or more after we had almost given up all hope. Some customers are quite honorable, but may fall on hard times for a while. They will often find a way -- eventually -- to do the right thing: pay their debts.
Don't resort to legal means too early or too late. "Example number 1: If you threaten to sue immediately, you can kiss that customer good-bye -- even if he finally pays you. Example number 2: Let's say you sold a central air conditioner to an HVAC contractor. If he doesn't pay, you might consider resorting to a mechanics lien. But if you wait too long to file that mechanics lien, your lien rights expire."
Ilan Mochari is a staff writer at Inc.
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