How to Collect from Anyone (Even Enron)

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7. Take legal action.
If things get really bad -- if a customer breaks a promise about making an ultralate payment, for example -- then Larkin places what's called a "mechanic's lien" on the utility's property. That's when the utility (again) gets angry at the general contractor. "It tends to cause a rift between them," says Larkin, who adds that for both parties the prospect of a mechanic's lien is dreadful. "Just the threat of it usually accomplishes the mission," he notes. According to Bob Edinger, contract manager at Larkin Enterprises, the cost to file a mechanic's lien is minimal.

8. Revoke privileges.
Rolf Albers of Albers Manufacturing Co. has been in business for 23 years. One thing still baffles him: "If I went to Sears today and wanted to buy a refrigerator, they would make me pay today, in one form or another," he says. "But a small manufacturer with no track record can call me, wanting $1,000 worth of equipment, and they think they can wait 90 days to pay. It's a stupid system, but that's the way it is." So Albers does his best to prevent his customers from taking advantage of "the system." If a customer gets too far behind in payments, Albers immediately converts that customer to COD status going forward. Unless it's one of his big customers. In that case, "they pay when they feel like it," he says.

9. Just drop by.
If you don't receive a scheduled payment, you might call your customer and ask, "Where's the check?" Whereupon your customer might say: "It's right here. It's going out in today's mail." To which, all our experts agree, you should always, always reply: "Don't bother sending it. I'm going to be in the neighborhood today. I'll pick it up." That simple tactic might be the most effective collections procedure out there. Larkin says he once visited his biggest customer, an international energy goliath, and came away with a $3.8-million check. Albers recalls walking out of a customer's office with a check "in the $10,000 range." Richard Kadet, a veteran CFO who works for the Brenner Group, also recommends making collection visits, especially for large invoices. And it doesn't always have to be the CEO or CFO who makes the visit. "For out-of-the-way customers, your salesperson in that territory can personally go for it," he says.

Make Your Visit Count

10. Enlist your allies.
Visiting a customer to collect a check may seem like trying to snatch a hostage from enemy territory. It needn't be that way, especially if one of the customer's employees is satisfied with your work. Tracy Wald usually has a good relationship with his clients' project managers. When Wald is looking to collect, he and the project manager will sometimes visit the accounting department together, with Wald playing the role of "bad cop" and the project manager playing the role of "helpless victim." "I'll bring the project manager down to accounting," says Wald. "Then I'll get him to say, 'It's not that I don't trust you. But Tracy says work will have to stop if he doesn't get a purchase order.' "

11. Always bring backup.
When you visit a customer, make sure that you come armed with specific documentation to support what the customer owes you. The last thing you want on a collection visit is a dispute over the amount of the bill. You also don't want to hear customers say that they either lost or never received the invoice that you had sent. Cullen G. Williams, CFO of Larkin Enterprises, heard those and other excuses the first few times that he visited his company's largest customer. But each time he had backup on hand -- time sheets signed by the customer's managers, which showed that Larkin employees had worked a certain number of hours on specific projects.

12. Remain calm.
"You have to be dispassionate about it," Williams advises. "Don't raise your voice, and don't make it personal. Be very bland. Use simple, nonthreatening sentences." Williams speaks from experience. His first visits to one customer came on the heels of some heated interactions between CEO Larkin and some of the customer's employees. Larkin, as co-owner of the company, understandably had both a personal and a professional stake in the large collection and was unable to remain dispassionate about the collecting process. So when Williams took over the task, his job was to diffuse "the harsh past" and make it clear that he'd do "whatever was reasonable to comply with the customer's requests," which meant, in this case, supplying backup documentation "10 times" over, he adds.

Use Phone Etiquette

13. Show some sympathy.
Just as you refrain from getting mad in face-to-face encounters, it doesn't pay to lose your cool on the phone, either. But how can you remain calm when some faceless administrator is giving you the runaround? Nettie Morrison of Foresight -- an administrator herself -- has mastered the art of phone empathy. "I say to them, 'I know they're not paying you to chase around invoices,' or something to that effect," she says. Showing that you understand where people are coming from helps to mollify them and possibly even win them over as an ally.

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