Another podcast from the road with me, Wilson Cole, President of Adams, Evens & Ross (AER). Today I want to discuss the secret weapon of collections industry. It’s so effective that here at AER, half of our collections would get paid if we only used this one tool.
This tool is the sequential collection letter. It may be stereotypical and dreaded, but again, I am speaking from 27 years of experience when I tell you it is effective.
The key to its effectiveness is that it does not need to be aggressive. You can even do sequential collection postcards instead of collection letters.
I hear from clients that if they send out collections letters, they would lose all of their clients. Unfortunately these are also the same clients that also ask me “why do I get paid slowly?” The answer, whether they want to hear it or not, is because they have trained their clients to pay them slowly. Frequently in these cases I also see the friendship dynamic working against them. I’m talking about how building a rapport and friendship works great when it comes to sales, but it actually has a negative impact from a collections perspective. This is because debtors who have a good “friendship” with the people they owe money to will think “oh, we’re such good friends, they won’t mind if I take longer to pay them back.”
To begin a postcard or letter series, just let them know that you know they’re behind (such 30 days past payment due date), and let them know if they didn’t get the invoice, it can be re-sent.
The second phase of the series (such as 60 days past due) focuses on reminding them of the non-payment and requesting contact be returned whether they can or can’t pay at the present time.
The third phase (such as 90 days past due) communicates that invoices are past due and that payment needs to be sent immediately or contact returned immediately about when payment will be sent.
Just note that there is a difference between being aggressive and being abusive, with the obvious goal being not to cross the line into abusive.
Sequential collection postcards are a non-emotional, and potentially non-aggressive, way to collect funds. Especially when you consider that if you look at such alternatives as calling yourself; it’s typically not very effective. If you have a credit department make the calls, they either might not get made or might not be made with enthusiasm, because nobody likes collection calls (receiving or giving)..
Second series of collections letters/postcards is typically the most effective, for whatever reason.
If you want to turn over any collections to AER, or get your people trained up like a pro, call 800-452-5287, extension 6578 or visit www.yourcollectionmanager.com.