Chapter 8

The Ins and Outs of Collection Phone Calls

In This Chapter

Setting goals for successful collection calls

Sharpening your phone skills

Dealing with difficult debtors

Getting the results you need on the phone

In the collection business, your accounts receivable aging sheet speaks volumes. It tells you which debtors are ignoring their invoices and shouts out to you, “Get on the phone and tell your debtor that it’s time to pay up!” Why make phone calls to request payment? Because, despite the improvements in technology through media such as fax and e-mail, the telephone call still provides a personal touch, second only to actually knocking on the door and confronting the customer face to face. Also, quite often, it works.

Before you pick up the phone, you need to know the tricks of the trade. You should have all the information on the account at your fingertips and have an established note-taking system to document calls. Although you’ll improve with practice, from your first collection call you should give thought to which telephone techniques work for you, be prepared to handle disputes and complaints, and brace yourself to confront a variety of personality types. This chapter tells you what you need to know.

Strategies for Successful Collections

It’s difficult to say exactly when the transition takes place from customer to debtor. A good rule of thumb is that when an account is 30 days past due and a customer has ignored collection efforts, the customer’s a debtor. You can feel the transition: When you communicate with a debtor, there’s tension in the air. Your goal is to get past the tension, complete a successful call, and get paid.

Selecting who will make the calls

If your collection department consists of you, congratulations. The job of calling delinquent accounts is yours. But if you have a staff, you need to figure out who’s going to be most effective at making collection calls. So size up your staff and think about your best candidates.

Many people, probably most, aren’t comfortable making collection calls. You may be tempted to hand off the job to the part-timer you hired to enter data and water the plants, but don’t do it. The ideal person is

Self-assured

Quick on his feet

Assertive

Professional

A good listener

Good at taking notes

Familiar with your customer’s purchase history and paperwork

When assigning this job, you may be tempted to draw straws, short straw loses. But that’s no way to choose the best person. You want someone who can grab the phone and collect money. (Note: In the rest of this chapter we assume you’re the one making the calls.)

Whoever makes the phone calls from your company represents your business. Her words and actions reflect on your business, and, believe us, when getting collection calls, your customers will remember any slights. The person making the calls must be calm and professional. Don’t tarnish your business by tolerating arrogance, rudeness, or any other lack of professionalism by your caller.

Having the debtor’s file at your fingertips

Before the call, have the customer’s collection file on hand: copies of invoices, statements, POs, credit and debit memos, credit applications, contacts, personal guarantees, financial statements, notes from prior conversations, and any previous demand letters.

When a debtor starts squawking about paying, the documents in your file are worth their weight in gold. When, moments after making an objection, your debtor sees documents disproving his complaint come crackling out of his fax machine, he knows you mean business.

Ease of access is a key to effective communication

Do you dread the idea of getting a debtor on the phone and being told, “We paid that bill,” or, “We don’t owe you for that”? You shouldn’t. It’s a challenge, and cutting a debtor’s arguments to pieces can be a lot of fun.

For example, your debtor has three open invoices and refuses to pay, claiming, “I already paid the third invoice, and I only owe the first two.” Your ledger shows this isn’t true, so you tell the debtor, “I have my ledger here, and it shows one payment from last October of $357, leaving these three invoices outstanding. Your past-due total is $2,527. May we expect that payment today?”

Chop false claims off at the knees. That won’t always stop your debtors from making false claims, but it puts them on notice: You mean business and are prepared for the challenge.

Having backup copies at the ready for your customer

You may discover that some of your customers keep very poor records, while others falsely claim, “I don’t have a copy of that invoice,” as a stall tactic. It’s easy with today’s technology to furnish that information while your debtor is still on the line.

Sometimes it’s obvious that a debtor is stalling. Your debtor claims, “I need a copy of that third invoice you’re talking about. I’ll review it and get back to you.” The promise to “get back to you” is debtor-speak for “I want to get off the phone,” and the promise to review the invoice means nothing. So scan the invoice and e-mail or fax it to the debtor while you’re still on the phone. If you can fax from your location, tell the debtor, “Hang on with me; you’ll have it in 10 seconds.”

If you still have your customer on the phone when the fax or e-mail goes through, ask her if she received the document and if it resolved her concerns. The response will give you a pretty good sense of whether the debtor is sincere or is continuing to stall.

Taking notes to capture the moment

Develop a note-taking system so you can make quick notes while you’re on the phone with your debtor. Take notes as you talk, starting with the date and time of your conversation and the name and title of the person you’re speaking with. Your notes should include anything that may be helpful in future collections, including disputes raised by the debtor and how you responded, any admissions you elicit, and any agreements you reach.

You shouldn’t rely on your memory to make notes after the call’s completion. Also, pausing between calls to record your recollections will keep you from getting “on a roll” and making a rapid series of collections calls. We explain the importance of making a series of calls at the end of the chapter.

Standardize your note-taking system. Compile a glossary of commonly used abbreviations to use in your notes. If you can’t recall what abbreviation to use, err on the side of clarity: Spell out the word or use a standard abbreviation, but be careful — does “N/A” mean “no answer” or “not applicable”? Handwritten notes must be legible. If no one can read or interpret your notes, the benefit of keeping notes is lost.

Preparing for a bad outcome

No matter how experienced you are, some collection calls are much more effective than others. In the best case, you get right through to the debtor and make immediate arrangements for payment. Payment arrives promptly. Perhaps the debtor even apologizes for the lateness of the payment.

Unfortunately, the best case is uncommon. More likely, the person at the other end of the line is distracted, confused, ill, unfamiliar with the account payable, or just plain angry or mean. You may apply every ounce of your ability, only to find that the person you’re talking to is very good at stalling, or maybe he simply hangs up on you. You’re left with the feeling that the call was a waste of time. I’ve made many phone calls where I ended up staring at the phone, listening to the haunting sound of the dial tone, and wondering why I even bothered to get out of bed that morning.

If you’re prepared for a bad outcome when you make a collection call, you’ll be in shape to confront problems you encounter while you’re on the phone. You don’t need to be told how to deal with the best case. The rest of this chapter is devoted to making the best of the bad cases and how to keep your sanity. Yes, you’ll figure out that I’ve made a lot of mistakes while discovering how to handle collection calls, but rest assured, no animals were harmed in the process.

Always remember, it’s the debtor who owes you money. Whatever you may choose to give to a debtor, you don’t owe the debtor a thing. Think of the debtor’s abruptness, coldness, and defensiveness as a challenge. With your firm commitment to collect payment, even calls that start out rough can be turned around and made productive.

Making the All-Important First Call

The first collection call is often the most important one you make. Why? Because if you’re dealing with a customer who wants to avoid payment and doesn’t want to talk to you, it may be your only chance for a successful call.

Your first call catches your debtor off guard. Short of hanging up on you, your debtor must listen to what you have to say in a direct, one-on-one conversation. The next time you call, your debtor may see your name pop up on her caller ID and let your call go to voice mail, or she may simply tell her secretary to say that she’s busy.

Also, the courtesy you sometimes get by virtue of surprise may not be so easy to come by in the future. Your purpose is now known. The next time you call, no matter whom you speak to, you may encounter a lot less helpfulness and courtesy.

The following sections walk you through the steps and strategies to make the most of your first collection call.

How to mentally prepare

I remember as a kid, I wanted an increase in allowance, and I just blurted it out to my parents at dinner one night. My heartfelt plea was met with a cold stare of rejection. That was a request made without adequate mental preparation. I didn’t discover the lesson right away, but eventually figured out that when I needed to say something important, I would benefit from running the conversation through my mind — visualizing it, if you will — to anticipate how it would be received and whether I was likely to convince the listener of my wisdom.

Before “dialing for dollars,” spend a few moments to consider what you’ll be discussing with the debtor, the debtor’s likely responses, and even the outcome. Think through your call, including

Warming the person up for a collection demand.

Fixing the minimum demand in your mind (full payment now, or half down and half in 30 days, for example).

Keeping on an even keel, emotionally, even if your debtor “loses it.”

Being persistent if a debtor stalls for time.

Listening, yet not agreeing with any statements contrary to your collection goals.

Picture yourself being calm, confident, and collected during the call. This is time well spent and can help make your call much more effective.

Choosing whom to call

If your debtor is a consumer, you want to speak to the person who incurred the debt. Follow the guidelines of the Fair Debt Collection Practices Act (FDCPA), and don’t speak to any third parties about the obligation. Your goal is to confront the debtor himself about paying off the debt. See Chapters 6 and 20 for tips on complying with the FDCPA.

With commercial debtors, you may be able to speak to one of several people regarding an unpaid bill. You want to figure out who has the authority to actually write a check. A clerk in the accounts payable department may process paperwork but may not have the authority to prioritize your debt. In fact, a clerk may be under instructions to preserve cash flow and avoid paying bills altogether. Whenever possible, speak with someone in charge.

Orders are delegated downward. If you persuade the company president that your debt should be paid, odds are that the president will order the bill paid. Although the president of a large company may not have a great deal to do with paying bills, she can assign the call to someone who does. Start high and work down.

Preparing a script

Your collection phone calls adhere to a simple pattern: You identify yourself and request payment from the debtor. You don’t need to have a complicated script on hand, anticipating every response and scenario, but you should have your basic collections request scripted.

Your script opens with, “This is Jane Smith from the XYZ Company calling for Mrs. Jones.” Never disclose that you’re seeking money until you have the intended person on the phone. You want to be sure that the person you’re speaking with can authorize payment of your bill.

After the debtor answers the phone, repeat your name, the name of your business, and make a specific request for money. You can say something like, “This is Tom Smith calling from the ABC Company in Birmingham, Michigan. We show a balance of $2,500 that is 60 days past due, and I’m calling to request payment of that sum. Can you send us payment today?”

Honing your listening skills

During collection calls, you need to maintain control over the conversation, but at the same time you must listen carefully to what the debtor is saying. If the debtor is merely asking for more time, you should remain firm and persistent in your encouragement of prompt payment.

But if the debtor raises a dispute, you need to pay close attention and make careful notes of the exact nature of the dispute. Try to hone in on the specifics of the dispute and figure out, on the fly, how you can address it. Be prepared for the unexpected. Common problems include:

Surprise on their end: You’re speaking with a representative of the debtor who isn’t familiar with the fact that the account is past due. Find out if you can speak to somebody else, or offer to send over a statement of account (for the millionth time) or other helpful documents.

Lack of documentation: Sometimes what can sound like stalling or a lame excuse turns out to be bad record keeping, and the person paying the bills lacks key documents. Getting paid may be as simple as providing your billing address or furnishing another copy of the statement or invoice.

Poor accounting: Your customer may be unsure about his exact outstanding balance. You should be able to provide an immediate, accurate balance in the initial phone call (along with supporting documentation). Conclude the conversation by getting a commitment for payment in a specific amount and a date by which that amount will be paid.

Business or personal problems: You’ll hear all sorts of reasons why a customer hasn’t paid, including divorce, death in the family, illness, injury to a key employee, embezzlement within the debtor company, a sudden downturn of business, and the debtor’s inability to collect its own receivables. In your collections call, take the role of problem solver and even make polite suggestions such as: “I understand you’ve had some serious challenges, and I’ll work with you as much as I can. Can we arrange for at least half of this outstanding bill to be paid today with the remaining half in 30 days?” Your willingness to sympathize or bend the rules a little bit in some, but not all, occasions can result in payment. (Trust your instincts if you think you’re being played.)

Whatever the reason for the problem with payment, check your notes. If the debtor has used similar excuses in the past, but you didn’t get paid promptly, you need to reconsider your extension of credit. Remind your customer that “I’ve heard that one before, we worked through it, and you still didn’t meet your commitment of payment.”

Hopefully, the dispute is minor and can be resolved quickly in the first telephone call, so the entire bill can then be paid. Whatever the dispute, if it applies to only a portion of the debt, seek a commitment for payment of the undisputed amount before concluding the conversation.

Tricks of the Trade: Handling Your Collection Call like a Pro

Although many technologies exist for instant communication, the telephone is still one of the best. A phone call gives you direct and instant communication with no gaps in time. If you reach the desired person on the other end, she can’t complain about missing messages or e-mails.

Used properly, the telephone can get you paid in many instances where other forms of communication may not. It’s not just a matter of timing. The manner in which you represent yourself and your company can make a big difference in whether your collection call succeeds or fails.

The following tricks of the trade can greatly enhance the collection phone call, making it more productive in less time than you thought.

Perfecting your “telephone voice”

Develop a “telephone voice” that is a bit slower, lower, and louder than your normal voice. This isn’t to be exaggerated. Your telephone voice helps you pace the conversation while allowing your debtor to clearly hear every word you say.

Pressing the receptionist for details on business debtors

Don’t forget that receptionists are trained to be courteous and polite and to provide information to their customers. Although you don’t want to state the purpose of your call to the receptionist, before you request to be connected to a specific person, use the receptionist’s helpfulness to confirm information from the debtor’s credit application. Have the receptionist verify the phone number, address, and company name (or listen carefully to the name when the receptionist answers the phone), and subtly confirm who the owners are to make sure there haven’t been any significant changes.

If the receptionist answers the phone with a company name other than the one in your records, be sure to ask about the name change.

Getting the correct person on the line

The person who answers the phone may not be the person you want to speak with. Use your credit application or other information from your credit file to ask for a specific person who you know has the authority to pay you. When you’ve reached the point of making collection calls, you only want to speak with a person you know to have the actual authority to write a check and put it in the mail right now. After the right person is on the phone, give your name and the name of your business and make a specific request for money.

Making proper comments and avoiding the improper

When you’re trying to collect money, positive comments and professionalism can go a long way. Particularly for consumer debts, you need to be careful about legal restrictions on when and how you make contact. For example:

Don’t say you’re going to sue the debtor if you don’t actually intend to file a lawsuit if you don’t receive payment.

Don’t talk to third parties about the debtor’s account.

Don’t threaten or harass a debtor.

Don’t try to collect debts directly from a debtor who has just filed bankruptcy.

Don’t threaten debtors with criminal charges if they don’t pay the debt.

Don’t contact debtors directly if you know they’re represented by a lawyer in relation to the debt you’re collecting.

The FDCPA and other consumer laws limit the times of day for collections calls, limit the number of times a call may be placed, restrict the people who can be contacted about a debt, restrict what you can do if you’re asked not to call again, and the list goes on. Mistakes can get you sued. For a comprehensive list of do’s and don’ts under the FDCPA, consult Chapter 6.

Listening, yet controlling the conversation

The expression “out of the mouths of babes” is applicable to many conversations with debtors. Listen carefully and you’ll uncover pearls of information from debtors including, if you’re lucky, information you can use later to collect the debt, such as after you’ve obtained a judgment and are looking for assets to attach.

You want to pin down your debtor, getting a commitment for a specific payment by a specific date. But you’re also seeking information to help you evaluate collectability and identify the debtor’s assets. Good listening can help you uncover:

Where the debtor banks: “That bank of mine, Comerica, refuses to loan me more money.” This information can be used for future garnishments.

Whom the debtor is doing business with (who owes your debtor money): “As soon as I get my money in from Ford, I can send you a check.” This information can also be used for future garnishments.

Whether the debtor can borrow money to pay you: “I’ve got an application in to the Small Business Administration for a loan to pay you and other creditors.”

Information that explains why you haven’t been paid — and whether you’re likely to be paid: “I fell off a roof and haven’t been able to work for six months, and all my employees left me to work for others.”

Although you want to pick up all the information you can that’s relevant to collection, a conversation with a talkative debtor can quickly spin out of control. You may soon be subjected to a million bits of information that aren’t helpful to you, including personal stuff, reasons a debtor doesn’t like your company, why life is unfair and . . . well, you get the idea. When that happens, try to bring the conversation back under control. You may have to assert yourself, break in to the debtor’s soliloquy, and bring the call back to the topic at hand: when is the bill going to be paid!

Silencio! Using a pause

Wanna know what a debtor is really thinking, even when the debtor’s antics seem to make communication impossible? Use a pause.

Try this: Make a statement or ask a question you want a reply to, such as, “When will you have payment on the account?” Then pause silently for a few seconds. Most of us are uncomfortable with more than a few seconds of silence, so we say something to fill in the silence. If your debtor fills the pause, that filler often contains good information or insight into the person you have on the line.

Staying positive

Throughout your call, you want your debtor to perceive an upbeat, positive attitude. Your debtor used to be a customer and ideally will be again after the account is current. Positive comments and attitude may preserve your stressed relationship.

You may be tempted to say, “I need your immediate cooperation,” or, “We must have your payment at once.” These types of negative statements do little to motivate a debtor to pay. Try a positive comment, such as, “You’ve paid promptly in the past, and I’m surprised I had to contact you about a past-due account . . .” or, “I know you’re making every effort to take care of this as soon as possible,” or even, “Let’s work this out together to avoid having to report any adverse comments to the credit bureaus.”

Keeping Your Eyes on the Prize

Telemarketers have their tactics down cold: After a few sentences of warm, fuzzy comments, they go in for the kill. Nothing in their work is random. They have a pretty good idea of what their prospects will say before they pick up the phone, and they have a plan that covers the most common contingencies.

That sounds like the strategy of a good bill collector to us. Collection call goals should include

Getting paid: When possible, get a commitment to a specific date when payment will be made, the amount that will be paid, and the method of payment.

• Convince the debtor that the balance owed to you is high priority and should be resolved quickly, ahead of other debts.

• Help the debtor think of sources of funds, such as borrowing from associates or relatives or accessing a line of credit, to avoid stronger collection measures.

Verification of customer data: Confirm the debtor’s address and ownership, and contact information, and make note of any changes from credit applications or earlier file notes.

Conveying confidence: The debtor should understand that you know quite a bit about him. That understanding may provide a strong psycho-logical edge and may discourage the debtor from making ridiculous excuses for nonpayment.

Playing the cards you’re dealt: Dealing with the debtor’s personality

Debtors come in all shapes, sizes, and personalities. If you’re lucky, your customer will be polite and apologetic. More realistically, you’ll encounter some unpleasant behaviors, even from normally pleasant people. You should know how to respond to the most common problem personalities.

Arrogant debtors

Some debtors think they’re smarter and more clever than anyone else. A collection call can become a battle of wits. The debtor offers all sorts of justifications for nonpayment, and may have even convinced herself that the money isn’t owed and that you have no business interrupting her day and demanding money. To keep the call under control, you must respond calmly and persistently, point by point, with facts that refute the debtor’s allegations.

Debtors with selective memory

You get your customer on the phone, and he doesn’t recall making the purchase, doesn’t recall making any commitments to pay the bill, and doesn’t even remember promising to put a check in the mail a few days ago. You must remind the debtor that commitments were made on specific dates for specific amounts of money, and you should produce copies of confirming memos or e-mails to prove that the debtor made the commitments. By producing a document for every denial, you can successfully overcome the debtor’s lack of memory.

Screamers

Some debtors become enraged, perhaps to the point of screaming into the telephone. Your challenge is to remain calm and remember the ultimate goal: to collect payment. You must not get angry or hang up; odds are that’s what the screamer wants.

A common complaint by a screamer is, “You people never respond when I have a problem! Why should I pay you?” Your response is, “Please let me know what your issues are specifically, and I’ll deal with them, one by one. Meanwhile, let’s also work on having the outstanding invoices paid off.”

Some screamers are calmed down by a blunt request for permission to speak. If the screamer grants permission, you proceed to state the case for payment without any sign of emotion or attempt at intimidation. Describe the account balance and make a specific request for payment: “I appreciate the comments you’ve made, but you have three invoices outstanding totaling $2,500. Can we expect you’ll put a check in the mail today for that amount?”

If asking for permission to speak fails and the screaming continues, you should make notes of the call. Despite the screaming, you should make every effort to get the debtor to admit the debt and arrive at a firm date and amount to be paid. With persistence, even screamers can be broken down.

Criers

Sometimes the most difficult person to have on the other end of the phone is the one who breaks down in tears. Odds are, the person is playing on your emotions. She wants sympathy and makes every effort to make you sorry for her by using illnesses, divorce, death in the family, accidents, and other “Lifetime movie events” to tug at your heartstrings.

Keep in mind that many people with real problems, who actually deserve some special consideration, may not discuss them with you. Some criers have real problems, but many don’t.

You should remain calm and composed, giving a response such as, “I can certainly appreciate how you feel; however, we have business at hand and must resolve this outstanding balance.” You should demonstrate that you listened to what the crier was saying, but at the same time continue forward and demand payment.

Keeping your temper: The secret to success

Yes, it’s very difficult to keep your temper in check when you’re dealing with certain personality types on the phone. This is especially true when you know you’re being lied to, or you’ve been lied to in the past. Broken promises can make you angry. Likewise, the sudden raising of disputes that are probably false, such as claims that “Your product never worked, and my customer wasn’t happy,” can trigger an angry response, particularly when your file is meticulously kept and includes no signs of any prior dispute or complaint.

But remember: Cooler heads get paid. You want to stay professional, regardless of the debtor’s attitude. Staying professional is difficult to do. In the showdown between you and your debtor, the debtor would like you to become angry and disorganized so he can “justify” (in his own mind) not paying you. Your calm demeanor and collected ability to respond to his claimed disputes will serve you well.

When you make collection calls, consider it your challenge to come away without having raised your voice, without hanging up the phone out of anger, and having carefully listened to your debtor without allowing the debtor to control the conversation.

Getting on a Roll: Making a Series of Collection Calls

When you’re making collection calls, try to get on a roll by making a series of telephone calls to different debtors. Assuming you’re organized before you begin, with files on hand (or on your computer screen), most collection calls can be completed rather rapidly. Use a headset so your hands remain free to take notes during the conversation or to do quick research through the file.

The fact is, some calls will go better than others, and some calls are just downright unpleasant. Getting on a roll helps you keep a positive mental state, because the calls with positive results deflect the negative ones. Exploit the momentum of a good call, and avoid the temptation to procrastinate after a bad call. Don’t let half an hour or an hour pass between calls. Whether the call before was good or bad, on the whole you’ll be more effective if the very next thing you do is call the next debtor on your list.

Mix up your calls. You have some idea who the tough debtors are going to be, so make sure some of the easier calls are mixed in with the tough ones. Nothing’s foolproof, but this approach can help keep you motivated and upbeat as you work through your list.