Debt Collection Theory

The problem with disputes

2005-07-01T15:17:00.000-07:00

A dispute can cause a lot of problems. When there is a dispute it becomes very diffult to collect the money. Disputes will often result in legal action of some sort. Even after a judgment people will not always pay. Accounts that are clear cut with the person not paying the bill are often the most collectible.

The trouble with accounts

2005-06-30T17:26:00.000-07:00

People culture and develop their accounts. So when an account becomes bad they often times are very unwilling to let it go. Creating an emotional response in your client can be the quickest way to close deals. Talk about how ridiculous it is that they have not been paid yet.

Id Debt or Number of Accounts going to collections

2005-06-29T21:07:00.000-07:00

You ideal prospect will have debt they need to send to collections as well as have a history of sending an account to collections. Often times one or the other will happen and the two do not always occur together. You want to develop continued business with all of your clients but some may only have one account and the other may send a ton to collections but having nothing immediate right now.

Collecting and Timing

2005-06-28T20:53:00.000-07:00

Sometimes timing is everything. When people are feeling fired up about someone that owes them money they get tenaciously vindictive. I called up a guy that was so pissed off he was willing to split whatever we recover.

Collecting using an investigative approach

2005-06-27T21:42:00.000-07:00

Many collection agencies claim that they use private investigators to employ an investigative collection process for your company. An investigative approach allows the agency to put more pressure on the company than the standard approach of just letter and phone calls.

Keep them from dragging their feet

2005-06-26T16:20:00.000-07:00

It is such a pain for the average AR person to send an account to collections. Even though there is no upfront fees the majority of times to begin the collection process people do not like to give up and send the accounts over. This is an important fact to keep in mind as you are identifying debt from your prospective client. Just because you have identified debt does not mean that they will hand the account over in a timely manner.

Collections is a mind game

2005-06-25T09:25:00.000-07:00

When we collect money there is a huge psychological element to it. The collectors do their best to create a picture of horrible consequences if the bill is not paid. As a sales rep in collections I am acutely aware of the fact that my commission is dependent upon the competency of the collector.

How to cultivate relationships in the midst of adversity

2005-06-24T05:26:00.000-07:00

I am dealing with a client right now that is considering placing another account with us. She has already placed three accounts with us and we have not collected on any of them. I try to instill confidence within her that if we can not collect it no other company can. This is indeed a tricky affair.

Leads and what to look for

2005-06-23T05:26:00.000-07:00

Having an accessible decision maker is so important. When you give your pitch to the AR person they could care less half of the time.When they tell their supervisor about your services the whole pitch is diluted. This is one of the reasons I hate talking with the AR person and not the owner. They view collections as a threat to their job.

Using the Sales Rep as Leverage

2005-06-22T05:29:00.000-07:00

It is common for AR people to tell their client that they are talking with a collection agency. This is one of the many aspects of the collection sales process that makes closing the sale slow. People will drag their feet as long as they can before they send anything to collections.

Collection Reps are viewed as scoundrels?

2005-06-22T05:26:00.000-07:00

It is not uncommon for me to have an excellent conversation with someone on the phone where I feel the rapport was excellent and a good connection was made. Then when I call back the person may sigh, appear to be aggravated or simply forget who I am. Leaving an impression that is different from the other collection reps is essential. Collections is intrinsically negative. People usually don’t get excited about sending accounts to collections.

Collection Reps are viewed as scoundrels?

2005-06-21T05:25:00.000-07:00

Residential collections versus commercial collections

2005-06-20T16:28:00.000-07:00

I was talking with my manager about the differences between residential collections and commercial collections. She believes there is more money to be made in commercial debt recovery. Residential collections requires making calls at specific times. Commercial debt recovery can be conducted at any time of the working day. One problem with commercial debt recovery is that you can only go after the company that is still in business. Unless of course there is a signed personal guarantee. Residential collections gives you the flexibility to go after the person no matter what.

Debt collection in Mexico

2005-06-19T17:41:00.000-07:00

We have just collected some money from a company in Mexico. The bilingual collector was able to retrieve some money and set up a payment plan. Being able to apply the correct amount of pressure requires a good understanding of the local laws in that particular are of Mexico.

International Debt Collection

2005-06-18T18:56:00.000-07:00

As globalization slowly becomes a reality many people are turning to debt collection agencies for non-paying customers in different countries. Many debt collection companies have bilingual collectors that are able to collect in several different countries. This could be an interesting niche for a new company. A company that deals strictly in international debt collection.

Australian Debt Collection

2005-06-17T19:53:00.000-07:00

Australian businesses are being warned they need to make an early assessment of their bad debts this financial year, as to whether or not they are recoverable or written off.
Privately-owned debt collection firm Prushka Fast Debt Recovery says businesses should think ahead when writing off debts that are not likely to be recovered.
"If you are hoping to get a tax deduction for the write-off of a bad debt, you have to take active steps prior to June 30," said Prushka chief executive Roger Mendelson.
"There must be a physical act of treating it as a bad debt prior to June 30 - it is insufficient to wait until preparation of accounts after the end of the financial year."
Mr Mendelson said one of the important steps businesses must take is actually resolving the fact that the debt is unrecoverable.
He said if the person or company owing the money is bankrupt or has gone into liquidation or receivership there would be a reasonable basis to conclude the debt could be written off.
"It comes down to making a value judgement on whether or not it is likely you are going to collect the debt or not," Mr Mendelson said.
"You then need to have a journal entry or a note written before June 30 to say that the debt is written off."
Mr Mendelson also warned that if bad debts are referred to a collection agency, the agency should be hired strictly on a 'no recovery - no charge' basis.
"Ultimately, spending money on collection activity indicates that you are not writing the debt off," he said.
"You wouldn't refer it to the agency if you didn't think you had some chance of actually recovering the debt."

Large Accounts

2005-06-17T05:25:00.000-07:00

Today one of the sales reps I work with closed a 1.5 million dollar deal from one call. I have to say that is very motivating to see that kind of close. He picked that up from one call. It was an impulse placement. Sometimes that can be a sign of desperation by companies but if that full amount is collected this guy will receive a full years salary and more.

Debt recovery for the credit unsophisticated

2005-06-16T05:16:00.000-07:00

It always amazes me when people tell me their accounts receivables are really not that bad when they have 15 accounts past due. I suppose it really is all relative even when it comes to clean account receivable books. People need our help and they do not even realize it. Some of the smaller companies I have dealt with have huge account problems and they honestly believe it is normal.

Your own version of collections and justice

2005-06-15T05:19:00.000-07:00

I asked a man today how he took care of their collections problem. He told me that his collector is a 300lbs gorilla named “Bruno” with a baseball bat.

Diesel Mechanics

2005-06-14T05:10:00.000-07:00

I was talking with a new woman today at work. Her last job was with a collection agency. We were both talking about profitable niches and what niche would be the best. She mentioned to me that Diesel Mechanics could be a good niche for commercial debt recovery services. She said the average balance on accounts are between $10K to $20K and the debts are all very collectable. She mentioned trucking companies have a lot of debt but it is not very collectable.

The Ideal Client

2005-06-13T05:12:00.000-07:00

Ultimately you would like to have a large client base that will place accounts 10 times a year or more. Holding onto these clients will result in a profitable book of business. A client should have 100+ active open accounts. The business should annually bring in between $5 million and $20 million. More than $20 million dollars annually is great but these companies often times have a strong internal collection department.

Collection intensity and preserving relationships for clients

2005-06-12T12:37:00.000-07:00

I often times hear my prospective clients tell me they want to preserve the existing business relationship they have with their client but they would like to send the client to collections. Depending upon the debt recovery service this is possible. Conducting a firm yet softer collection approach can often times solve the situation. This can be the case with hospitals. When a medical tech company sells to a hospital the hospital is often times slow to pay but the medical tech company depends upon the hospital for orders. Conducting a firm yet softer collection approach can result in recovering the money from the hospital as well as preserving the relationship that exists between the hospital and the medical tech company.

Coordination between Collector and Sales Person is essential

2005-06-11T14:20:00.000-07:00

I recently called a client that just placed a $20K account with our commercial debt recovery service. I wanted to give him an update. I called the collector first to get an update and I then called my client. Apparently some of the information the collector gave me was a bit vague and the client told me that he did not like that I did not know exactly what the situation was. I assured him that the collector was addressing all his needs. The next time I talk with the collector for an update I will be sure to get more details to leave the right impression on the client. This is especially important with those larger accounts.

Lead Generation Sources……Finding The Perfect Niche…Is it Out There??!!

2005-06-10T05:09:00.000-07:00

What is the perfect Niche for Commercial Debt Recovery Services. I was talking with my coworker who has been in the industry for over ten years. She believes distributors are a good target…..better than manufacturers. Manufacturers sell their items to the distributors leading to excellent accounts receivable books. The distributors end up selling to the mom and pop shops who do not always pay on time. My coworker and I also discussed the potential of specific departments that exist in large corporations such as Hewlett Packer.

BuyerZone Leads are a good thing!

2005-06-09T10:43:00.000-07:00

We are currently calling upon buyer zone leads. I have been given three buyer zone leads so far and I have closed two. This is an excellent ratio so far. The website www.buyer zone.com allows buyers to request a quote from several commercial debt recovery services. They are ready to use a service now. Rate wars between competing agencies does occur when calling upon these leads. This is the only downfall to this lead source.

ID Debt before it becomes a problem

2005-06-09T05:18:00.000-07:00

One important aspect of the sales process is identifying debt. It is often times better to identify debt that may potentially be a problem versus debt that is more than a year or two old. It is important to identify debt that is collectible. I was talking with a co-worker and she believes that finding a niche within an industry will help you identify debt that is highly collectible. I am very curious what type of debt is the most collectible.

Commercial Debt Recovery is not always a happy close.

2005-06-08T17:36:00.000-07:00

Let’s face it…..when someone turns over an account to a commercial debt recovery service they are essentially accepting defeat. They admit they can not collect the money on their own and they are now willing to take a cut in their profits to salvage what they can. With this in mind it is the sales person’s responsibility to keep the close as pleasant as possible. People may also turn over an account with vengeance. They may be so pissed off they have not gotten paid that they will make an impulsive emotional decision to send an account to collections. It is better if the close is emotionally driven. An emotionally driven client will be a smoother and quicker close.

Commercial Debt Collection Niche...Factoring?

2005-06-07T18:21:00.000-07:00

I have just started working for a commercial debt recovery service. We are given a variety of leads from a variety of industries. What I really want to find out is what niches are most profitable for commercial debt recovery services. I know we have a few large accounts from factoring companies. As far as I can understand factoring companies pay other companies for their account receivables at a discounted rate. I have heard mixed reports in my office as to whether this is a profitable niche.