Using a collection hierarchy and following up unpaid accounts very quickly, while being polite but persistent, is much simpler, less confrontational and far more effective than chasing slow payers later and harder.
How to set up and work a Collection Hierarchy
Start chasing accounts gently with an individual. If they’re not effective in getting a paymemt in, ramp it up, get a more senior person to take over the follow up. AND, if THEY aren’t successful either, bring in the Big Guns then. But only then, only if the first two people have not been successful.
to explain …
The most junior person in the business should always be the first person to start phoning or writing to customers about overdue accounts. He or she may not actually be the most junior person, but should be the person that customers would consider the least threatening. If that person is not successful then they can refer that account on to the next person up in the hierarchy.
The customer then has to explain why they have not paid the account all over again to this second person. The more people in the hierarchy – the more times the customer has to tell their story if the payment has still not been made. The more times they have to tell their story – the more difficult it becomes for them not to pay.
The more difficult it becomes for them not to pay – the more likely it will be that you will be paid in preference to other creditors as soon as they do have the money to pay anyone.
This gradual increase in psychological pressure brought to bear on the debtor is extremely powerful. Much more powerful than the Big Gun following up an account from the outset. Best Practice – Three levels.
1 An Information Gatherer
Someone to inquire if the payment has “already been sent” (Secretary, Receptionist, Accounts Clerk, Girl Friday, Parent Liaison, Client Liaison, Andrew Thomasson …)
2 A Problem Solver
A more senior person who can contact the debtor with a “How can I help” approach (Office/Branch Manager, Manager of Accounts Receivable …) and, lastly,
3 The Decision Maker
The most senior person (Business Owner, Partner, School Principal …) who, armed with all the facts, can decide on the next logical collection action to be taken. By being last in the chain or hierarchy he can also adopt the “How can we resolve this problem together?” attitude. He can speak to them as an equal, as an ally – their friend. He will be armed with all the background notes on all collection action taken to date and can speak to the client from a position of knowledge, not from a position of frustration or annoyance. Logic will rule the discussion – not emotion.