Always use a “Collection Hierarchy”

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Always use a “Collection Hierarchy”

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.

Only a few staff?
Do Collection Hierarchies work?
Use a non-threatening title to start off with

By | 2017-09-20T10:17:02+00:00 March 20th, 2015|Uncategorized|0 Comments

About the Author:

Have you ever wondered why a client does business with you and then ignores your invoice like they had no intention of paying it in the first place or they treat you like their own personal line of credit, leaving YOU dangling, waiting months for their payment? Unfortunately this situation is all too common and can even be puzzling for the most experienced business owner. If you’ve ever had to handle outstanding accounts or you are just so over non-payers, then we can help. Real-world skills, solutions, tips & strategies to get more accounts paid on time, and, most importantly, how to maintain customer goodwill while keeping YOUR cash flow in the positive. You will find the blog posts helpful but to get real results, contact us by using any of the forms on this site, by email or by phone. I’ve been involved in the management of accounts for over 30 years, heard every excuse in the book, can spot a non-payer at 20 paces. Finance Companies in the 70s (systematic, tough), professional firms in the 80s (no systems, too gentle) and, since then, just about every other sort of business you can think of. I’ve written books on the topic, spoken all over the place about it and the blog in this website is my way of “giving back”. I hope you find it helpful.

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