When chasing slow payers there are three simple and fundamental rules to follow. We all learnt these in the playground.
Babies who use the third rule get fed. Children always use the first one when lending out a toy (“When can I have it back?”) Unfortunately most people in business concentrate on the only rule that doesn’t get accounts paid more quickly – the second one!
Lip service is paid to the first and the third rule simply isn’t applied at all until the debt has become very old. (Of course, by that stage the situation is embarrassing for both parties and often the amount is so large that it’s also difficult (if not
impossible) to resolve quickly.
It’s the systematic and planned application of all three rules that results in effective credit management in any business.
Rule #1 – Start early and tell everyone what you’re doing
You meet someone for the first time. They’re pleasant, easy to get along with. You enjoy their company, they enjoy yours. Now imagine how you’d feel if, when you see them again, they were rude and unpleasant. Like most of us, you’d probably wonder …
* “Why are they acting so differently?”
* “What’s so different from the last time? or
* “What’ve I done to upset them?” (this is the most common reaction.)
BUT – what if they’d been rude and downright unpleasant to you at that first meeting? Would you be worried about them during the second meeting? Of course not … because cos that’s the way they are. You wouldn’t be affected at all. That’s what they’re normally like.
Whatever we like to think,
we’re all affected by the way other people treat us.
What’s this got to do with account collections?
If you use start collecting accounts as soon as the payment’s due you can use this knowledge of human psychology and be pleasant and become gradually become more assertive (and “colder”) towards them later on if necessary.
It’s an extremely powerful tool but extremely under-rated. Simple. Powerful. Not applied in many businesses.
Now, ask yourself this.
Do you start collecting as soon as the payment’s due?
Ask, and you shall receive
Although now somewhat dated, the moral that underpins this true story still applies today ….
I was talking to the Financial Controller of a large legal firm a while ago when the phone rang.
“Excuse me”, he said, and took the call.
To the caller – “Yes. Hang on I’ll check.”
To me, while I waited – “Sorry about this. I’ll just be a second.”
He opened the top desk drawer, rifled through a pile of cheques (about 20) and returned to the phone call.
“Yes, we do have the account. I thought it’d been paid. But, if it hasn’t been, I’ll get it organised for you today. Straight away.” “Sure. No problems. Bye.”
He hung up.
“What was that all about,” I asked.
“That was one of our bigger creditors,” he explained.
“Times are tough right now.
That’s why we’ve got you here.
I’m holding a few cheques back and not mailing them out until they phone.
When they do, I’ll pay.
If they don’t, I’ll hang on to them a while longer!”
Motto: Apply Rule #1 – Start chasing accounts as soon as possible.