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How to Make Receivables Harder to Collect

posted on 2014-05-11 by Dean Kaplan

We don’t know any­one who actu­ally wants to make it harder to col­lect invoices, but here are some com­mon issues that result in this scenario.

Repeat­edly Invoice Incorrectly

Develop a rep­u­ta­tion with your cus­tomer for send­ing invoices with wrong infor­ma­tion is a great way to end up at the bot­tom of their list to process.  Regard­less of the cause (e.g. wrong prices, back orders, miss ship­ments, incom­plete pur­chase orders), the result is delayed payment.

Don’t Lis­ten

If you won’t lis­ten to them, why should they lis­ten to you?

Delay Resolv­ing Disputes

You can­not col­lect while a dis­pute is unre­solved.  Regard­less of the rea­son (too busy, can’t get inter­nal coop­er­a­tion, can’t locate doc­u­ments, etc.), the longer it takes you, the longer your pay­ment gets delayed.  Wait long enough, and it becomes even harder as the nec­es­sary infor­ma­tion, includ­ing people’s mem­ory of the trans­ac­tion, is more dif­fi­cult to compile.

Auto­mated Nasty-grams

Keep send­ing auto­mated, increas­ingly nasty let­ters on dis­puted invoices that you haven’t had time to deal with to resolve.  Keep remind­ing them of your fail­ure to address the issues while threat­en­ing  to take esca­lated action against them.  They’ll remem­ber this unpleas­ant treat­ment long after the par­tic­u­lar dis­pute is resolved.

Bounce Them Around Your Company

“I can’t answer that ques­tion; you need to talk to _____”.  Make it their job to sort things out with the var­i­ous peo­ple in your company.

Treat All Cus­tomers The Same

Sure, poli­cies and pro­ce­dures are required for effi­ciency and effec­tive­ness.  But not all cus­tomers are alike.  Refuse to develop dif­fer­ent approaches, or even poli­cies and pro­ce­dures, and you can end up with repeated pay­ment issues.

We get a large num­ber of claims at our B2B col­lec­tion agency that reflect one or more of these issues.  We’ve become experts at dis­pute res­o­lu­tion with resul­tant debt col­lec­tions while try­ing to pre­serve vendor-customer affin­ity.  We under­stand that for clients where this is a rare occur­rence, turn­ing it over to us for the inten­sive time com­mit­ment and exper­tise required makes eco­nomic sense.  But, we have con­cern for our clients and their long-term cus­tomer rela­tion­shipsif we see this too often.

 




Free Fraud Detection Resources

posted on 2014-05-04 by Dean Kaplan

One of the sim­plest ways to detect poten­tial fraud is to con­firm cer­tain infor­ma­tion pro­vided on a credit appli­ca­tion using easy, free resources on the Inter­net. As a com­mer­cial col­lec­tion agency, we reg­u­larly get claims where this has not been done and we dis­cover that the infor­ma­tion pro­vided was either mis­lead­ing or out­right fraud. In either case, it is no sur­prise that the invoices were not col­lected by our clients. In less than five min­utes you can use four free resources on the web to uncover indi­ca­tors of the most com­mon fraud fac­tors.

The first thing to do is look for the company's web­site. Frankly, if a com­pany does not have a web­site in 2012, it is a cau­tion­ary indi­ca­tor, either as poten­tial fraud or as a com­pany that may strug­gle to per­form well in the Inter­net age. Typ­i­cally, sim­ply putting "www." in front of the text after the @ sym­bol in the email address pro­vided by the poten­tial cus­tomer will lead to the company's web­site. If this infor­ma­tion isn't avail­able, we sim­ply search on the Inter­net to find the com­pany web­site. If the email address pro­vided from an email ser­vice, such as Gmail, hot­mail, etc., that too is a cau­tion­ary indi­ca­tor, either of poten­tial fraud or sim­ply a very small business.

The next step is to ver­ify that the con­tact infor­ma­tion on the web­site is the same as pro­vided on the credit appli­ca­tion. This helps to ensure that you have found the cor­rect web­site as well as con­firm­ing that the cus­tomer is pro­vid­ing con­sis­tent con­tact infor­ma­tion. It is very impor­tant to call the phone and fax num­bers to ver­ify they are valid. Be care­ful if:

  • The phone is not answered in a pro­fes­sional manner;
  • The voice mail sys­tem does not iden­tify the company;
  • You can't get a live per­son via the voice­mail system;
  • It is a cell phone voice mail greeting;
  • It is a direct line to an individual.

Make sure you get the company's main phone num­ber, and for smaller busi­nesses get the owner's mobile phone num­ber and direct email address. If the busi­ness phone is a mobile phone, that typ­i­cally is an indi­ca­tor about the size or pos­si­bly the legit­i­macy of the business.

If there is no phone num­ber on the web­site, that is a red flag. Any com­pany that does not pub­lish a phone num­ber means they don't want their cus­tomers call­ing them. It is dif­fi­cult to pro­vide good cus­tomer ser­vice if there can­not be phone com­mu­ni­ca­tion, and if a poten­tial cus­tomer doesn't pro­vide good cus­tomer ser­vice, how long can their com­pany per­form well? The lack of a phone num­ber on a web­site is a com­mon fac­tor on a sig­nif­i­cant por­tion of the fraud­u­lent cases we see.

If the cus­tomer indi­cates they are a cor­po­ra­tion, LLC (lim­ited lia­bil­ity com­pany), or part­ner­ship, con­firm this with the appro­pri­ate Sec­re­tary of State. Forty-seven of the 50 states have free web­sites where you can get this infor­ma­tion with a sim­ple search. A com­plete list of these sites with links directly to the search pages is pro­vided on our web­site at http://www.kgaction.com/secstlinks/. Also on this page is the info-graphic dis­played here as well as a free down­load­able file that you can import into your web browser. It cre­ates a favorites folder in your browser with links to all 50 states for easy future reference.

Con­firm that the name and address reg­is­tered with the state is con­sis­tent with the infor­ma­tion on the credit appli­ca­tion and inves­ti­gate dis­crep­an­cies. If nec­es­sary, use a sim­i­lar process with the respec­tive licens­ing authority's online web­site if the busi­ness is required to have a pro­fes­sional license, such as a con­trac­tor, real estate bro­ker, or med­ical professional.

Next, ver­ify that the busi­ness address is valid and is a com­mer­cial loca­tion. Type the address into Google Maps. Use the satel­lite view to quickly estab­lish the type of build­ing at the loca­tion. Use street view when avail­able and if you feel the need to take a closer look. Fur­ther inves­ti­ga­tion is rec­om­mended if:

The build­ing does not look appro­pri­ate for the type of busi­ness;
Sig­nage view­able on street view shows a dif­fer­ent com­pany name;
It is a res­i­den­tial location.

Most impor­tantly, con­firm that this is not a mail­box ser­vice, such as a UPS Store, or exec­u­tive suites loca­tion. Over 90% of the fraud cases we see have a mail­box ser­vice, exec­u­tive suites or res­i­den­tial loca­tion as a pri­mary address.

There are a num­ber of dif­fer­ent ways to try to deter­mine if a com­mer­cial loca­tion might be a mail­box ser­vice such as a UPS store. Google Maps typ­i­cally will give you a list of the busi­nesses located at a spe­cific address. More research is needed if:

  • Sev­eral busi­nesses are listed at the address
  • The busi­nesses have suite num­bers, which might actu­ally be mail­box numbers
  • The name of one of the busi­nesses indi­cates a print, copy, pack­age or mail ser­vices firm

If noth­ing shows up on Google Maps, do a copy and paste of the address into your default search engine for a quick search. In a recent fraud case, Google Maps listed 15 other busi­ness names at the loca­tion, but not the UPS Store. But, the first result when we put the address into reg­u­lar Google search gave us the UPS Store phone num­ber at that address.

If you ship mer­chan­dise to a mail­box, you are not going to have proof that your cus­tomer actu­ally got the mer­chan­dise. You will only have proof that it was received by the mail­box ser­vice (or exec­u­tive suite in that sce­nario). Your col­lec­tion agency will also be at a dead-end if the debtor skips on payment.

If you sus­pect or con­firm that an address is a mail­box ser­vice, ask the com­pany for their phys­i­cal loca­tion and con­firm it. If the loca­tion is a mall unit, con­firm that it is a phys­i­cal store and not sim­ply a kiosk in the com­mon area. Con­firm any home addresses pro­vided through Inter­net search and maps. It is crit­i­cal to have a home address if the busi­ness does not have a per­ma­nent phys­i­cal loca­tion or you get a per­sonal guar­anty.

Finally, use the Inter­net to get the phone num­bers and other con­tact infor­ma­tion for the trade ref­er­ences pro­vided by the poten­tial cus­tomer. Some fraud­sters pro­vide the name of a legit­i­mate com­pany as a ref­er­ence, but the con­tact infor­ma­tion is directed towards a con­spir­a­tor instead of the actual company.

If you are deal­ing with a legit­i­mate, estab­lished com­pany, this process can take less than five min­utes and be per­formed by any­one who uses the Internet.

This is not meant to be a com­pre­hen­sive list of fraud detec­tion activ­i­ties. Nor does the uncov­er­ing of a cau­tion­ary indi­ca­tor mean fraud is being attempted, just that fur­ther inves­ti­ga­tion may be war­ranted. In these cases, you may want to get addi­tional forms of con­tact infor­ma­tion, a copy of a driver’s license, busi­ness license, or util­ity bill for the busi­ness, and check trade ref­er­ences and credit reports more carefully.




What to Do When You Hear “That Employee Did Not Have the Authority to Sign that Contract”

posted on 2014-04-28 by Dean Kaplan

 

We hear it all the time: “We are not going to pay those invoices because the per­son who signed the con­tract didn’t have author­ity.” Many go on to say: “It says right in our By-laws that only an offi­cer can bind the company.”

This tells us sev­eral things:

  • The debtor does not want to pay;
  • The debtor is aware of this out­stand­ing payable;
  • There is a good chance the debtor has the money to pay;
  • The debtor either does not know the law or is pre­tend­ing to not know the law.

As a B2B col­lec­tion agency spe­cial­iz­ing in large claims, we know the law is on our side. But, our ini­tial response is not about the law, but to ask ques­tions to learn more. We want to know why they don’t want to pay, because that is the real prob­lem to solve.

We encounter this sit­u­a­tion most fre­quently with ser­vice con­tracts. Typ­i­cally the debtor signed up for a ser­vice of some type, such as adver­tis­ing, email list access, or an infor­ma­tion data­base. The most fre­quently expla­na­tions we hear as to why they don’t want to pay are:

  • We never used the service;
  • We didn’t get any ben­e­fit from the service;
  • The ser­vice didn’t work the way we thought it would;
  • Our busi­ness changed direc­tions and we didn’t need the service;
  • Our rev­enue declined and we just can’t afford it.

Once we hear the expla­na­tion, we’ll ask a few more prob­ing ques­tions to fully under­stand the real issue we need to resolve. We also make sure to con­tact the client regard­ing the debtor’s actual usage of the ser­vice in case that infor­ma­tion will help us with the debt col­lec­tion effort.

Then we pivot to the issue of Appar­ent Author­ity, the excuse the debtor is try­ing to hide behind. Under the law of agency, an Agent (employee) is able to bind the Prin­ci­pal (com­pany) in a con­trac­tual rela­tion­ship with a third party (cus­tomer or ven­dor). Busi­ness could not func­tion effi­ciently if pur­chas­ing peo­ple could not order sup­plies and if sales peo­ple could not quote prices and com­plete sales. While these employ­ees may not be Agents of the com­pany able to exe­cute a con­tract to sell the entire com­pany to some­one, they typ­i­cally do have the author­ity to bind the com­pany to these daily transactions.

Under Appar­ent Author­ity, if it appears that the employee has author­ity then their actions bind the com­pany. This appear­ance can be accom­plished by pro­vid­ing the employee with com­pany iden­ti­fi­able forms or sta­tionery, a truck with a com­pany logo, or just hav­ing them work from the com­pany office. In all of these cases, it is rea­son­able for the other per­son to assume that this employee has author­ity to enter into the trans­ac­tion being dis­cussed and there­fore the thresh­old of Appar­ent Author­ity has been met. Our client’s con­tract with the debtor is legally binding.

Our col­lec­tion strat­egy will be dif­fer­ent if we are deal­ing with a sophis­ti­cated busi­ness per­son who is just try­ing to snow us with a bad excuse ver­sus an unso­phis­ti­cated busi­ness per­son who is just hop­ing this excuse will work. So, we typ­i­cally don’t just explain the con­cept of Appar­ent Author­ity, but ask a series of ques­tions to learn more about who we are deal­ing with while lead­ing the debtor to this conclusion.

For exam­ple: how many peo­ple work for the com­pany, who pur­chases the office sup­plies, who makes the sales, where do they work from, do they have busi­ness cards or access to com­pany sta­tionery, do they bind the com­pany to these trans­ac­tions? From there it is easy to explain Appar­ent Author­ity and vol­un­teer to send them links on the Inter­net where they can see for them­selves that this is a bind­ing con­tract. From that point for­ward, we refuse to dis­cuss that issue and get back to the real issue of col­lect­ing the money that is legally owed.




This Credit Application Language Can Help With Delinquent Accounts

posted on 2014-04-17 by Dean Kaplan

 

Get­ting per­mis­sion to run per­sonal credit reports on B2B Credit Appli­ca­tions can lead to pay­ments dur­ing dif­fi­cult times

At our com­mer­cial col­lec­tion agency, we often encounter busi­ness own­ers who claim their company’s finan­cial con­di­tion is ter­ri­ble and they can’t pay any­thing or can make only small pay­ments. It is dif­fi­cult to ver­ify this infor­ma­tion on a pri­vate cor­po­ra­tion or LLC unless the debtor vol­un­tar­ily pro­vides com­pany finan­cial state­ments. But, if we have per­mis­sion to run a per­sonal credit report, the report can give us many clues as to how best to resolve the matter.

If the report shows the owner has a stel­lar credit rat­ing and large untapped bal­ances on credit cards, we can nego­ti­ate to get them to bor­row from the card issuer instead of our client. Even though they don’t have a legal oblig­a­tion to use per­sonal assets to pay com­pany debts, if they aren't will­ing to do this when we have this knowl­edge, it impacts the deci­sions we and our clients 

have to make dur­ing the debt col­lec­tion process.

Alter­na­tively, if their credit cards are maxed out or there are numer­ous credit issues, we know the debtor could be on the verge of not hav­ing the funds to keep things going. At that point we ask our clients to con­sider set­tling for a sig­nif­i­cant dis­count to at least get some­thing before it is too late or agree to small pay­ments if that is the best we can negotiate.

By law, we have to have writ­ten per­mis­sion to run a per­sonal credit report. That is often dif­fi­cult to get once an account has entered col­lec­tions. We do not have this writ­ten per­mis­sion on most of the claims we receive, which prompted me to start a dis­cus­sion on LinkedIn. I asked if any­one was includ­ing this per­mis­sion state­ment on their credit appli­ca­tions and sev­eral peo­ple responded in the affir­ma­tive. Many were kind enough to share spe­cific lan­guage for other pro­fes­sion­als to con­sider. Here are some examples:

  • the under­signed con­sents to cred­i­tor obtain­ing a con­sumer credit report on the above listed owner, part­ner, offi­cer, or guar­an­tor of the cor­po­ra­tion, LLC, pro­pri­etor­ship, or part­ner­ship for the pur­pose of eval­u­at­ing their cred­it­wor­thi­ness in con­nec­tion with an appli­ca­tion for busi­ness credit;
  • I give per­mis­sion to cred­i­tor to request and receive infor­ma­tion required to ver­ify depos­i­tory accounts and credit his­tory. This includes per­mis­sion to run per­sonal credit check reports …;
  • I/We autho­rize Seller from time to time to obtain Busi­ness and Con­sumer Credit Reports on Cus­tomer or any prin­ci­pals listed above or to obtain credit and fund­ing infor­ma­tion from any other per­sons or entities.
  • You may con­tact any bank and credit rat­ing bureaus to obtain credit information

Back when I owned a small man­u­fac­tur­ing com­pany, I would never give ven­dors a per­sonal guar­anty (I would just go to their com­pe­ti­tion if they wouldn't extend credit). But, I would have granted per­mis­sion to run a per­sonal credit report. A cou­ple decades later, I real­ize what an impor­tant tool this can be for a cred­i­tor if an account becomes problematic.




Mental Preparation for a Commercial Collection Call

posted on 2014-04-09 by Dean Kaplan

Elite athletes mentally visualize technique and success to improve actual performance.   Our debt collectors use a very simple technique to get better results.  Studies have shown that visualization improves awareness, mood, confidence and outcome.  We've been using these techniques with dramatic success at The Kaplan Group for years.

In house collectors typically have 2 objectives, and they are not always completely compatible:

     Maintain a positive relationship with customer leading to future profitable sales;

     Get the money that is already owed and past due.

 

Early in the debt collection process, in house collectors clearly do not want to jeopardize the long-term relationship with a customer.   Customers (at least paying ones) are the lifeblood of the business. 

In the training programs we have done for clients' in-house collectors and with our own collectors, we focus on several mental factors:

     Be in an Upbeat Mood

     Have a Positive Attitude

     Use a Calm Demeanor

     Have a good Tone to your voice

     Be Professional

     Be Courteous

     Listen and Understand

     Be Caring and Compassionate

 

It is widely recognized that having an upbeat mood typically leads to greater success in everything we do.  Individuals tend to perform better when their mood is positive.  And just as important, this seems to influence other people as well.  So, if the collector's upbeat mood rubs off on the delinquent customer that can have a positive impact on the collection process.

With respect to positive attitude, we are referring to having the belief that the debt collection call will be successful.  Success can be collecting money, getting helpful information, or building the relationship as a step in the process of eventually collecting.  This positive attitude is similar to the visualization technique for sports - the more you believe, the more likely you will make it happen.

Clearly, when dealing with customers, being professional and courteous is very important for maintaining a relationship.  A calm demeanor and a good tone are equally as important.  A tone with an edge, or outright nastiness, can draw attention away from the main issue - resolving the past due balance.  It can also cause the customer to become defensive or angry, neither of which helps the collector achieve the goals of collecting or maintaining a long-term relationship.

The last couple of items are a bit trickier.  For decades collectors have been instructed to maintain control of the conversation and not allow it to get off-topic of simply getting the invoice paid.  Many collectors work for companies or collection agencies that expect a very large volume of calls to be completed on a daily basis.  So, there is a real balancing act between these criteria and taking the time to listen, understand, and express a level of empathy if that seems appropriate to achieve your goals. 

For in house collectors, developing some level of a personal relationship with the customer is an excellent way to establish and foster a long-term relationship between the companies.  This relationship can be used in a positive way to help collect when the customer runs into cash flow issues.  At our commercial collection agency, we know a key factor in our success is often related to taking whatever time is required to listen to debtors, understand their situation, and express some empathy if that is appropriate. 

We recognize that the debt collector's approach and tactics need to change over time if progress is not being made using the attitude described above.   The change in approach is just another tool in the collector’s arsenal.

Having an upbeat mood, maintaining a positive attitude, and talking with a good tone is not always easy, especially as the day wears on or after a particularly difficult call.  Our collectors use one simple trick before each call to help them stay on track:  SMILE!  You will be amazed at how smiling helps you feel better and gives you a better attitude for the next call.





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