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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.
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.
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.
One of the simplest ways to detect 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..
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:
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, (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 . 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 . 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
Most importantly, confirm that this is not a mailbox service, such as a 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 store. Google Maps typically will give you a list of the businesses located at a specific address. More research is needed if:
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 Store. But, the first result when we put the address into regular Google search gave us the 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 .
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.
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:
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:
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.
At our commercial collection agency, we often encounter anything or can make only small payments. It is difficult to verify this information on a private corporation or 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.
Back when I owned a small manufacturing company, I would never give vendors a (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.
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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