You’ll Get Paid When We Get Paidposted on 2015-06-17 by Dean Kaplan
This is one of the most common ‘explanations’ we get while providing commercial collection services. How the debt collector responds to this assertion can have a big impact on understanding what is really going on and figuring out how to get paid even if they don’t get paid.
We know that many debt collectors will respond to this explanation very forcefully with something like: “It doesn’t matter if you are owed money. You agreed to pay for this product (service), you are X days late, and if you don’t pay immediately, then _____________ ” (fill in the blank with the extremely unpleasant consequence of your choice).
If this works, great! But if it doesn’t, the collector has gone a long ways towards shutting down communication and cooperation with the debtor or customer.
When we hear this explanation, our biggest fear is that it might be true. Since the financial crisis a few years ago, we’ve seen a much greater proportion of smaller businesses fail because a couple of their larger customers ceased operating without paying large receivables. This is a real domino effect which has even taken down a couple of our smaller clients as their delinquent receivables were not recoverable from
At the same time, we are excited, because the debtor has started with a specific explanation which can be scrutinized and thereby gives us the opportunity to establish communication and professional rapport. We start by giving positive reinforcement for their acknowledgement of the outstanding balance and the commitment to pay. We may even focus on getting an email confirmation that there are no disputes on the balance owed and that it is in their payables system, especially if it is for a service provided or a product that the debtor could later complain did not perform properly. This written confirmation can be very valuable down the road if the debtor’s financial struggles continue and they start looking for other excuses to not pay invoices.
As a collection agency, we are working on invoices that are already significantly past due. So if this is a real explanation, it has already been going on for a long time. And if that is the case, it is highly unlikely that the debtor’s customer is just about ready to pay. So, instead of asking “when do you expect to get paid so you can pay this bill,” we ask for background information, such as “please tell me what’s going on with this situation.”
At this point, we are using the additional information being provided to determine if this is a real explanation or just an excuse. We want to know a number of things, including:
The answers to these questions let us know if their explanation:
There may not be much that anyone can do in the first instance, but in the second and third circumstances, this is where debt collection skill can lead to recovery.
For in-house collectors, we recommend that you get as much specific information as possible whenever this explanation is initially given. Send an email to the customer with all the information collected, asking them to confirm you have understood the situation correctly, with the explanation that you want to provide an accurate report to your manager. The sooner you understand what is truly going on with your customer, the less likely you will end up having to turn it over to a collection agency or eventually having to write off the full amount.
In my prior career as a CFO at several companies, I learned to never use the explanation “you’ll get paid when we get paid” unless I knew it would stand up to scrutiny. If I could explain that we had a surge in business from credit worthy customers and we were simply struggling with working capital issues until we got over the hump, the explanation typically got the relief we needed. But it only results in a short-term respite and a damaged relationship with the vendor in most other circumstances.