posted on 2014-06-05 by Dean Kaplan
A Credit Manager’s Creative Way of Saving
Customers
This Article by Dean Kaplan was originally published on our Blog at The Kaplan Group.
Want to see a salesperson squirm with displeasure:
just tell them the account for a long-term customer is being sent to a collection
agency. The salesperson has visions of rogue debt collectors badgering
their customer with threats of bad credit references, legal suits, judgments
and garnishments, caring only about collecting a few dollars and no concern
about preserving relationships. They assume that once the customer
has been through this ringer, he’ll never talk to the salesperson again.
Of course, this customer hasn’t been talking
to the salesman since his account went past due and his credit availability
was suspended. At the last industry trade-show, the salesman saw his
customer coming down the aisle, but then abruptly turn away when brief
eye-contact was made. Presumably the customer was embarrassed that
his account was delinquent and didn’t want to face the salesman he let down.
The salesman’s nightmare got worse when later that day he saw the customer
in another booth negotiating his first-ever purchases from a competing brand.
Unfortunately, at the moment the customer
is not a customer any more. And the longer the account is allowed to
stay delinquent, the lower the likelihood he’ll return to being a customer.
While he can’t buy from your organization, the customer is working
to develop new sources and relationships. Positive experiences with
new vendors can lead to permanent lost sales for historical vendors.
And the incentive to pay invoices to ‘historical’ vendors during
cash-crunches also goes down.
One enterprising credit manager we know has
taken a novel approach to the delinquent account process. Their goal is
to ‘Save Customers’ for the sales department. He believes it is much
easier to resurrect a previous customer than to generate a new one, and
in the process, gain the respect and appreciation of the sales department
and senior management.
Here’s the 4 step process he uses to Save
Customers:
- Credit availability is automatically suspended
when accounts have invoices 15 days past due;
- Internal
collections follows a predetermined letter, fax, email and phone
call collection procedure with exact timing
that is rigorously implemented;
- Accounts
are turned over to select collection agencies automatically when
accounts are 90 days past due. Salespeople are told “this customer
needs special attention” so they can become a customer again;
- Collection agencies are instructed that while collecting
is the highest priority, preserving relationships is also of paramount
importance. Only highly trained collectors are permitted to handle
these accounts.
The results of this program have been astounding
for over a decade. Over 70% of claims are collected within 30 days
of placement with the agencies (including our agency), and over 60% of these
companies place new orders within 90 days. Over 85% of all claims are
collected, so actual write-offs are minimal. It is extremely rare that
a customer ever allows their account to become delinquent again — they know
this company means business when it comes to its receivables terms.
An added benefit is that senior management
realizes the fees paid to collection agencies to save a customer were nominal
in comparison to what it costs to get a new customer. So now when a
salesperson hears that “this customer needs special attention”, they know
they are likely to have a “saved customer” and new orders in the next quarter.
And the Credit Manager is perceived as profit contributor and strategic
thinker, with the respect and compensation that comes with that
accomplishment.
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