News: General News

An Effective Way to Create Urgency to Pay

Tuesday, April 28, 2020  
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Getting past-due customers to pay is an endless challenge for credit and collection departments. Even with thorough collection processes in place and well-trained collectors on the job, companies are challenged by customers who shun payment requests.

Often, older, problematic accounts consume a lot of time, keeping collectors from focusing on customers that will pay with the proper attention.

Customers may choose not to pay because they no longer need your company’s products/services or can get them elsewhere. They may owe several companies and have decided yours is a lower priority than others. Whatever their reason, the consequences for ignoring your payment requests – if there are any – haven’t been persuasive.

“A lot of companies tell customers that if they don’t pay, the account will be placed with a collection agency but then they don’t follow through,” said Larry Barthel vice president of Commercial Collectors Inc. “As a result, people have become used to that threat and don’t respond.”

Credit managers seeking a solution to this problem may be overlooking an easy, cost-effective option that increases customers’ urgency to pay – a third-party collection letter service.

Using a third-party letter service is not designed to replace internal letters or phone calls, but rather acts as a supplement to internal efforts. If used at 90-120 days past due, companies are often able to collect a great deal of money at a relatively low cost compared to full contingent fee collection service.

Receiving letters from a collection service signals to problem customers that you’re taking action and aren’t making empty threats. It allows credit staff to “draw a line in the sand” and move the accounts out of the company’s internal collection process. They can then refocus internal efforts on more pressing customers that are becoming past due. 

“When customers see a third party is reviewing the account, they’ll often call you to apologize or complain,” Barthel said. “Either way, the letter was effective in generating a call. If someone ignores all three letters sent within 30 days, they’re telling you loudly and clearly, they don’t care what you do. You’re at the bottom of that list of companies they owe or can’t pay anyone. If you didn’t use the letter service, it may have taken you several more months to figure that out.”

After the 30-day, three-letter series, your company is under no obligation to place the account for collection under a contingency fee. You still have the ability of working the account internally.

Using a third-party letter service forces customers to reevaluate their relationship with you. Another phone call or letter from you doesn’t create the same urgency as a letter from a third party. The flat-fee cost for a letter service is pennies on the dollar, making it an especially cost-effective tool for credit manager seeking to improve collections without adding staff.

Commercial Collectors Inc. (CCI) is NACM North Central’s preferred collection services provider. Having worked with NACM North Central members for many years, CCI has the knowledge and experience needed to provide efficient, effective, service-focused collections to reduce write-offs. To learn about CCI’s letter service or other collection solutions, contact Larry Barthel at barthel@commercialcollectors.com or (763) 453-7408, or visit www.commercialcollectors.com.