Strengthening Debt Recovery through Facts and Relationships
Financially stability, ownership changes, support (contract in place and proof of work performed). Even with the odds stacked against us in all of these issues, we still push forward as our client did the work and should be paid unless we are proven otherwise. Just because the business (Debtor) is struggling financially, changed ownership and has questions about what was done or never signed the contract does not mean our client should not be paid. Again, we flip the script in our communications where we must be proven it’s not owed vs. proving just that it’s owed. This change in communications leads us to a higher chance of recovery vs. begging for payment. Facts and relationship building components in the communications are the key to successful collections. Yes, persistence and accountability are also a factor, but it has to be teed up correctly to be successful.
Balancing Amicable Recovery with Strategic Escalation
Age, financial stability, supporting documentation and if this is an active client or not. Clearly the goal is to always resolve it amicably, but sometimes we need to factor in the costs of legal and timeline to get it through the legal process vs. taking a hit now that would ultimately recover more for our clients. Of course, any change to the amount due and how we negotiate or escalate remains in control with our clients. We handle the collection process, communications and leverage to get it done, but we also provide best practices and the highest quality recommendations to our clients so they can make an informed decision based on thousands of successful collections rather than just trying something different. Our clients know when we recommend something, it has been well vented and supported. Again, protection and collections is at the core of everything we do.
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Recover what’s owed. Redefine what’s possible.
Using Payment Trends to Identify Early Warning Signs
Collection data and debtor conversations are great markers and indicators on where it’s tracking and where this may lead too. For example: Watching DBO (Days billing outstanding) climb up over the time, but only by a few days here and there is an indication that your client has either 1) Started managing vendor cash and slowly delaying payments or 2) They are changing their payables team and / process. Either one, it’s hurting your cash and when you add this to others doing the same thing, this puts heavy strains on your operations where companies are unable to invest further into themselves to grow because they are forced to finance their existing clients. If the DBO shows significant increases in a short period of time, this could mean a few things. 1) They are financially strapped and possibly drowning 2) You are no longer a priority, meaning their needs are with other vendors 3) They are disputing your product or services and putting all of most of it on hold. With any of these, time is of the essence for a higher chance of recovery. Taking this DBO data and mirroring it up again your collection notes, how many times, broken promises, previous concerns, financial scares…etc to also the industry they are in as well in the news and lastly looking at your payables and how much you incur on behalf of this client.
Using Payment Scorecards to Guide Escalation
The terms and budgets agreed upon in the beginning are not just a starting point in hopes you get paid on time. They are key markers that guide the financial stability of the relationship. The work or product delivered is obviously important too, but carefully watching DBO against your terms and watching your billings to the budget will give you an indication on how quickly you need to dial up the collection communications. Always create a score card when doing collections. 1) How far off and how many times have they paid past the terms. 2) Are we billing on track as agreed upon or is the client scaling back? Looking at the reverse, did we scale up the billings with our clients' permissions and now that’s when they can’t afford us? 3) Do they respond quickly and professionally with detailed payment info when you reach out for payment updates? 4) Are they telling you one thing, but telling your sales people something else? 5 ) Do they see you as a priority and keep you informed at all times or is the info coming to you less than before? All of these things make up a scorecard that help you know when and how to escalate.
Lastly, all of this seems easy when you read it, but when the pressure of collections and keeping your company financially stable is in play, creating and following a scorecard for each debtor seems overwhelming. This is why we are hired, trusted and given the best referrals from our clients and people we have collected from. Over 70% of companies we collect from end up calling us later to have us help them with their past due receivables. This is a win-win for us and our clients.
