Establishing a customer relationship is one thing, maintaining it
is quite another. Customers require a high level of support and after
sale service, in addition to quality products at competitive prices,
in return for their loyalty. Companies have come to realize that it
is far more expensive to locate, solicit, qualify and establish a relationship
with the new customer than it is to find ways to keep existing customers.
As a result, customer service has become an important task for every
department in the company - including the credit department. The goal
of the credit and collection department is to accomplish the goals
assigned to it with as little damage to the relationship between the
company and its customer base as possible.
There are several techniques the credit and collection department
can use to do their work in a way that minimizes the impact on customer
relations including these:
Tell customers that you appreciate their business. Make your appreciation
more tangible by being more flexible when addressing collection
problems involving customers that have been purchasing from your
a long time.
Recognize that your company does not offer its products and services
in a vacuum but in a competitive environment. A customer is more
likely to move its business to a competitor if offered a more tempting
balance of price, performance an terms of sale. Therefore, as competitors
change the way they [a] establish credit limits [b] collection
past due balances or [c] determine the terms of sale you must consider
making similar changes.
Before addressing a problem with a customer, the credit department
must be sure it has all of the relevant facts and there is no doubt
that its position is the correct one.
To borrow an idea from baseball: All ties go to the customer.
What this means is that if there is some doubt about the validity
seller's position, in the interest of customer retention there
should be a bias toward accepting or allowing the customer's point
Try to limit interactions with customers to their accounting department.
Any time a creditor is working outside of its normal collection
channel [such as dealing directly with the buyer] the seller's
is at greater risk. Why? Because the accounts payable department
is accustomed to the types of questions and challenges a collector
may ask - but the buyer may be shocked or offended by the directness
of the collector's approach.
Don't think of debt collection as a zero sum game, meaning the
only way that the creditor wins is if the customer loses. Think
of it instead as a mutually beneficial process in which the customer
has the opportunity to continue to buy your company's goods and
in exchange for payment of the past due balance.
Make certain that credit holds are used sparingly, and are truly
used as a last resort. Try to notify the customer and the sales
department about the possibility of a credit hold... and try to
give as much
advanced notice as is practical under the circumstances.
Negotiate, don't litigate. Litigation should only be considered
after every effort has been made to resolve problems amicably.
Litigation should never be initiated until the credit manager and
his or her manager
have discussed options and alternatives, and until frank and earnest
discussions have taken place with the customer [assuming it is
still in business] about the seller's desire to avoid litigation
options present themselves.
One final thought: Even though the credit department has an obligation
to support and if possible strengthen the relationship between the
company and its customers, it also has a duty to address and resolve
past due balances as quickly and as effectively as possible. This is
the tightrope that credit professionals have chosen to walk.