Calling Customers that are not Seriously Delinquent
Questions from our Readers
By Michael C. Dennis, MBA, CBF

Question.
Our collection department does a good job with the balances over 30 days past due, but cannot seem to achieve the collection goals for balances 1 to 30 days past due. I think it is fair to say the collection staff is uncomfortable confronting customers that are not seriously delinquent. Any suggestions?

Answer. I think there is a widely held belief that it is inappropriate to call customers until they become seriously delinquent. I think it is a central part of the problem you described. In my opinion, collection calls should be made without delay as soon as an account becomes delinquent. Many companies establish a grace period before any collection calls are made. I believe this is an invitation for customers to delay payments, and for this reason I can think of no advantage to the seller of allowing a grace period before starting the collection process.

I suggest that you teach your collection staff to start the collection discussion by requesting/demanding immediate payment in full of the entire past due balance... not just the balance that is over 30 days past due. Please also consider the following suggestions:

• Set specific and measurable goals for yourself and your subordinates in the 1 to 30 past due column.

• Hold subordinates accountable for not reaching these targets. This would include disciplinary action for poor performance if the necessary improvements in collections are not made within a reasonable [but specific and relatively narrow] time frame.

• Consider holding orders for customers 1 to 30 slow --- at least until they are contacted and make a reasonable and specific payment commitment.

• Be certain collectors follow up promptly and systematically on broken payment commitments.

• Help to shorten the collection cycle by faxing rather than mailing any requested supporting documents - even when there are a large number of documents to send.