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And as debt collection specialists, we are often asked how businesses can handle the process of debt collection better, and what systems they can put in place to reduce debtors and manage the process of collecting debts better, while still being flexible to their clients. We wanted to answer that – but we might end up going on for quite a while. So we’ve split the issue up into a 3 part series all about negotiating with debtors. This first post is all about using standardised criteria in your business to help you maximise collections, and keep the cost of recovery as low as possible.

Setting Standardised Criteria

Standardised criteria are simply a set of rules you follow for certain scenarios. It’s a guideline that gives your team the rules and direction they need to be able to approach each overdue account confidently and fairly. It’s not a firm ‘3 steps’ with no flexibility, but more a set of rules and limits on how you can handle different kinds of overdue accounts. For many businesses, your clients will fall into one of 3 categories: ‘payer’, ‘wants to pay but can’t right now’ and ‘not going to pay’. Each of these customer types will require a different approach to reclaim their debt. For example, payers won’t require any intervention at all, while those who want to pay but can’t just yet might benefit from a payments plan, and those who aren’t going to pay will need to go through external debt collection proceedings. Your standard criteria should be split between these three types of customer, with a clear approach to each.

Standardised Criteria In Practice

That all sounds great, but it can be difficult to picture how that would work in practice. So, picture this scenario. Your business is a private medical centre, taking payment for medical treatments. You have been working on getting a patient to pay their overdue bill for a week or two – you’ve left messages, sent letters and more. Today, you get a call saying they are ready to start paying their bill. All you know is that they are ready to pay something on their account – so it’s your job to maximise their payment and minimise the term. This is where your standardised criteria come in.

To establish how to handle the discussion, you will need to understand that patients situation. Was this a pre-agreed procedure that they had notice of? Then you can take a harder line in negotiations, since they will have had time to get the money together in advance. But if this was an emergency that wasn’t planned (and has maybe put your patient out of work for a while), then you can work on a payment plan to make sure the debt is paid in instalments – so you get your fees and the patient can afford to pay them. This approach stops you from having to chase payment when a patient who wants to pay but can’t, doesn’t pay you. However, if the patient has a serious or long-term illness, they may no longer care about their credit, or have the resources to pay anything at all. If this is the case, then you will need to hand this on to a collections agency to deal with on your behalf.

5 Things That Will Maximise Your Collections Returns

Of course, every business and every client is different, so some approaches may work in different ways, or not at all. But, no matter what industry you’re in, there are a few tips we can give to help you collect overdue payments quicker:

  • Try to identify your debtors and place them into one of 3 categories – ‘payer’, ‘wants to pay but can’t yet’ and ‘not going to pay’.
  • Listen to your debtors. If they fall into the ‘want to pay but can’t yet’, try and understand their circumstances. Keep a record for all of these kinds of clients, and analyse to see if there is a pattern forming.
  • Apply all of your knowledge to a set of standard criteria for your business. This gives your negotiations a strong starting point.
  • Start any debtor negotiations by allowing them to suggest terms that will work for them, and then follow your standard criteria to offer acceptable terms.
  • If at any point this doesn’t work, follow your debt progression plan and hand the account over to your collections agency.

That concludes part one of this three-part series. Negotiating with your debtors can sound difficult, but really it’s about applying a level of logic, flexibility and empathy to the situation. By creating these three types of customers and 3 standardised criteria for dealing with them, you will soon see your collections increase and the time it takes to collect go down. At Debtcol, we specialise in dealing with the third type of customers – the ones that just don’t want to pay you. With our outsourced debt collection service, you can be confident that your difficult debtors will be dealt with professionally, and your fees recovered. For more information, get in touch with us today. And stay tuned for parts two and three!

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