Earlier this week, I presented this topic to the Universities and Colleges Credit & Collections Conference. While the presentation spoke to some of the specifics of student debt, in general this is an important subject.
From my perspective, there is a tendency for polarization into two kinds of collection approaches, whether it’s a collector or a creditor. Both are wrong. Negotiating payment arrangements requires proper presentation of the debt, and very controlled tone and language.
Now, everyone has different personalities and language, so negotiating payment is an art form rather than a science, but here are my observations.
The Meek Sometimes Inherit the Calling List
Many creditors (and some struggling or new collectors) are afraid to pick up the phone and call. In fact, they are probably more stressed than the people receiving the calls. That’s because they think that a collection call will likely end in confrontation, and most people try to avoid conflict.
Also, when they get the customer on the phone, because they are afraid of conflict, they use passive language or are unsure of where the conversation should go. Because of the lack of planning or assertiveness, the call is ineffective, and the consumer does not resolve the account.
If you get butterflies in your stomach when you think of picking up the phone and talking to someone about money owed, take a deep breath -- this is you reaching out to work with them, not get into a shouting match.
Like Lions Before Lambs
The other extreme is a personality that believes confrontation is necessary to collect an account. In the old days, "sweat shop" collection managers would propagate this believe by telling staff “treat it like these debtors owe you money personally”, or encouraging loud aggressive speaking. However, just because you verbally “turn someone upside down and shake them for loose change” does not make you a negotiator – collecting by fear and intimidation does not work in this day and age, and while an aggressive collector might collect more in the first 15-30 days, they will not be able to liquidate the full potential of a receivables portfolio in the long run.
In this day and age of consumers posting on the internet, if you are antagonistic, I can guarantee you will hurt your brand reputation, which will influence your entire customer base present and future. Don't do it!
To negotiate you need to engage with the consumer – you do want to establish yourself as an authority figure (and if you are taking legal action, or can affect their credit rating with a press of a button, you *are* an authority figure) before negotiation even begins. This does not mean yelling, this means laying out your role, and the consequences for not addressing the debt.
Once that’s been done, *then* you can get into the nuts and bolts of the account – how much is owed, how it will be paid, and so on. If you don’t establish the first part, and have the consumer acknowledge your role, you can never get to this part.
Be prepared to be open minded. Not everything will end with "Paid in Full". The whole reason you need to make the call is something has gone wrong, and you need to be somewhat flexible. Remember that flexible does not mean the customer can't pay -- trade payments for positive reinforcement, leniency for exchanges of information, and always reinforce that actions (on the part of the consumer) speak louder than words.
What Polite Means In Collections
Establishing authority does not mean being rude, abrasive, or antagonistic. It also means not being subservient or passive. You should avoid language like “please”, or “could you…”, or “would you like to …”, and instead work on A/B choices for the consumer “are we going to make arrangements on this account, or are we cancelling your services and sending you to our collection agency, which can damage your credit rating?” That can be done in a courteous manner, without undermining yourself.
If you present a series of A/B choices, what you are doing is mapping out a logic chart where the consumer has input, but you are creating structure for the conversation. If you have established authority at the beginning of the call, then the rest of the call should fall into the patterns you establish, resulting in a consumer willing to pay, and likely willing to thank you at the end for working with you. And that is successful negotiation.
Your tone is important too … many consumers are stressed and emotional about their debt, and can easily react badly to someone who is not making them feel they can work with you. Keep your tone even, polite, properly pace your conversation, and give the debtor a chance to interact with you rather than steamrolling them.
Below is a link to the Power Point presentation we used while talking about this subject – the pictures attached illustrate the topic I’ve addressed here. One of the end-slides also contains some useful resources and links for the credit manager to learn about proper negotiation techniques.
Let me know if you would like to see more power point presentations on the blog, and if you have any questions about negotiation, which we address in our APPRAISE technique, I would be happy to share it. I can be reached directly at Kingston Data and Credit at 226-946-1730.
KINGSTON Data and Credit