Strategies for Collection: New and Old
Steven Elias and Steve Capper, Flexible Funding - July 21, 2017
Mr. Elias and Mr. Capper are Managing Members of Flexible Funding, a temporary agency funding firm based in California. They are also CATSS Associate Members
Getting your customers to pay nowadays involves new and important concerns, but while focusing on modern day problems we should not forget old techniques for out-smarting debtors.
Never leave a message on an answering machine, a voice mail, or e-mail message that refers to a past due invoice or notice or a delinquent account. You have no way of knowing who is really receiving the message, or if the message is being overheard by
third parties at the time of playback. Leaving a negatively worded message could result in legal liability based on confidentiality issues. In an answering machine message, voicemail or e-mail message it would be wiser to leave a more general message, as “I am calling about invoice #5238, dated 10/12”.
Confidentiality issues may also apply to your faxes about past due invoices. Because so many companies have central fax machines you need to be sure that faxes about unpaid invoices include the name of the person you are sending it to. To be truly safe, the fax or fax caller sheet should have been a confidentiality statement or stamp on it. An example of confidentiality statement wording can usually be found on faxes or fax cover sheets from communications with attorneys.
Receiving an NSF or bum check is annoying anytime at all, but especially after time-consuming collection effort. One information-gathering technique, still unknown to many, can help one decide the next course of action with a debtor. When you call the debtors bank to ask if the check will clear, and we are informed that it will not, ask the following questions. Would the check clear if there were $200 more in the account? Would the check clear if there were $500 more in the account? And so on. Although the bank will not tell you exactly how much is in the account, they will usually give you a yes or no to these hypothetical questions. If the debtors account is short a relatively small amount, one solution is to go down and deposit some of your own money into their account to make up the shortage and then cash the larger check they gave you. This may be more acceptable than not being able to collect anything at all because the entire check amount won’t clear.
Some people use another more aggressive info-gathering strategy to determine if the nonpaying customer has money but is running it through another bank account. This has been used with a judgment against the debtor. They send the debtor a $10 check with a letter that says, “Our records indicate that we have made an error in our accounting and that you are entitled to a small refund on your account. Enclosed is a $10 check to cover the overpayment. Please accept our apologies.” When the debtor deposits the check, the debtor’s new bank account number is revealed on the back of the check. People who report using this maneuver would be ready with an explanation of the accounting error in case the debtor called before depositing the $10 check. A position for collection sometimes starts long before invoices are sent out, and even before the work is performed. Virtually all temp agencies send potential clients a business credit application questionnaire asking for credit trade references and bank references, but most often these forms are nothing more than fill-in-the-blanks. Some employment agencies turn these forms into a business credit application and “agreement”. A few paragraphs are added below the questionnaire covering the terms and conditions for payment.