Collection debt help

William Atkinson is a free-lance business writer in Carterville, Ill

A friendly nudge can work better than a harsh ultimatum when persuading a customer to settle an overdue account.

Carol Frischer has become a successful practitioner of the art of debt collecting largely because of a lesson she learned as a dental hygienist in the 1970s. "I realized that a lot of people were terrified of visiting the dentist," she says, "so I tried to make the experience as painless as possible-even enjoyable."

A friendly, relaxed approach can work magic not only in soothing dental patients but also in getting a company's slow-paying customers to settle their debts, Frischer says.

Several years after her dental-office experience in Chicago, Frischer became an accountant's assistant at Parks, Palmer, Turner & Yemenidjian in Los Angeles. In about 1984, soon after joining the firm, she was asked to help with collecting overdue accounts for one of the firm's CPAs.

Though she had no experience in collections, Frischer began placing calls. Within two months, her collection rate was so high that the firm's other CPAs began asking her to collect their accounts as well.

Frischer's methods were so effective that some of the companies she asked to pay up started asking for her help--through her employer-in collecting their own overdue accounts.

For the past 12 years, Frischer has been a full-time collections specialist with the accounting firm. She gives seminars around the country on effective collection methods, and she has written a book, Collections Made Easy (CSA Publishing, $15).

The low-key approach that has worked for Frischer is also advocated by others in the field, including Roger Willis, a principal with Willis Associates, a collections consulting firm in San Diego.

"The majority of collections in the 1950s and 1960s involved contacting blue-collar workers," Willis says. "The perception at the time was that in order to collect, you had to 'grind' people-be tough."

Most debtors today, however, are senior citizens, "aging yuppies," and Generation Xers, Willis says. "People are much more educated and less accepting of criticism and pressure."

Updating The Formula

Despite changes in demographics and customer attitudes over the past 40 years, collections experts say, some practitioners still go about their work as if they were in the 1950s.

But an increasing number of them are finding that the old talk-tough approach to collections doesn't work as well as it did then.

What does work?

To answer that question, Willis' firm has been using focus groups for almost a decade to conduct consumer-collections research. One of the most significant findings, Willis says, is that "what happens during the first 30 seconds of a collection call determines whether that customer will pay you or not.

"The goal is to become the 'payment of choice' based on the way you treat your customers, especially during the first 30 seconds."

One company that understands and applies that notion is Commercial Financial Services of Tulsa, Okla. CFS purchases charged-off credit-card accounts-typically those with small balances and no collateral, accounts that no one else has been able to collect.

"We operate under the philosophy that the majority of people are honest and want to do the right thing," says Jeff O'Hare, managing director of credit for CFS. 'The people we call are just like us. The only difference is that they have fallen on hard times, such as divorces, medical problems, family deaths, and so on. As such, we treat them with respect, dignity, and politeness."

A visitor walking through the collections department at CFS would likely hear the account officers joking with customers and talking socially-not the sort of environment one might expect to find in a collections company

Using this customer-friendly approach, CFS collects millions of dollars yearly, O'Hare says. The firm also receives many unsolicited letters from customers expressing their appreciation for the way they were treated, he says, and for the opportunity to resolve their debts and get back on track with their finances.

Jim Shaw, owner of Shaw Resources in Cupertino, Calif., is another collections specialist who advocates treating customers with respect. His hook, Customer-Inspired Quality: Looking Backward Through the Telescope (Jossey-Bass, $23.50), emphasizes the importance of looking at all business processes, including collections, from the customer's point of view.

"In the U.S. justice system, you're innocent until proven guilty," says Shaw. "The same should be true in collections. Nine out of 10 times, customers want to pay you. If they do not, you need to start with the assumption that they have valid reasons."

For example, Shaw says, maybe the customer withheld payment because of something your firm did or failed to do. Perhaps the shipment or the invoice never arrived, the product didn't work, or the service wasn't satisfactory

Like Shaw, collections specialist Frischer assumes when she calls clients for the first time that there are valid explanations for nonpayment. For that reason, she prepares herself mentally for each call by making sure she has a positive attitude. "I visualize a positive encounter every time I pick up the phone," she says.

When Frischer reaches the person she's calling, her positive attitude-her concern and interest-get through to that person, she believes. The experience for the person being called, she says, is completely unlike that of someone called by a collection specialist who conveys resentment, anger, or frustration.

"Again," Frischer explains, "I want to make the experience as painless as possible. If defenses go up, rapport goes down."

Friendly Ploneers

One of the early practitioners of the customer-friendly approach to collections is Jack Renton. In the 1960s, Renton was the credit manager for a construction firm in Australia, where he found that applying friendly, colorful reminder stickers to customers invoices increased on-time payments substantially.

While he continued working for the company, Renton and his wife, Patience, began a part-time business printing and selling such stickers.

"By the late 1960s it had become a fulltime business," says Renton's son Peter, who is president of Renton's International Stationery Inc. in Denver,

(The Australian-based parent company, Australian Credit Stationers, is run by Peter's brother, Ian; founder Jack Renton remains active in the business, and his wife is retired.)

The Denver-based company also sells other business-oriented stickers such as "Thank you for your business," "Thank you for your timely payments," and "20 years in business."

The firm is also expanding its line to include labels and holiday cards.

"Most billings lack any type of relationship-building," says Peter Renton. "Companies spend a lot of money getting new customers but never spend another dollar to keep them."

In fact, a firm's collection practices can send customers running in the opposite direction, collection experts say. "If I have been paying on time for a number of years and then, one month, I'm late by two or three days, I would really resent receiving a collection call," Renton says.

A company that decides to take a customer-friendly approach to collections might consider the following methods, which have worked for others:

Ward off collection problems with an early dose of thoughtful friendliness. Some firms that attach Renton's International Stationery's thank-you stickers to initial invoices find that it sharply cuts the need for subsequent collection calls.

Before you place a call, get yourself into a positive frame of mind. "Visualize yourself and the customer having a positive interaction," emphasizes Frischer. "See the customer wanting to pay you. This will definitely come across when you call."

Begin with questions, not demands. "Your first call should be to find out what the situation is," suggests Shaw. Begin with something like: "We believe we shipped you these items and that there is payment due. Can you help us understand where things might have gone awry?"

Frischer's initial statement is often along the lines of: "We noticed that your invoice is X number of days old. We want to make sure that you received the invoice, that you are happy with the service you received, and if there is anything else we can help you with."

Emphasize listening skills. Once you pose your opening question to the customer, you should listen. "You have to be able to listen to and understand customers and be able to convey to them that you are listening and understanding," says Willis, who refers to this technique as "bridging"--getting yourself on the customer's side of the issue.