When an invoice becomes past due, the goal of credit and collections professionals is to liquidate the claim most expeditiously or, secondarily, to learn the reason for nonpayment. But the methods one uses to do so can have dramatically different results. In AFM's September 2018 newsletter column, I shared some advice on how to complete recovery efforts when dealing with two of the most common reasons for nonpayment: customer disputes and promise-breaking customers. But what are the best actions to take when a customer is financially distressed or out of business? Read on. FINANCIAL DIFFICULTIES When a customer with past-due invoices claims it does not have the means to pay monies owed, immediately determine their proposal to satisfy their balance. You may not receive a concrete settlement offer, or you may not have the authority to accept what's proposed, or you may decide that it is not in your company's best interests to accept the customer's plan. Regardless, attempt to obtain a complete understanding of the customer's financial picture. Signs of distress may include decreased revenue or reduced personnel, payroll difficulties, numerous uniform commercial code (UCC) creditors, cautionary liens filed by UCC creditors, federal or state tax liens, legal proceedings, collection balances or other substantial liabilities. Much of this information can be learned during your call with the customer. To extract as much information as possible, ask open-ended questions. Before ending the conversation, ask for a recent tax return, balance sheet, profit-and-loss statement, and/or bank statements to help you evaluate their financial status and your next steps to maximize recovery. In addition, you can learn about the customer's financial status by reviewing state and federal court records, credit reports and financial statements. If the customer is experiencing severe financial hardship, it is most economical to quickly settle by securing an immediate lump-sum payment, even if the amount is less than the full amount owed. Another option is to enter into a payment-plan agreement. However, you need to protect yourself. For example, if the customer is incorporated and goes out of business, there will no longer be a party from whom [...]
When an invoice becomes past-due, the goal of credit and collections professionals is to expeditiously liquidate the claim or, secondarily, to learn the reason for nonpayment. The methods one uses to do so can have dramatically different results. Below are suggested recovery approaches that every credit and collections professional should utilize when handling two of the most common reasons for nonpayment: customer disputes and promise-breaking customers. By following the steps below, you will save yourself and your company time, money and may even grow the customer relationship. DISPUTED CLAIMS When you learn about an alleged dispute, it is important to immediately uncover the exact nature of the disagreement, obtain all information and documentation pertaining to it, and inquire about previous disclosures. A frivolous dispute usually arises to delay payment and is generally easy to recognize. Often, the first complaint of the dispute does not occur for months after the goods were delivered or the services were rendered. To resolve a dispute, conduct a comprehensive analysis and thoroughly respond to all elements contained therein. To do so: Extract as much information and documentation from the customer about the dispute; Become well-versed in your company’s services, if you aren’t already; Know your company’s reputation, which will indicate whether you should either settle or show no leniency; Attain critical customer information, such as their buying power; Determine how the contract was formed and the terms that governed the agreement; Investigate other significant file facts, such as any customer collectability issues. This dispute analysis will give you the tools to narrow the scope of the issues and shift the customer’s focus to the crux of the problem. That should expedite settlement of legitimate disputes or escalate the file if the dispute is meritless and the customer refuses to change their stance. When a legitimate dispute arises, your best option is usually to settle the case. A common approach is to segment the non-disputed portion from the disputed portion of the unpaid balance. That should allow you to extract full payment for the non-disputed portion and reach an agreement involving payment and/or credits for the [...]
2018-09-11T11:38:49+00:00 August 14th, 2018|
Since 1964 we have been proudly working to be the best accounts receivable management firm in the eyes of our clients, business partners and employees. Forward thinking, implementing new technologies and acknowledging important business trends are just some of the ways we ensure our company is keeping up with the game to ensure our client’s goals are exceeded. In the spirit of progressive social interactions, American Financial Management has taken another step forward in opening a blog to stay current with our clients and business partners. Our new online personalities will ensure everyone is up to speed on current events, office happenings, and the latest news in the collection industry. We hope you join us on our next step forward!
2017-02-08T14:54:58+00:00 December 27th, 2016|