Compassionate Debt Collection Method

The days of strong-armed collections tactics are hopefully a thing of the past. More and more organization are using the measured approach to recoveries of debts.

From my knowledge and experience in the industry, the collection industry has, in recent years has been put under the spotlight from various sources. This is even more so, during the current difficult financial crisis the whole globe is experiencing. Even the government and the media is focusing their spotlight on the credit managers or rather the credit management of the companies.

In the past, it has been seen as acceptable to employ recovery tactics which are designed to strong-arm debtors into payment through the use of threatened court action and to some extent by trying to make the debtors feel guilty or shy through black listing and so on. Our collection teams have been taught to talk to people about the possible negative consequences of non-payment. Due to the various support from the various sources, especially the government and the media, such tactics may not be suitable anymore for most credit managers. To a certain extent it may even back fire to the managers and sometimes the creditors. We managers of the credit department have be told or advised to use the more measured approach.

A measured approach - Is this a good place to start, or should we use these options with more care? Is using the more measured approach in today's world in the credit management make us more effective in our collection? What is taking a measured approach in Recovery?

A measured approach in recovery basically involves in the following:

Consider each case individually - With more and more advanced method in collection is being introduced, especially when more and more companies are moving toward automating the collection process. Automating your debt collection may be good for numbers, ie. the number of reminders sent, the number of customers contacted etc. But it may not be good in terms providing information as to why the account is not paid and to the propose mode of payment. It is advisable to consider each case individually since different case has a different set of problem and different solution to resolve.

Invest in the right people - Credit Managers have to change their mind set at the point of recruitment. It has been the norm that most Credit Managers would look for person who are tough and strict to be in their collection team. Little emphasis is being given to candidates who approachable, with good public relations skills or even with some ability in counseling and applying psychological method. Credit Managers should not look at how many customers their collection team had covered, but also to the quality of time spent with their customers.

Specialist on the front line - Since the company had invested heavily in the people, ensure that these people who are specialist in their field being put on the front line. Most companies would consider the Sales team as their front line staff. The company should try to make the collection team's job to be as glamorous as the sales team if not more.

In addition to all this, a sound training and development package is essential for your collection team. A 'one-size-fits all' policy should be avoided. Design a collection policy that is able to deal with a variety of recovery solutions.