Successful Debt Collection by Phone in 4 Simple Steps

Small and medium-sized enterprises usually cannot afford an additional recovery department for debt collection; therefore, the debt collection becomes an extra task for some of the employees. By effectively collecting the debt, the company as creditor can achieve repayment of receivables and reduce late payments. However, to be as effective as possible, the person working must be well trained and prepared. In addition to attend workshops and seminars on telephone debt collection, this may also mean that the employees responsible for debt collection have to become some kind of quasi-lawyers.

General tips for effective telephone debt collection

Recovery is about finding solutions and does not have to lead to a deterioration in business relations. Telephone debt collection is the earliest and cheapest stage of debt collection process and is usually enough to reach an agreement on payment - as long as it is done in time, of course! When can we start? Creditors are perfectly entitled to call the debtor and ask for payment on the first day of the default. We can kindly remind the buyer/debtor by email or by a short call of the impending due date, even a few days before the due date. Some debtors wait until they are reminded to pay before they will actually pay the invoice - so don't delay.

The 4-step telephone debt collection process

1. Preparing for the conversation

First, we check the previous cooperation with the debtor and which person is responsible for the payments. Determine the recovery objective (payment agreement, instalment payment, compensation, etc…). Some people find it helpful to prepare an indicative scenario of the conversation in the form of talking points, a mental model, including the debtor's anticipated objections. When preparing and following scenarios, we are careful not to stick to them at all costs and allow ourselves to deviate. The telephone conversation is a two-way communication, and we adapt to different situations as we speak. After some practice, you will have enough mileage and feel completely natural during the call, you can safely put your script away in a drawer.

2. The first contact

It is very important - it is often the key to the continuation of the conversation and the agreement. Keep it simple, short, clear, and concise. Usually along the following lines: greeting, company, first (and last) name and introductory words. Example:

"Hello. I am calling from the Invoice Exchange, Gašper Bunič speaking. I am calling you regarding overdue invoices. Who can I speak to?"

The phrase "Who can I speak to?" can be omitted, but it is essential to say exactly why we are calling (because of overdue invoices). We use our voice as a tool (intensity, speed, intonation, pronunciation, etc.). We speak calmly, not too fast, and not too slow. If you already know who oversees the payments, whether it is the director, the head of finance, the person in charge of payments or the accountant - ask for that person by name.

3. The core of the conversation

Now we are talking with the person in charge. We give specific information about the invoices due and make sure to add an unambiguous question at the end:

"There is an invoice in our records for €2,357.80, due 18.09. When can we expect payment?"

or

"In reviewing our records, I noticed that we have a number of overdue invoices totalling €5,860.55 with due dates from 15.09. to 10.10. When are you planning to pay?”

Usually, the buyer already tells you at this stage exactly when they will settle their debt. Any delay may be due to current illiquidity - such a debtor usually communicates professionally and is far from difficult. If this is not the case and we encounter a difficult interlocutor, our conversation can become challenging. It is essential to be patient, calm and respectful throughout the conversation. We should not take any provocation from the debtor personally; we should remain calm and personally unaffected. If necessary, reassure the debtor with a polite phrase (e.g., I understand, it's fine) and direct them to the point of the conversation - the payment agreement! Remain both professional and objective, presenting facts and figures (amounts, dates, etc.). It is important that the debtor recognises us as a competent interlocutor.

If the conversation becomes difficult it is essential to remain patient, calm and respectful, we should not take any provocation from the debtor personally and direct the conversation to the point - the payment agreement.

Sometimes it will take several conversations or calls from you to finalise payment. Listen carefully to the customer/debtor and take notes during the conversation. Ask (open, proactive), goal-oriented questions and look for the best possible solutions. Important: avoid asking "why?" as it puts your business partner in an awkward situation. Unless the debtor's prolonged inability to repay a claim or debt requires us to clarify the reason and the risk it poses to us - to take timely action, we ask the debtor about the reasons for the situation. We manage the situation by proposing a solution ourselves and explaining what the consequences of non-payment will be. We are persistent, but never aggressive. Some people unconsciously change their language to a harsh and sharp tone when collecting - don't do it. A sharp and aggressive manner will make it more difficult for you to communicate with the debtor and to reach a favourable agreement.

4. Ending the call

Our aim is to reach an agreement - either on the payment of the claim or on the next call. We do not end a call without an agreement. When we end the telephone conversation, we make sure to summarise the agreement:

"To summarise, you will pay in three instalments of € 3,200.00 each, starting on 15.11.2022 .…"

"We have agreed that you will make the payment by 30.10.2022 at the latest and send me an email confirmation of your payment .…"

We then explain in detail what the consequences will be if the invoice is not paid or if payment is delayed (interest for late payment, collection costs, enforcement action, etc.). We thank the debtor for the conversation, greet him and (optionally) wish them something encouraging.

Caution:

If we assess that in a particular case the possibility of default is too high, we do not issue all the steps that will follow to the debtor. If we consider that it is better for us that the enforcement action we take is unexpected (in the case of enforcement by writ of execution). The creditor's ultimate objective is to receive payment of the debt with all the costs of recovery, which sometimes requires withholding some information from the debtor - but more on that next time.