Benefits of Paying

 Good credit reputation – Credit score

 The satisfaction of fulfilling an obligation – Fulfilment
 Reputation of fair play – Fair Play
 Self-respect
General Types of Debtors
1. The Up-to-Date
 •a debtor who pays on time and who responds to available prompt payment
incentives offered because of his sound financial position
 a "dog type of debtor"
2. Occasional delinquent
 •most debtors become this type, because there is no perfect matching of their
income and expenses
 ." a monkey type of debtor"
3. Habitual delinquent
 •this kind of debtor must be the target of strict collection efforts to prevent his
account becoming a bad account
 •"a lizard or turtle type of debtor"
4. The changed circumstance
 •a debtor who, for social, economic or political reasons by law, contract, accident
or fortuitous event, suddenly cannot pay his obligation
 •"a chameleon type of debtor"
5. The premeditated delinquent
 •a debtor who, in the first place, should have been noticed and avoided. Needs
fast, drastic and decisive collection efforts
 •"a crocodile type of debtor"

General Categories of Debtors Defenses

1. Offensive or aggressive. This kind of debtor’s defense is generally used
by one who is premeditated delinquent debtor, one who, from the inception or obtaining
the credit, had no intention of paying at all
2. Denial or evasion. This debtor’s defense is motivated by the debtor’s
inability to pay (with good reason) or to avoid payment (without good reason)
 3. Defiance. A defense generally used by a debtor who is either
unscrupulous or a habitual debtor
4. Plea for sympathy and compassion. A debtor who uses this kind of a
defense is either a victim of an accident or misfortune or has been placed in such an
unfavorable financial position that he cannot earn enough to pay back his debt.

Twelve types of problem customers and how to deal with them

Description How to deal

Look for the tell-tale signs

of bad management in
Does not bother with bill-paying, flag your file
THE NEGLIGENT
due dates of his debts on him, try sending a
letter that does not look
like a collection letter

This customer is all too

familiar, but as a rule, he
offers no real collection It is a good idea to
problem assume the responsibility
THE HONEST BUT
for the misunderstanding
CONFUSED One who did not and patiently explain the
understand the terms or terms in a friendly way
conditions of the sale or
obligation

This type of customer, Keep on sending

who puts off paying little reminders until the bill is
balances until he adds paid
THE “CAN’T BE
on to his account, is Write a frank and friendly
BOTHERED”
considered as a letter explaining the
necessary and incurable bookkeeping bottlenecks
evil they are causing

A careful evaluation of
financial statements and
Falls behind in paying periodic reports on the
debts because his business will be worth
THE SEASONAL
business slows down at their cost for accounts of
DELINQUENT
certain periods of the substantial volume
year
Extend terms and help the
customer toward recovery
 Leniency at such time is
expected and many
THE EMBARRASSED LATE- Pays late because his
suppliers make it a point
PAYER /HONEST LATE - own debtors also pay
to telephone or telegram a
PAYER him late
customer who is affected
by such

A debtor who makes all

Press for payment even at
creditors wait until they
THE CHRONICALLY SLOW the risk of losing them as
give more liberal
customers
payment terms

A debtor who uses

supplier’s credit which is Give him your “You leave
THE CHRONIC LATE- generally interest free us no choice” letter very
PAYER / THE WITTINGLY instead of a bank loan shortly after the account
LATE
They could pay, but they becomes due
say they can’t

A debtor who is
temporarily over-
extended or who
intentionally delays
paying Limit his credit at the
THE CREDIT STRETCHER
outset
They are usually jovial
and optimistic people
who can’t resist living a
little beyond their means

If you allow the discount,

acknowledge the payment
right away
When you refuse to allow
the discount taken but
One who insists on a unearned, you must, in
THE PERENNIAL
discount- whether fairness, return the check
DISCOUNTER
earned or not
Don’t allow
“inconsequential
discounts months after
months and then refuse to
allow a substantial
discount.
 One who is usually on Try to assist the customer
THE LAST-DITCH the verge of financial out of his difficulty
DEBTORS /THE crisis
Send out your best credit
TIGHTROPE WALKER They are the insolvent counselor or call your
debtors lawyer fast

A debtor who almost

always says “ Do you
know who I am?” and
THE OUTRIGHT
generally does not pay Limit his credit or do not
FRAUD/THE
unless put in an lend at all
BRAGGART(MAYABANG)
embarrassing situation
or threatened with a
court suit

Do not extend credit the

One who is not around next time
THE SILENT QUESTION
come paying time, but is
MARK/ THE “VANISHING” Send someone to see
always around when
(HOUDINI) DEBTOR what’s wrong
borrowing
Proper credit evaluation

Basic Collection Approaches

 Education
At the onset of the creditor-debtor relationship, it is always practical and good
collection management technique to indoctrinate the debtor about the credit and
collection policies and procedures of the creditor.
 Persuasion
It is sometimes referred to as collecting by “artful intimidation” since its effectiveness
depends on the creditor’s knowledge of the pertinent facts.
 Problem solution or Problem Solving
The creditor must always be ready and willing to offer assistance to your debtor.
 Coercion
Coercion must be applied only when needed. Any form of coercion must be valid
and legal. When coercion is decided upon, apply it promptly and to its full extent
End of lesson 11
 Collection Negotiation Gambits
Demand for Maximum Payment under the Contract
 It gives some leeway to negotiate because “you can always come down, but
never go up” “a negotiation always looks better after you have thrown out
something”
 You may get what you demanded
 It raises the debtor’s anxiety and fear for the repercussion of not paying
 It provides a graceful face saving mechanisms for egotistical conflicts
 It creates a perception for the debtor to feel he has won some concessions

How Much More Than What You Demanded is Enough

 Wait for the debtor to talk about his means and capability to pay the debt
 Don’t be eager to give the initial offer or counter offer
 Counter gambit is a tactic to protect you from accepting the first offer. Refer to
the boss or higher authority is a counter gambit
Play a Reluctant Collector/ Negotiator
 To reduce the negotiating range before the real collection negotiation starts
 Debtors generally accedes or accepts a substantial amount of the obligation/
debt you are collecting
Stick to Issues of the Debt/ Obligation
 When the debtor is upset or angry, focus on the issues of the obligation, not on
personality issues
 The most important is to have an improvement or progress from where you were
Pressure Points
 Generally use to counter a payment proposal or counter-payment proposal
 Concentrate on the peso amount of the debt, not on percentages. Don't worry or
be overwhelmed by the total amount due
"Refer to the Boss/Committee"
 *Avoid posing or letting the debtor know that you are the authority to make the
decision
 •Don't de egotistical, leave your "EGO" at home/ office
 •Use your skills and art to prod the debtor to accept and approve your scheme of
payment
Avoid/ Prevent Adversarial Collection/ Negotiation
 It provokes and irritates. The debtor uses it to show or prove himself right in
delaying or not paying
 *Use the 3 F’s (feel, felt and found
Value of Favor/ Concession
  Always ask for a reciprocal concession/ favor for what you have offered or made
to the debtor, because favors or concessions rapidly dimishes in value as time
passes
Avoid Offering to Share the Difference
 Encourage the debtor to offer to split the difference
 If debtor offers to split the difference between what you want to collect and the
amount debtor want to pay, it is a sign that debtor wants to compromise, which
will give him the perception that he won in the collection negotiation- give in
Leverage
 *For every concession asked of you by the debtor, you must correspondingly
demand a reciprocal concession/favor in return because by doing so, the value of
the concession is increased. It is a give and take situation. Try to “magnify” the
concession
 *It will put a stop to the bargaining process
Don’t Make Debtor’s Problem Yours
 •When debtor tosses his financial problems to you, test and check for his
financial capability whether or not he is in a position to pay, or just playing a
diversionary tactic to stretch his payment or see how gullible you are to his
gambit
Personal Collection Negotiation Attributes
1. What’s In a name? Who are you in your company
2. THE POWER OF FAVOR. The power to provide some leeway, liberality,
space, concession, comfort to SIT someone
3. COERCIVE POWER. Feeling of a debtor to be inflicted with some
embarrassment, punishment by a collector
4. Ability. ability of a collector to work on a consistent set of values, pattern
that influences debtors not to vacillate, delay or evade obligation.
5. MOST EFFECTIVE LEADER. The position power and personal power.
The ability of a collector to use and extend some latitude of power over
someone however petty, generally overcomes somebody
6. LOVABILITY. The ability of a collector to exude and project natural
helpfulness, empathy, artful reinforcement on the debtor.
7. Expertise. The perception of you having more knowledge, skill,
experience about your work and problem at hand.
8. Encyclopedic Knowledge. Ability to share some information with the
object of one's collection efforts-may motivate some form of influence
Debtor’s/ Collectors Personality Negotiation Styles
 1. Practical- is a street smart and his only goal is to win irrespective of the means
and who loses. Don’t get affected by his win-win advantage styles.
2. Friendly- gets so excited about things that he losses perspective. Sometimes
referred to as the Den Mother. He is likely to have monopoly of the collection
negotiation which may fall down but did not realized there was a problem in the
first place.
3. Peacemaker- generally turns into a pacifier or trouble shooter whose objective is
to make the parties agree on a win-win solution
4. Chairman- turns into executive type of negotiator. Rigid and everything must be
in place and always take refuge saying often; it’s the rule and principle of thing or
“trabaho lang” retort.

Ten Rules to Collect and Get Paid

 Those who want to get paid, must insist on Payment-on Time
 Collecting something is better than nothing
 Act decisively to collect legally
 Get assistance soonest
 Have a Team
 Use your Aging schedule positively and aggressively
 Always be a Good Creditor in good or bad times
 Stand your Ground
 Don’t hesitate, Enforce your Credit
 Never threaten, unless you mean and do your threat

Role of Collectors
The collection efforts will be performed primarily by the personnel in the collection unit
generally given the title "Collectors" or "Account Representatives". The collector's role
has grown from the mere "getting and receipting payments" to a much more
complicated and sophisticated job. He is at once:
1. The "action man" of his department for, after all, he brings home the "bacon", the
cold cash so much needed by the company
2. The "after delivery credit investigator", the eyes and ears of the credit department
for it is part of his job to submit additional credit investigation reports, to supplement the
CIR already on file.
3. The "listening post of the customers' business condition. Since he regularly visits
the customer, he is in the best position, together with the salesman, to report any usual
change in the business
4. The "PR or public relations man" not only of his department but of the company
since he is in the front line of the business operations
5. The “financial adviser" of the customer since he is supposed to know the financial
conditions of the accounts he handles

Being then a many-faceted man in the organization, the company should now be
selective in choosing the man to fill this position. Among others, the following would be
the qualifications of a good collector.
PAST DUE
 Honest
 Alert
 Good educational background
 Know how to drive
 Good Public Relation man or Good PR man
 Women as collectors
 Persevering
 Presentable
 Good health