Collecting from Delinquent Customers

Creative ways to connect with slow payers and collection dodgers


Phil Sasso is the president of Sasso Marketing (www.sassomarketing.com), a technical marketing agency specializing in tools and equipment. Subscribe to his free marketing tips at philsasso.com./blog. I’m having collections problems. A lot of my customers are starting to fall behind and I have some dead beats I can’t catch up with. What should I do?   You don’t want to hear this, but if a lot of your customers have fallen seriously behind, you first have to realize there’s only one...


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I’m having collections problems. A lot of my customers are starting to fall behind and I have some dead beats I can’t catch up with. What should I do?

 

You don’t want to hear this, but if a lot of your customers have fallen seriously behind, you first have to realize there’s only one person to blame: You.

‘I can’t blame them,” Cincinnati-area Mac Tools Dealer Bruce Holsinger says of his customers who are behind or delinquent. “It’s my fault. I let them get to that point.”

That doesn’t mean he lets them off the hook. It just means as a 20-year mobile veteran, he realizes it’s his responsibility to keep them from getting to that point. And once they’ve got to that point, it’s his job to get them back on track.

The consensus among top dealers and trainers is that good collections all pivots on starting off on the right foot. As Mike Boyhan said in the August 2012 Sales Q&A column (www.vehicleservicepros.com/10739333), it’s all about covering your bases upfront when you begin working with a new customer so they know what’s expected.

Get Information Up Front, You May Need It Later

Holsinger, for example, makes sure he gets every piece of information he can when he first opens a new truck account. He asks questions that might seem a bit invasive: Do you have a wife or girlfriend? What’s her name? What’s her phone number?

Holsinger says if the customer mentions a dad, uncle or brother he asks for their name and number too. Never know when it might come in handy.

 

Some customers may balk at these somewhat intrusive questions. But just remind them they’re in essence applying for an interest-free loan. If they were applying for a bank loan, they’d be asked many more personal questions. Heck, I was asked to supply a reference and phone number when I applied for a library card several years ago. Really. For a library card!

Why does he want this information? He may not call them as a reference, but if a customer starts dodging him, Holsinger is not above calling a wife, girlfriend or family member to try to collect his money.

A Truck Account Is A Privilege

Holsinger is among the best collectors in his region. He says his secret isn’t quite that secret.

He makes sure he tells customers his payment policy upfront, and reminds them that having a truck account is a privilege. If they want to keep that privilege, they need to hold up their end of the deal.

He doesn’t just do that when he opens a new account, he gives his 15-second speech nearly every time he closes a new sale. This reminds the customer and everyone who overhears him that Holsinger is dead serious about getting paid on time.

In fact he recites his payment policy so often, he has customers that have it memorized and will recite it to new customers on the truck, often giving Holsinger a chuckle. (See “Holsinger’s Payment Policy” sidebar.)

Watch For The Warning Signs

It’s important to know the red lights that a customer is likely to fall behind and to keep them in check before they are seriously delinquent.

“He’ll start to dial back his payment,” says Holsinger. “When a customer says ‘I’ll be $10 short this week,’ you’ve got to be sure they know you expect that $10 next week.” Otherwise, you’re leaving the door open to more weeks when he’ll be $10 or even $20 behind. Once a customer begins to fall too far behind, it becomes next to impossible for them to catch up. He could end up more than just behind on payments, he could start avoiding you altogether.

 

In the same way, avoid selling a customer more tools while keeping the payment the same. In either case, you’re putting your cash flow at jeopardy. It doesn’t matter if they can only afford $25 a week, if he wants more tools, he has to come up with more money. Or he has to wait until he’s paid up to add that shiny new tool to his box.

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