Collection Tip: The Dangers of a Poorly Worded Agreement

The Dangers of a Poorly Worded Agreement

Accounts are frequently submitted to us for collection that are needlessly difficult to collect due to confusing written or verbal agreements.

Here is how weak wording can - and often does - result in lost dollars.

Who owes the money?
Sometimes written agreements don't distinguish between the customer's company and the customer personally. We often discover that the party from whom we were instructed to collect, is not actually responsible for the debt. Not making it clear who is responsible results in complications that could render the debt uncollectable.

What is owing?
When credit agreements are worded in such a way that doing the math can lead to different amounts owing, the customer could derive a different balance than you have on file - even though you are both basing your calculations on the same information. In some cases, interest rates are stated in terms that are open to interpretation - are they annual? monthly? simple or compound? Make sure the agreement is clear on what will be owing at any given time.

When is payment due?
Generous settlements or payment arrangements are often discussed and agreed upon. However, believe it or not, the actual payment due dates are frequently omitted from the signed agreements. In these cases, a customer could claim ignorance regarding the payment due date or settlement offer expiry date. Remember that it's always best to include exact dates with whatever payment schedule is in the agreement.

Where is the payment to be made?
Difficult customers can twist and confuse any issue to their advantage. For instance, if goods are involved, be sure all parties are clear on where they are to be delivered - what address, at whose expense, etc.

Why do I owe the money?
Recently we had a collection account where the debtor produced cancelled cheques showing payments he had made prior to being sent to collections - payments which had not been applied to his balance with our client. Turns out that when he issued the cheques, he requested that they be put toward his brother's account instead of his own. Unfortunately, since our client didn't get that in writing, the debtor then had the opportunity to question why he still owed them money after his cheques were cashed.


The Bottom Line:

Anything in business that can be misinterpreted, will be misinterpreted by people who like to take advantage of poorly worded agreements. Complete and clear details go a long way toward preventing disputes and lost dollars.

Collection Tip: Cutting Corners

Cutting Corners

Ever heard this saying? "An ounce of prevention is worth a pound of cure."

In the busy workplace, there always seems to be too much to do and not enough time to do it in.

Cutting corners may feel like a short term solution, but it can lead to long term collection problems.


Some common corner cutting cases we've come across:

• Relying on opinions and hearsay rather than on credit facts.
• Not insisting that a proper credit application be completed and signed - or failing to notice that it was not signed or properly completed.
• Not verifying information that should be verified before any credit is extended.
• Not investigating and dealing with disputes promptly.
• Failing to follow up on deteriorating payment habits.
• Ignoring overdrawn credit limits instead of reviewing the customer's ability to pay.

The Bottom Line:

Take the time to be thorough. Each and every corner cut throughout your sales or lending process can become a very large obstacle down the road.

Collection Tip: Right Under Your Nose?

Right Under Your Nose?

Accounts listed for collection get larger all the time. Despite the larger balances, information customers provide is often disregarded – information that could prove very helpful later, if the account goes unpaid.

Examples of details that often slip through the cracks:

• Bank and account number from which payments were drawn. This can be found on cheques, and sometimes on credit applications and preauthorized payment forms.
• Possible alternate or updated business names (incorporated or otherwise) under which the customer appears to be operating.
• Letters or documents showing changes in the business, such as asset ownership, partners, etc.
• Change of address notice from the customer.

A good, up to date credit application is usually the most well rounded source of information. However, we’ve found the leads mentioned above can also be extremely useful when collecting an account.

The Bottom Line:

When an account is delinquent, have a closer look at the documentation you already have on file and see what you find. There could be essential information right under your nose.

Check out our end to end A/R solutions at www.crmcanada.com

Collection Tip: "No Big Deal"

No Big Deal

When your accounts receivable fall into these categories:

1. Terms of payment not kept
2. Promises for payment not complied with
3. Credit limits exceeded

These are serious, urgent issues.

“So the account is a bit slow, what’s the big deal?”

This type of thinking is the root of the problem. When you make accounts receivable calls with the “no big deal" attitude, it's reflected in tone and word. This gives your customer the impression that it doesn't matter to you if they pay or not.

The Bottom Line:

If the person calling for payment does not convey urgency, then how can the customer consider their payment urgent?

How many accounts remain unpaid because the customer considers the delinquency “No Big Deal”?