Chapter 3:Simple ways to collect a debt yourself

Simple ways to collect a debt yourself

LET'S SAY you've got a bad one. The money is way overdue, you've called a few times -- now you're convinced it isn't going to be easy. What should you do?

I wish I could list nine easy steps. It's not that simple. First, it depends on the size of the debt -- $31 calls for a different strategy than $1200, or $34,000. It's different chasing an individual than chasing a company. If it's a company, it depends on the size of the company. It can also depend on how important you are to them.

Let's look at the main categories, then list things that often work. But caution: don't follow any of this slavishly. Use common sense and a bit of psychology. We're dealing with quirky, obstinate, vain and wonderful humanity -- even if they are debtors. You know the history of the debt, and you know what the debtor is like. Use everything you know. Use it skilfully to turn up the pressure.

Little debts owed by individuals

1. Write them a letter, saying it's unlike them not to pay promptly, and please could you have the money. Use a bit of shame on them.

2. Keep phoning them, politely but firmly. (Keep threats out of it, but keep records of the calls you make -- they may be useful later.) Just wear down their excuses and hope they'll get tired of it all. By and by, it may seem simpler for them to pay the $31.

3. If a cheque is there (they say) but for some inventive reasons it never gets sent, say you'll send a courier around at 10.45 to pick it up. That often works wonders.

4. If it seems worth it, send someone from your office around to pick up the cheque. If you can afford to do this, you'll almost always get a cheque this way. (Professional debt collectors favour calling around on Saturday afternoon.)

WARNING: You'll probably be all right visiting the debtor personally, if you're just offering to pick up the cheque and you don't start making big waves. But if you handle things wrong, there's always some danger of being prosecuted for 'harassment'. A legally minded (or bloody-minded) debtor might try calling the police. True, the police might have better things to do than follow up. But don't ask me to guarantee it.

Big debts owed by individuals

1. You can try steps 1 to 3 above. But don't let too much time go by doing that. Instead, go straight to...

2. Call in to see them. Call in at work, or at home, or wherever you can find them. Not many people can stand the pressure of a personal call. And remember, this is a big debt -- one that's important to collect. The best way is to collect it yourself.

Little debts owed by companies

1. Make sure they have at least one letter from you, firmly but pleasantly asking for the money. This means a letter -- not one of those stickers you put onto copies of your invoice. ('A friendly reminder' and so on.)

2. Try wearing them down with telephone calls. Phone daily, even twice a day. (Not the most popular job for someone on your staff, but it's the only cheap way to collect small amounts.) Don't threaten anything: instead, moan about your own cash flow, or say your accountant wants to square up his books, or whatever sounds OK. They may pay faster than you expect: some large companies keep a log of demand calls, and after you've logged in a certain number, you get your cheque.

3. 'Offer' to send around a courier. This often breaks through their weaker excuses and exposes a realm of truth: they might tell you they're having temporary cash-flow problems, and that the account will be paid within two weeks.

Big debts owed by companies

1. Try steps 1, 2 and 3 above (for small debts owed by companies). But go through the steps faster. This is a big debt, after all. Don't mess around too long before you...

2. Go and see them. Make an appointment with the credit manager. If you get a lot of excuses, just go without an appointment, unannounced, and plop down in reception. Be polite and smile at everyone. Look like you're prepared to spend the day. Take something to read, or even a laptop computer and do some work. Sooner or later someone will see you. Then you'll either get a cheque, or you'll find out what you're really up against.

TIP: if a big debtor is in financial trouble, and you push him hard, he might find something 'wrong' with your product and offer part payment. Your product was faulty, or your service wasn't up to scratch -- or whatever. This is face-saving. But it offers an easy chance to get most of your money.

Consider his offer very seriously. Believe me, it can be the best thing you can do. You'll probably still end up with a profit on the deal. (And he'll be happy, because he's got a reduction.) You'll have saved yourself a lot of time. And you'll probably get more money from the debtor than you'd get in any other way. Also you'll come away feeling like a good guy. You're reasonable, you can compromise. Do it! Do it! Don't get involved with law courts and endless hassles if you can avoid it. Pride can be very expensive.

(If there's still a lot of anger on both sides, allow me to recommend this ancient advice from Aristotle.)

Psychological section: know thyself

DEBT-COLLECTION professionals estimate that at least 80% of people have terrible problems asking for money. Even if there's no squabble. They just hate asking. They can't stand the idea of walking up to someone and saying, "You owe me such and such, could I have a cheque please?"

Are you like that? Worse yet: is your credit manager like that? (Many are.)

Here's a simple test: you're in a queue and someone pushes in. Do you grumble under your breath and let him in? Or do you pipe up and say, "Hey! There's a queue here. Go to the back." Eighty percent or more would let the person push in. The same 80% are the ones that have trouble asking for money (from anyone -- even their own brother).

If you're honest and think you aren't a natural debt collector, take account of the fact. Hire someone who finds it easy. This is precisely what many debt-collection agencies try to do themselves: pick people who are psychologically right for the job. There's no point in them hiring someone to collect debts if it takes the person half an hour to calm down each time he phones someone.

And back to you: think of your health. If debt collection rattles you, you won't be able to sleep at night. Is it worth it? Can you run a business that way?

You have to know how much debt-collection you can stand, then hand over the job when you reach your threshold. That's what I do. I press debtors to a certain extent -- then just throw up my hands and let the professionals go after them. The peace is wonderful.

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