Debt collection at its best can be an awkward process. No more so than in the midst of a pandemic. In fact, this must rate as the most challenging time to ask people to cough up what they owe. And it has an unpleasant domino effect because while you might be reticent to push for payments, you may also owe money and be hoping your creditors are going to be reasonable as well.

Debt collection at this time should focus on setting the right atmosphere and relationship with both debtors and creditors to create a palatable situation for all concerned – and one that will ultimately achieve the right outcomes. There’s no doubt that at this time people’s ability to pay is at risk, so hard line tactics will probably do more harm than good. Have we been here before? Yes, but not for some time. Probably the last big deal was the 2008 financial crisis. But there are lessons and solutions embedded in the past that we can apply or reform for today’s challenge.

Setting up response

  • Understand the customer who would normally have paid you as against the customer who was going to give you a problem anyway. Many people are compromised purely because of Covid-19 and not because they are remiss in their accounts management. Review those customers’ past conduct before you blandly apply the same urgent pressure to all. Remember that the emotions you elicit now will affect your business as well as those very payments you seek to collect.
  • Financial morality differs, and short-term payment problems must be kept separate from the general ongoing issues you may have with difficult payers. You need the wisdom to see the differences between your customers and handle situations individually. In short, if you treat your customers with fairness now, then – when collections return to normal – you will find they consider repayment a priority; upset them unnecessarily now and you might wait a long time for your money.
  • Routine may take a while to return and you need to allow those good customers the courtesy of patience, just as you might expect the same from your creditors. Ultimately, you will be rewarded with more than just the money owed, you stand to genuinely improve customer loyalty stakes.

Steps of connection

  • Many businesses will be working with a smaller staff than usual. So will your customer. Therefore communication can become difficult. Business continuity has taken a massive knock, not to mention that you and your customers may be working from home and contact details may have changed.
  • Once things settle down, you will have more work than ever because your collections portfolio will have increased enormously. You will need to plan for that, as well as servicing present collections – and plan it without creating ill feeling and losing customers.
  • Use this crisis time to strategically think solutions. Thinking ahead will enhance possibilities of collecting your money and building sound relationships along the way.
  • Increase your data knowledge of every client. In this way you can set up a list of priorities – those most vulnerable and those upon whom you can rely to eventually pay. Understand who you can deal with easily, digitally perhaps, and those who appreciate a phone call, or even a visit. With up to date data you can meet your debtor on his ground and deal in a more granular way with the issues at hand.
  • Key is the ability to differentiate between debts that are pre-Covid and those that are purely Covid-related. For that you will need to ascertain the circumstances of their Covid-19 situation: Have they been sick with the virus? Have they lost their jobs or their business? Are they temporarily unemployed due to the virus? What is the outlook on their return to earn? Are they able to access financial support from government or otherwise? From this information, you can build your own schedule of potential recovery and time-scale of debt repayment.
  • Sensitivity must loom large in all engagements: people are hurting, frustrated, bewildered, frightened – may have suffered family loss and not been able to attend a funeral. Understanding the emotional crisis is as important as getting to grips with the financial one. Tolerance must be a two-way street. Those customers who have never found themselves in the situation of owing money, will be keen to get out of it. Let time and adjustment effect a course without accusatory tones or admonishments.

Be clear, be kind – but be organised

  • Written communications must convey the problem clearly. With cognisance of the Covid-19 pandemic, make sure you can agree on a proposal of re-aligned payment structure. Thus the debtor acknowledges the debt.
  • If the debtor is going to be difficult or simply cannot pay at all, this is highlighted at this point. If the dispute can be settled before costly interjections of legal processes and courts, it’s best to avoid the ensuing negative energy and negotiate a settlement as soon as possible.
  • If the reasons for non-payment are purely due to Covid-19, the debtor must provide documents/evidence to prove this.
  • Keep in contact with your debtor on a daily or weekly basis, carefully monitoring their situation. This will be more beneficial than any credit report.
  • If there are complexities that are beyond your control, it’s wise to get in professional help. But considering the crisis that business is in everywhere, it may be prudent to try all the positive suggestions listed above before bringing in the big guns as a last resort.

LegalTrack – how we do things differently

At LegalTrack we work with real people with real problems and therefore we apply a highly considerate and respectful approach to debt collecting. We understand that we need to be firm, but we are also aware that to negotiate successfully with an individual who is already in a difficult financial position, we need the skilful combination of empathy and experience, backed by well-honed communication capabilities. Our modus operandi is simple, direct, efficient:

  • Our first contact is via an SMS.
  • This is followed by a phone call to begin the negotiations on how the debt will be paid.
  • All payment arrangements/negotiations are confirmed via letters, emails and text messages.
  • Our promise is to constantly keep contact with our debtors in terms of all arrangements.
  • Any legal action is considered the last option.

Please find out more at: www.legaltrack.co.za