When looking for debt recovery solutions, never forget the most power tool you have: negotiation. Each time you reach out to a delinquent customer, you are negotiating. You must learn to rightfully judge your customer’s situation, evaluate your own and use those in an equation to solve your accounts receivables problem. By mastering the art of negotiating with late paying customers, you are on your way to mastering the ultimate debt recovery solution.
Debt Recovery Solutions: The Power of Negotiation
KNOWING WHAT YOU NEED
The first step in negotiation is understanding your own position. You must do a full evaluation of yourself and where you stand in this face-off. How important is this customer to you? What is your relationship like with them? How much flexibility can you afford financially? By evaluating these things, you can judge how drastic you can make the measures, how you can approach the person, and most importantly, you can sketch up possible payment arrangements that would still satisfy your cash flow needs but offer options to your delinquent customer. A payment installment plan is what you should be aiming for; it is definitely the middle ground for debt recovery solutions.
LISTENING TO THE DEBTOR
Nothing is more critical than LISTENING to your customer’s response to the payment request and trying to figure out WHY they haven’t paid. You have to learn how to separate FACTS from EXCUSES. For example, a customer having cash flow issues is something you can verify through bank and other financial statements. However, if the customer says “I never got your invoice”, this is an excuse, although easily manageable, as you can have one in their hands immediately.
At times customers can get emotional with their arguments, so the more you stick to the facts, the easier it will be for you customer to work past their smoke screen. Your goal is to look past excuses and find out the FACTS, to see if there is a way your customer can pay, or if negotiation simply won’t be an option for your debt recovery solutions.
REMOVING THE ROADBLOCKS
Whenever your customer seems resistant to pay, make sure you use this as as opportunity to remind them of the benefits of paying on time: faster supply deliveries, larger credit limits, etc. As part of the art of negotiation, when you can sense someone being resistant to a situation, you have to remind them of the consequences of their actions. In this example, though, you are choosing to highlight the positives they are missing out on, versus exploiting the negative.
You have determined your position, where you have room to maneuver and you have come to understand your customers and their financial situation. This leaves you in the position to offer up negotiations. The most effective way to remove a roadblock is to show the customer you are willing to work. Knowing your position, never start with your most lenient option, but give a customer an initial offer that shows them you understand their position and are open to adjustments that avoid sending them to collections. This gives your customer room to negotiate down to the level you had set for yourself. If you aren’t careful, and you demand too much, this could scare the customer away and lose any possible chance to reach an agreement.
REACHING AN AGREEMENT
When you have reached an agreement, you must remember this: BE SPECIFIC. Confirm with them the exact due dates, amounts and methods of payment. Leave no room for uncertainty. Specificity shows your customer you are serious about collecting. However, the most important part of this agreement is making your customer think they have won. You have to let your customer understand the sacrifice you are making for them. When the customer feels they have won, at the expense of something, it adds certainty to the promise they have made to you.
There is no stronger tactic in debt recovery solutions than negotiation. However, being a skilled negotiator is the key. You must always know what you are able to give, and you must always know where the other person stands. Do your research on their situation and lend an open ear. This gesture alone gives them more initiative to cooperate. Remove obstacles by allowing them to see the benefits of their agreements, and play ball when you are talking numbers. Finalize the agreement so there are no gray areas. Follow these steps, and you will have sharp negotiating tactics to serve as your ultimate debt recovery solution.