Collections Best Practices seminar. 2014 CreditScape, Western Region Credit Conference Seminar Slide Deck, sponsored by Credit Management Association. More information: www.creditmanagementassociation.org

1. Collection Best Practices
Sam Fensterstock
SVP of Business Development
October 2014

2. Collection Best Practices
What Causes Customers To Pay Late?
1. Financial issues – they owe more than they can pay
• Must seriously prioritize how they pay their bills
• Who they need – critical suppliers
• Who has security – Liens, UCC, PG
• Who calls them – who is aggressive in their collection efforts
2. Disputes – pricing, service, quality of goods, shipping issues, etc…
3. Creditors not following up consistently – not getting to customers pocket first
• Remember companies owe, but people pay the bills and most people prioritizes how
they pay their bills
• Delinquent customers know how to work the system!

3. Collection Best Practices
Tips For Getting Customers To Pay On Time
• Pre-call - >utilize the information that you have on your customer
• Review credit file – are they creditworthy?
• Search Google – are they in the news? Is their any local data on them
• Risk Assessment – what is the probability they will pay or not pay?
• Reviewing Documentation – invoices, POD, BOL, PG - what kind of protection
do you have?
• Knowing the results you are seeking – getting paid and keeping a customer
• Positioning the call - you are invested in a win/win solution

4. Collection Best Practices
Tips For Getting Customers To Pay On Time
• Key to a successful collection call
• Talk to the correct person
• Befriend you customer, develop a relationship
• Listen
• Grasp what your customer is telling you.
• Identify their pain point or problem
• Be understanding before giving advise and guidance
• Do not get emotional
• Why should they pay you?
• Be realistic – sometimes you “can’t squeeze blood from a stone”

5. Collection Best Practices
How Do You Deal With A Difficult Customer?
Difficult customers are a challenge, but they are a fact of life, how
do you deal with them?
• Professionalism
• Pro-active vs. Re-active
• Control and lead
• Watch your temper
• Use your personality
• See through the anger
• Know when to terminate the conversation
• Now what –>next steps?
• Warning signs of a problem
• Partial or erratic payments
• Excessive irritation at collection or credit contact
• Refusal to respond to collection demands
• Purchases out of the norm
• Slow down in payments followed by pattern of excuses
• Requesting proof of delivery or other excuses

6. Collection Best Practices
Most successful collection departments have a structured and
defined collection process
• Collector to customer ratio – how many customers can a collector manage?
• What are the sequence of events (calls and emails) and what are the grace days between?
• How many contact activities are required on a daily basis?
• Call scripts, what do your collectors say when they speak to delinquent customers?
• What happens when customers break promises to pay – do they get cut off, reduction of
credit? - > interaction with sales?
• Can you automate your collection process using order to cash software?

7. Collection Best Practices
How To Protect Your Company
All customers can become problem payers in the future, how do you
protect your company?
• Credit application – making sure yours is worded properly and has necessary
information
• Ability to charge interest
• Ability to go after collection fees
• Personal Guarantee – get one if you can
• Check personal credit – is the PG worth anything?
• Liens & UCC’s - can you get a security interest?
• Make a intelligent initial credit decision – financial analysis, check references, credit
report payment analysis, credit group data, credit score

8. Collection Scenario’s
1. Creditor is a large distributor that has 10,000 customers. They provide parts and service to their clients. One of
their client’s is complaining over poor services. Debt is $32,000 of which $20,000 are parts and $12,000 are for
service which consist of 100 hrs. or repair work. Debtor is saying that the service man did not put in the 100 hrs.
only about 50 and only half of the parts they were charged for were actually used.
2. Creditor is a foodservice distributor. Client is a 6 restaurant chain that has financial issues and has been
swapping suppliers on a frequent basis – debt is $13,500 and client has missed 5 promises to pay and has
bounced 2 checks.
3. Creditor is an electronics manufacturer that sells large ticket items used for large security systems. Debtor owes
$800k for equipment; the debtor did receive funds from a finance company for the $800K equipment. The funds
were to go to the creditor; the debtor used the funds to pay other debt. Now they need to finish the project and
need an additional $250k in product.
4. Creditor is a large construction distributor who deals with contractors. Debtor is a large contractor that handles
commercial construction. Client shipped $150k worth of product and filed a preliminary notice. Debtor used
products in the construction of a building but never paid for the goods and after making many promises to pay
has gone silent and has not ordered any more goods.
5. Creditor is a pharmaceutical company who supplies medical equipment to a pharmacist located in a big box store.
Debt is for $85,000. The pharmacy is closed due to non-payment of rent on the store. The creditor holds a UCC on
a large piece of equipment at the premises but the landlord will not allow access.
6. Creditor is a large computer software licensor. Debtor entered into a 5 year contract calling for monthly licensing
of $2,000 per month. After 60 months debtor stopped paying as the contract expired. After 60 days creditor
started collection attempts due to the auto-renew clause in the contact. Demands were made for $120,000 (60
months x $2,000).
7. Creditor is a fiancé company who leased equipment to a pizza parlor in New Jersey. Debt was secured with a
personal guaranty. Due to lack of business debtor closed up shop and moved to Florida. The only asset debtor
possess is a large expensive home on the ICW in S.E. Florida. Debtor claims he cannot make any payments.