Saturday, November 03, 2007

Collections, the Currency of Communication

Have you ever noticed how people communicate with one another? Often they don’t realize the messages they are sending through body language. Human communication is the most advanced and complex of any species on the planet. Effective communication requires a sender, a receiver, a medium and an understandable code; language. The most amazing thing about human communication is that people communicate in many different ways at the same time, they could say one thing and their body language is saying something else. Body language or actions, speak louder than words. As an example, think ‘no’ and try to nod your head ‘yes’. It is very difficult; your body will react to what your mind is thinking. Next time you are in a meeting, look around the room, shut your hearing down and let your eyes “listen” to those in the room. I will venture to bet you will quickly identify people’s receptiveness to the topic and the speaker.

Effective AR collections is so bound to communication it is unreal. There are many forces surrounding communication that will determine your effectiveness in your task as a collector. In previous discussions and webinars I made the statement that there are only three reasons people don’t pay bills: bill related issues, relationship issues and economic issues. For today’s conversation, we will assume that billing issues are non-existent and we will examine relationship and economic issues.

“… a client who genuinely respects you and the work you did will pay your bill in a timely manner.” ED Poll (2003)

In meeting Ed a few years ago and having the opportunity to speak with him on several occasions, I can’t help but say that those few words embody AR collections. Not just law firm collections, but all collections. When we communicate with our clients, we need to keep in mind that every communication either gets us closer to payment or further from a payment. Our motivation, if you haven’t already seen it, should be closer to receiving payment!

There is a complex dynamic in communication when the collections person first makes contact with the client regarding the outstanding amounts. At this point the client has already made up their mind about the payment of the account. The client, by virtue of their interaction with counsel, has already determined the value of service provided and as such has affixed a price tag on it. It is the counsel’s responsibility to communicate to the client in such a way to demonstrate the value of the services provided and therefore moves the relationship closer to payment. I have addressed the importance of counsel communication in my study Collections after Billing, a Bit Late.

Now that counsel has failed to communicate the true value of the work, it us up to the collector to finish the job! The problem is now much more difficult than it was prior to billing and immediately after billing. The culprit to this increased difficultly in collections is the passage of time. Any MBA student studying the softer skills of business will tell you the range of emotions a buyer goes through before a major purchase, at the time of purchase, post acquisition and thereafter. The longer the passage of time following the acquisition of the item that the buyer has, they begin to lose the euphoria of the purchase. The buyer begins to question the value of the acquisition and essentially a reevaluation of the product or service takes place.

In the collections world, the collector is making a call for payment where the client has either already begun the reevaluation process or is in the midst of the process. In addition, other things have begun to happen; economics. Recall I made the statement that what goes on in one’s mind determines ones actions. Well, how the client feels about their economic situation hastens the reevaluation process and also sets the priority for payment of the account.

Recently a colleague and I were discussing AR collections and he expressed how in his circle of collectors, outside of professional services, other organizations are having difficulty collecting outstanding receivables. To that I responded, of course! Just look around. How consumers feel determine their buying and payment habits. If consumers feel that the economy is great, they will be more apt to spend and leverage their position. Whereas, if they feel that the economy is on shaky ground they will begin to be much more cautious with their resources. No matter where you are, consumer confidence drives the economy. It is the lowest denominator that fuels national and global economies!

Isn’t it amazing how the job of the collector has just become exponentially more difficult! With each call the collector is faced with, the client that has already revalued the services, prioritized the payment plan and has done so because of the current economic situation of their company, municipality or country. Now you Joe Collector – need to get that bill paid; before December 31!

I have always professed, the collector who only focuses on the bills outstanding, operates in isolation. Today’s professional collectors must see the entire picture! They are the ones who must repair broken relationships, open the lines of communication, and demonstrate to the client the value of the services provided. They must reverse the mental reevaluation process and prioritization process that the client has already undertaken. And they must do all of this within the realms of the current economic system! Of course, Joe Collector cannot change consumer confidence. However, in his capacity as a professional he can demonstrate the true value of the product or services received so much so that the client sees payment as a priority.

AR Collections is a very difficult task with the odds stacked against collectors. However, diligence and effective communication will get your bills paid before someone else’s. Remember, everyone calling the client is vying for the payment of their bills- communicate the value in paying you first!

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