Negotiating the Nightmare of “You’ll Get Paid When We Get Paid!”

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Dean Kaplan

This is one of the top ten explanations we get as a commercial collection agency.  Our biggest fear when we hear this is that it might be true.

Since the financial crisis of 2008, many small businesses have been stiffed by their customers.  When that happens it can have a domino effect, as many small businesses do not have the financial resources to survive a big write-off.  This is especially true now as most business owners do not have equity in their house that they can borrow against to fund their companies.

In this scenario, a company may not be able to pay its old bills until they collect on their delinquent receivables.  Very few companies have large profit margins, so current business is paying current bills and salaries, with very little if anything left over.

The first thing we do when we hear “we’ll pay when we collect from our customers” is to determine if this is a legitimate explanation or simply an excuse.  The key to finding out is to get a conversation going, ask probing questions in a non-threatening way, and get to the details.  Is it one large receivable?  Two? How much is owed?  How long has it been owed?  What is the explanation they are giving you as to why they can’t pay?  What are they doing about it?

Article on simple, free methods for confirming the information on credit applicationsAll too often, we are able to determine that this is more excuse than explanation, and then we collect using the appropriate techniques.  But if it is an accurate description of reality, then the debtor’s problem in getting paid is our problem in collecting.  At that point, the only way to get money is to help them solve their collection problem or to find pressure points that will get them to start allocating some of their cash flow in our direction.

We advise our clients that if they determine this explanation is real, it is more cost effective to turn these claims over to us sooner than later.  If it is a situation that requires monitoring, patience, and hope, then our clients are typically better off focusing their limited resources on current customers while we perform this task at no cost until there is success.  We are also are more likely to have the knowledge and resources to help a client’s customer solve their collection problems as well as finding the pressure points that can result in payments while these issues persist.

If our clients learn this is just an excuse and they still can’t collect, the sooner they get professional assistance, the dramatically higher the chances are that the money will get collected.  We all know that collectability declines rapidly with time, so the sooner a problem is properly addressed, the greater the chance of having success.

Continuing the Discussion

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  • avatar Commercial Guy says:

    If by “At that point, the only way to get money is to help them solve their collection problem” you mean that you take them on as a client and collect on their behalf while they are still indebted to your original client, doesn’t this pose a potential conflict? And doesn’t it create probable A/R issues for the agency, when one (or all) of the debtor/client’s receivables pay them directly?

  • avatar Dean Kaplan says:

    Commercial Guy: Very good question. Only in very rare cases have we actually performed collection services for the Debtor while still working for our Client. We will only do this with the agreement of our client, and on the condition that an agreed percentage of funds collected for the debtor goes to our client.

    The biggest reason we only do this very rarely is we typically do not want the Debtor to know about our different collection strategies and how ‘unpleasant’ (cost, time delay, uncertainty) is the last resort of collection litigation.

    However, we can give the debtor some tips on how to improve their own collection efforts, and that is what I meant with the comment “help them solve their collection problem”. Again, we have to be careful, but sometimes we can give them advice that helps without compromising our primary agenda which is to get our client’s money. Thanks for commenting. Dean

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