A Credit Manager’s Creative Way of Saving Customers
Want to see a salesperson squirm with displeasure: just tell them the account for a long-term customer is being sent to a collection agency. The salesperson has visions of rogue debt collectors badgering their customer with threats of bad credit references, legal suits, judgments and garnishments, caring only about collecting a few dollars and no concern about preserving relationships. They assume that once the customer has been through this ringer, he’ll never talk to the salesperson again.
Of course, this customer hasn’t been talking to the salesman since his account went past due and his credit availability was suspended. At the last industry trade-show, the salesman saw his customer coming down the aisle, but then abruptly turn away when brief eye-contact was made. Presumably the customer was embarrassed that his account was delinquent and didn’t want to face the salesman he let down. The salesman’s nightmare got worse when later that day he saw the customer in another booth negotiating his first-ever purchases from a competing brand.
Unfortunately, at the moment the customer is not a customer any more. And the longer the account is allowed to stay delinquent, the lower the likelihood he’ll return to being a customer. While he can’t buy from your organization, the customer is working to develop new sources and relationships. Positive experiences with new vendors can lead to permanent lost sales for historical vendors. And the incentive to pay invoices to ‘historical’ vendors during cash-crunches also goes down.
One enterprising credit manager we know has taken a novel approach to the delinquent account process. Their goal is to ‘Save Customers’ for the sales department. He believes it is much easier to resurrect a previous customer than to generate a new one, and in the process, gain the respect and appreciation of the sales department and senior management.
Here’s the 4 step process he uses to Save Customers:
- Credit availability is automatically suspended when accounts have invoices 15 days past due;
- Internal collections follows a predetermined letter, fax, email and phone call collection procedure with exact timing that is rigorously implemented;
- Accounts are turned over to select collection agencies automatically when accounts are 90 days past due. Salespeople are told “this customer needs special attention” so they can become a customer again;
- Collection agencies are instructed that while collecting is the highest priority, preserving relationships is also of paramount importance. Only highly trained collectors are permitted to handle these accounts.
The results of this program have been astounding for over a decade. Over 70% of claims are collected within 30 days of placement with the agencies (including our agency), and over 60% of these companies place new orders within 90 days. Over 85% of all claims are collected, so actual write-offs are minimal. It is extremely rare that a customer ever allows their account to become delinquent again – they know this company means business when it comes to its receivables terms.
An added benefit is that senior management realizes the fees paid to collection agencies to save a customer were nominal in comparison to what it costs to get a new customer. So now when a salesperson hears that “this customer needs special attention”, they know they are likely to have a “saved customer” and new orders in the next quarter. And the Credit Manager is perceived as profit contributor and strategic thinker, with the respect and compensation that comes with that accomplishment.
