6 Delinquent Customer Scenarios During COVID-19 and How to Deal with Them

Due to the sudden outbreak, CFOs & Treasurers are focusing on stabilizing the cash flows. Reduction of DSO is one way A/R teams are able to contribute towards this goal. However, a recent Gartner survey indicates that 60% of the CFOs on the buyer end are planning to increase their DPO in order to have more available cash. In this tricky situation, how will the collection teams ensure faster recovery?

‘Dunning via collection calls’ – this is one of the legacy methods used to recover past dues, and over the decades, the success rates have remained significant. Especially, during the complete global lockdown where people are working from home, a collection call adds a personal touch, enhancing the customer relationship.

But like they say, there is no free lunch! Collection call – although a very effective dunning tool – requires more than just asking the customer to pay. Making collection calls can be awkward, uncomfortable, time-consuming and unproductive.

As a collector, you must have had the experience of listening to never-ending excuses given by the customers as to why they were unable to pay. As a top-performer, you must have a set of strategies which you use to recover from those defaulters, but will those strategies be applicable during the current crisis?

In this turbulent economy, what can you do to ensure successful collection calls? Simple, take a pivot and be prepared for the common defaulter excuses. Be ready with prompt responses and multiple options to tactfully deal with typical excuses and scenarios while maintaining healthy customer relationships.
This e-book explains how top-performing collectors deal with the most common excuses and scenarios encountered by them every day at work.

As a thumb rule, always start a collections call by introducing yourself along with your company name and confirm the identity of the receiver. Apart from this, do not forget asking about the wellbeing of the receiver. For example, ‘How are you doing these days?

How is your family keeping up during the crisis?’. Once this is done, share the relevant invoice details with the customer.

Here is a list of 6 most common defaulter excuses collectors hear every day, along with recommended strategies on how to deal with them:

1. “We are facing a crunch in our cash flows right now”

Option 1: Negotiate Payment Plan, Ensure Customer Engagement, Alert the Credit Team.

• Get more information about their lack of fund supply, trying to understand whether it is
  an ongoing trend or not.
• Make the customer understand that to continue their line of credit and next orders, they
  need to make partial payments.
• Add a self-reminder to follow-up with the customer. Suggest credit card payments
  as they provide a 30-day float on buyers end while the suppliers receive the payment
  within 3 days.

Definitely, alert your credit team immediately to do an ad-hoc review and analysis of their payment trends.

2. “The payment is approved but the signatory is unavailable/on leave.”

Option 1: Capture Payment Commitment

Option 2: Leverage Next Order Blockage for Negotiation

For a critical invoice, leverage next order blockage to create a sense of urgency and get a partial payment upfront.

As a thumb rule, always start a collections call by introducing yourself along with your company name and confirm the identity of the receiver. Apart from this, do not forget asking about the wellbeing of the receiver. For example, ‘How are you doing these days?

How is your family keeping up during the crisis?’. Once this is done, share the relevant invoice details with the customer.

3. “I haven’t received your invoice.”

Option 1: Resend Invoice Immediately

• Verify the customer’s email address and issue the invoice again while the customer is on the line.
• Ask the customer to check the junk folder to ensure that your invoices aren’t getting blocked. Agree on a due date for payment and follow-up.

TECH TIP: Self-Service Portal to Access All Invoices

Enable an electronic invoice presentment portal, where all your customers could view and download all relevant invoices at any time.

4. “I haven’t paid because you have invoiced me incorrectly.”

Option 1: Negotiate Payment Plan, Fastrack Dispute Resolution

• Send the invoice copy again immediately.
• Get all the relevant information such as the disputed amount and reason codes, from the
  customer to create a pre-deduction.
• Forward the deduction line item to your deductions management team.
• Ask the customer for a partial payment against for the non-disputed amount. Get an
  agreement on the payment amount, date and proactively follow-up.

As a thumb rule, always start a collections call by introducing yourself along with your company name and confirm the identity of the receiver. Apart from this, do not forget asking about the wellbeing of the receiver. For example, ‘How are you doing these days?

How is your family keeping up during the crisis?’. Once this is done, share the relevant invoice details with the customer.

5. “I have already made the payment”

Option 1: Capture Relevant Details, Track the Payment

• Get all the relevant details such as payment type, payment date and confirm whether
  the transfer has made to the correct bank account or not.
• Contact your cash allocation team for payment confirmation. If confirmed, notify the customer, else add a self-reminder to look out for the payment & follow-up with the customer.

6. “The payment has been approved, it will be processed”

Option 1: Negotiate Immediate Action, Remove Payment Roadblocks

• Inquire if the invoice has been received & approved. If yes, whether it has been scheduled
  for payment or not.
• Ask if there are any claims or disputes wrt the invoice.
• Notify the customer that their credit requests could be put on hold if the invoice is not
  resolved. Create a sense of urgency. Suggest credit card or any other e-payment format.

TECH TIP: Self-Service Portals/Guest Payment Links with Dunning Emails

• Ask the customer to pay you electronically via the portal.
• Attach guest payment links with dunning emails to ensure instant payments.

Excuse #1 :

CUSTOMER: “We are facing a crunch in our cash flows right now”

YOU: I am sorry to hear that. How are you keeping up? Could you please tell me more about your cash flow issue if that’s okay?

CUSTOMER: [explains the cash flow problem]

YOU: Thank you for sharing that with me. I really appreciate your honesty. Cash flow is a constant headache for business these days. Well [customer name], we have had a great business partnership over the years and would love to continue doing business with you. But it is important that you make some payment to ensure that your line of credit and next order are unaffected. I think a payment plan would help us both. What do you think?

CUSTOMER: What does that mean?

YOU: It means that we agree on partial payments until the invoice is paid in full.That way we can both manage our cash flow better.

CUSTOMER: Okay. We could do that.

YOU: Explain your suggestion. Get a payment commitment. [Negotiate as you have an upper hand, get some partial payment at the earliest]

CUSTOMER: I am okay with that.

YOU: Thank you for committing to make those payments. I’m glad we could sort that out together. Additionally, I also wanted to suggest that you can make the partial payment through credit cards. I’ll make a note in our system and follow-up next week. Have a great day.

Excuse #2 :

CUSTOMER: “The payment is approved but the signatory is unavailable/on leave.”

YOU: When would he/ she be back in the office?

CUSTOMER: I am not sure.

YOU: Can I get his/ her direct contact information?

CUSTOMER: I do not have it.

YOU: Oh! Well, it would be a great help if you could introduce me to someone else at your company who could sign the check.

YOU: [If the customer gives the information, contact that person and get a payment commitment] Thanks for your help! I would contact [name]. Have a great day.

YOU: [If the customer says he/ she does not have the information] I understand. But we are in a tight spot here. It is important that we get this resolved as soon as possible in order to avoid your account being placed on credit hold and prevent your next order from getting blocked. [Create a sense of urgency] Can we discuss a payment agreement for next week.[Validate your customer’s intentions with some type of immediate payment or action]

CUSTOMER: Okay.

YOU: [Negotiate the payment plan] Thankyou! I will make a note of that in our system and follow up again. Have a great day.

Excuse #3 :

CUSTOMER: “I haven’t received your invoice.”

YOU: Thank you for informing me. Can I please verify the email address I should send the invoice to?

CUSTOMER: [email address]

YOU: Sure, I will issue the invoice again while I have you on the line. Could you please confirm if you have received it?

YOU: [If the customer did not receive the invoice] Could you please check your junk folder to make sure our invoices aren’t getting blocked?

YOU: [If the customer has received the invoice] Great! Now that you have received the invoice, can we agree on a payment date?

CUSTOMER: Okay. I can pay by next Monday.

YOU: Thank you! I will make a note of that in our system and follow up with a reminder email this Thursday. Have a great day.

Excuse #4 :

CUSTOMER: “I haven’t paid because you have invoiced me incorrectly.”

YOU: I am sorry. I did not know there was a problem with the invoice. Can you tell me more about the issue?

CUSTOMER: [explains the problem]

YOU: [If the customer is unable to share all relevant details, ask specific as well as open-ended questions to get the maximum details] Can you please share the reason code? What is the amount you are disputing for?

YOU: Thank you for sharing all the information. I have forwarded the details to our deductions management team. [Create a pre-deduction & forward to deductions team]

CUSTOMER: Okay.

YOU: In the meanwhile, can you process the invoice for a partial payment against the amount you are not disputing?

CUSTOMER: Yes, I can do that but not before next Monday.

YOU: Sure, I will make a note of that in our system and follow-up next week if I haven’t seen the payment come through. Have a great day.

Excuse #5 :

CUSTOMER: “I have already made the payment.”

CUSTOMER: I have already paid for this invoice.

YOU: Great! Can you tell me the payment format and the payment date? [Get all relevant details]

CUSTOMER: [Shares the details]

YOU: Thank you for sharing all that information. I have forwarded all the relevant details to our cash allocation team. They will look out for the payment and notify once it is received. I have set an alert on our system and will follow-up with you in case we do not receive the payment by next week. Have a great day and stay safe!

Excuse #6 :

CUSTOMER: “The payment has been approved, it will be processed”

CUSTOMER: I will be processing the payment soon.

YOU: [Inquire if there is an obstacle to the payment] Alright. Can you tell me if the invoice has been received and approved? If yes, has it been scheduled for payment? Are there any claims or disputes you would like to raise? [Let the customer answer before moving to the next question, make note of them] Please let me know if you facing any problem in processing payments for this particular invoice.

CUSTOMER: [Answers the questions]
YOU: You have been a great customer so far. But, it is really important that we get this resolved today in order to avoid your account being placed on credit hold and prevent your next order from getting blocked. You really need to help me here.

CUSTOMER: I understand

CUSTOMER: [Suggest e-payment options] Here’s a suggestion from my end. You can log in to our self-service payment portal to make the payment. Alternatively, I can also send you an email with a guest payment link through which you can make instant payments. Which one would you prefer?

Technology has already transformed the collections landscape by enabling the following functionalities:

• Automated Correspondence
• Centralized Data Repository
• Reporting and Analytics
• Integrated Dispute Management
• Prioritized Collections Worklist
• Email Templates
• Centralized Collaboration History
• Cash Flow Projection

Moreover, with trending technologies such as Machine Learning and Artificial Intelligence, collections teams could leverage proactive collections approach to enable faster collections. Advanced features such as invoice-level payment date prediction and segmentation based on dynamic customer behavior enable the collectors to have a microscopic view into customer payment behavior.

Impact on Collections Calls

AI could potentially transform collection calls by helping the collector with communication, understanding the customer sentiments, determining the probability of customer keeping the payment commitment and differentiating between false excuses and genuine issues.

Here are a few use-cases: