A timeline will help you collect in

an organized, fair and reasonable

manner avoiding too few contacts
that dont communicate the
seriousness of the matter or too
many that can be just as counter
productive.

Collecting Debts
Ten tips to help you tackle an overdue account
1. Know the customer. Regular late payers may
need a tougher approach than a first-timer.
2. Plan the call. Is it a first request for payment or the
latest in a long sequence of calls on the same
overdue account?
3. Focus on objectives. What do you want to get out
of the call?
4. Prepare for excuses. What reasons might they
use not to pay? Have your answers ready.
5. Keep it business-like. Dont allow the call to get
personal or youll not be objective.

Collecting Debts
6. Call direct. Its easier to get who you want on a
direct line than through a switchboard.
7. Keep accurate records. Record promises made
and by whom especially important if you have to
make a further call.
8. Insist on action. Dont be fobbed off with vague
promises of settlement. Agree firm dates and
methods for payments.
9. Follow up. Make another call if the debtor doesnt
honour commitments.
10. Call in the professionals. Know when to seek
help from a debt collection agency or solicitor.

Days Overdue

Efforts

Telephone

First reminder

20

Second reminder

30

Telegrams to pay within 5 days

35

Collection letter to pay within 5 days

45

1 Secured Accounts Attorneys letter/Field visit

2 Unsecured Accounts Final demand letter/field visit

60

1 Secured Accounts Repossession Extra-judicial foreclosure

2 Unsecured Accounts Telephone final follow-up/attorneys letter

70

Referral to lawyer of secured accounts for replevin/judicial foreclosure;

and unsecured accounts shall be referred for appropriate
legal/collection action by lawyer/collection agency

90

1 Follow-up action with lawyer on status of accounts referred

2 Continuation of collection efforts accounts not referred
3 Write-off

The use of the telephone makes it possible, with those

who can be reached, to ascertain the reason for nonpayment and to meet the various arguments and
defenses which the customers have built up to justify
their silence and failure to pay.
First calls are typically friendly reminder calls.
Things to do before you pick up the phone:
Make a list of excuses
Know the specifics of the past due account
Prepare to listen with a positive attitude

Hello [customer name] this is [your name] with [your

Company name]. I was just calling to followup on
[invoice#____ ] for [$____ ]. According to my records
it is [XX] days past due. Since we have still not
received payment, I wanted to make sure that there is
no problem with the invoice and if there is no
problem, determine when payment will be made. (If
its an established or larger customer, you may want
to rephrase: According to my records, there is a
balance outstanding.)

If this is a new customer or a previously late

customer, end the call with:
Great! As you know our terms are net
30 and we try to make sure all of our
customers accounts are kept current with
full purchasing power. I will look for the check
in the mail over the next few days.

For the larger or more established customer, end the call with:
Great! I appreciate your help and will look for it in the
mail over the next few days.
If it is scheduled for payment later or if the customer is vague
about his aim toward resolution, then you might respond with:
As you know our terms are net 30 and this invoice is now [XX]
days old. Is there anything that can be done to expedite this
payment and get it in the mail today?

 Chances are, when you make a second collections

call, its because a promise has been broken.
While all the rules of respect and professional
engagement apply for second calls (and any follow up
for that matter), its necessary to stepitup a bit, so to
speak. The situation is serious and in fairness to you
and your business, payment is expected.

Take note in the following script of the more

serious tone.
Broken Promise Call Example Script
Hello, [customer name] this is [your
name] with [your Company name]. I am calling
regarding [invoice # _____] for [$$]. When we
spoke on [date] you had indicated that a
payment would be made on [date] in order to
bring your account current.

Take note in the following script of the more

serious tone.
Broken Promise Call Example Script
Hello, [customer name] this is [your
name] with [your Company name]. I am calling
regarding [invoice # _____] for [$$]. When we
spoke on [date] you had indicated that a
payment would be made on [date] in order to
bring your account current.

 Your final call should be a short one. Youve

already heard the reasons and excuses. Youve
already verified the claims and youve already done
your best to work with this customer. So, whats
left?
Set your own stage for the call by remaining calm,
respectful and professional, while firmly stating the
facts of the situation. Your customer deserves to
know what action you intend to take should they be
unable to resolve the debt as a result of the final call

While the telephone is used at various stages in collection

follow-up by different retailers, the telegram is not usually
employed in retail collections until accounts have become
considerably past due.
Advantages
it is short and to the point, wasting no words and getting
right at the facts
it gives the receiver a mental jolt, urging action
it saves time and money because it brings quicker results
it goes direct to the person to whom it is addressed
it is given personal and preferred attention
it impresses upon him the importance of the message
It stresses the imperative need for payment
it urges immediate action
it is inexpensive collections by telegram frequently cost
less than one per cent of the amount due

Dear [Customer name],

Thank you for your recent business. We look forward to
a continued business relationship. I just wanted to send
you a quick reminder regarding invoice number [0000]
for [$$] which is now past due. If payment has not
already been sent, please send your payment today in
order to keep your account current. Should you have any
questions or problems regarding the invoice, please give
me a call. Thank you for your attention to this matter.
Sincerely,
[your name]

The following is an example of a Final Demand Letter:

Dear [Customer name],
Despite our continued requests and patience, your past
due balance of [$$] remains unpaid. We have reached
the point that unless the balance is paid in full or
satisfactory payment arrangements are made by [final
date], we will refer your account to our collection agency.
This is not a step we like to take but you have failed to
honor your commitment to us when we extended your
company credit. We did our part and are hopeful that
you will do your part now. I am sure you will agree that a
good credit rating is important for business. This is our
final request for cooperation.
Sincerely,
[your name]

The advantage of using collection

agencies and attorneys is fundamentally a
psychological one, because they have no
secret or exclusive collection technique
not open to use by the manager of credit
sales.

 In cases where the debtor fails to yield to the

pressure of the collection agency or attorney, the
manager of credit sales must decide whether suit
is advisable.
If it is determined that the debtor is not judgmentproof, the store advances cost of the suit to
secure judgment.
If as a result payment is not forthcoming, the
judgment is executed, or if there is no property
upon which to levy, the judgment is filed so as to
constitute a lien against any real property which
the debtor may later acquire.

Date

20

30

35

45

60

70

80

90

27

25

12

28

18

24

14

28

26

13

29

19

25

15

29

27

14

30

20

26

16

30

28

15

31

21

27

17

31

29

16

22

28

18

30

17

23

29

19

31

18

24

30

20

10

19

25

10

31

21

11

20

10

26

11

22

12

10

21

11

27

12

23

13

11

22

12

28

13

24

14

12

23

13

29

14

25

15

13

24

14

30

15

26

16

14

25

15

10

31

16

27

17

15

10

26

16

11

17

28

18

16

11

27

17

12

18

29

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17

12

10

28

18

13

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30

20

18

13

11

29

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14

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10

31

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12

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31

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26

16

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12

31

26

24

11

27

17

23

13

1. The negligent who doesnt bother with due

dates.
-The bill goes overdue with no explanation.
WHAT TO DO?
Look for the tell tale signs of bad management in billpaying. When you put a customer under this category,
flag your file on him, and try sending a letter that doesnt
look like a collection letter. Write a letter to the individual
who signs the checks, and remind him of the benefits of
paying early or on time.

2. The honest but confused who didnt

understand the terms to begin with.
- He sends a query instead of check after the first
overdue notice. As a reply, or in the second notice, its a
good idea to assume the responsibility for the
misunderstanding and patiently explain the terms in a
friendly way.

3. The cant be bothered who refuses to pay a

small balance
- This type of customer, who puts off paying little
balances until he adds on to his account, is considered by
retail credit managers as a necessary and incurable evil.
- In commercial credit, all that is needed is a frank
and friendly letter explaining the bookkeeping bottlenecks
they are causing.

Dear Mr. _____________:

This month, 573 of our good customers with balances less
than P 1000 let their accounts ride. To them, it was a terrifying
matter, not worth writing in a check for. To us, it meant singling out
573 accounts for attention, preparing and mailing 573 extra notices,
and waiting to collect over P 50,000 that might now be at work
making new products in our plant. Wont you help us avoid such
unnecessary delay and expenses in the future?
Sincerely,
XYZ CORPORATION
By:Vice President Finance

4. The seasonal delinquent who falls behind

when his business hits a slack season
- Much good or ill-will can be generated by your
treatment of growing accounts who, because of operating
capital shortages, have to fall behind at certain seasons of
the year.
- A careful evaluation of financial statements, and
periodic report on the business, will be well worth their cost
for accounts of substantial volume. Counseling before a
seasonal slump is due may help such a customer to avoid
embarrassment.

5. The embarrassed late-payer who pays late

through no fault of his own
- Unexpected calamities often slow a retailers
collections to a trickle, leaving him quite unable to meet his
own credit accounts on time. Many suppliers make it a point
to telephone or telegraph a customer who is affected by such
a disaster.

6. The chronically slow who makes all creditors

wait until their most liberal suppliers terms
expire.
- If they can find one supplier who gives 60-day terms
when others give only 30, some debtors will make their
creditors wait for a full 60 days every time.
- In many cases, the only way to cure them is to press
for payment even at the risk of losing them as customers.

7. The chronic late payer who prefers suppliers

credit to bank loan
- They could pay, but they say they cant. They like their
loans interest-free. They test every new credit man who
supplies them to see how far hell stretch.
- If you will to sell him, give him your You leave us no
choice letter very shortly after the account was due. Once he
sees you mean business, hell play the same straight.

8. The credit stretcher who is usually temporarily

over extended
- Most are retail credit problems. A great majority of these
people are honest but a grave emergency may force them into
bankruptcy.
- Keep ahead of large accounts, doing everything you can;
make sure you get among the first on your customers list.

9. The perennial discounter

- The late discounter is at least paying his account by his
terms. He is a customer, rather than a debtor, and often a
good customer at that.
We are allowing the discount on your December 1
invoice, which was paid on December 16, to save us both
inconvenience. If you wish to discount future invoices, please
put your check in the mail by the tenth of the month. Otherwise,
the difference will show on your next months bill.

Note: Whenever you send a note like this, and the customer
take unearned discount again, dont accept it.

10. The last-ditch debtors and customers who

simply cannot pay
- They are the insolvent debtors, or those verging on
insolvency, whose present problems only a lawyer or credit
specialist trained in legal procedures can handle satisfactorily.
- Send out your best credit counselor or call your lawyer
fast!

11. The outright fraud

- Most frauds are very good at seeming to be what they
are not. They work very hard to build up solid reputations. You
have to sue in addition to the original written order, copies of
invoices and bills of lading, and all dishonored negotiated
instruments, preferably the following:
Any statement given to you (including printed financial statements) to
prove to you that the customer was financially sound at the time of
purchase.
Any statement given to you to prove the reality of the customer
Any proof whatsoever that either of the foregoing contain false
information
Any proof that the debtor failed to tell you something he should have
told you

CAUTION:
- Keep suspicion of fraud to yourself. Letting it to be
publicly known that you think someone is out to defraud you
leaves you wide open to suit for libel slander. If the signs are
definite, get your lawyers help from the start and let him
takeover entirely the minute your suspicions of fraud are
confirmed.

12. The silent question mark (?)

- The debtor that goes to the bitter end without giving you
one word of response
- Rarely, he may have a legitimate excuse for not
answering your reminders, appeals, and demands- but it will be
rare indeed.
- Send someone to see whats wrong.

 The action man of his department

The after-delivery credit investigator
The listening post of the customers
business condition
The PR or Public Relations
The financial adviser of the customer

1.
2.
3.
4.
5.
6.
7.
8.
9.

Honest
Alert
Good Educational Background
Good PR man
Good Health
Persevering
Presentable
Women as Collectors
Know How to Drive

1. Write in clear, legible manner;

2. State to whose account the payment is intended;
3. Indicate at a proper line whether payment is for
an account receivable or notes receivable or
interest;
4. Write under the remarks column of the receipt
the invoice or invoices covered by the payment;
5. Place a check or an X mark whether payment
is by check, money order or in cash;

6. Write the back and check number or money

order on the receipt, as the case may be;
7. Note the branch office of the bank in case
payments of bank branch checks;
8. Issue the customer the copy of the receipt and
the customer that the validated original receipt
will be mailed within seven days;
9. Be sure amounts in the distribution equal the
total receipted for;
10. Be sure to turn over to the supervisor any
postdated checks upon arrival at the office.

1.
2.
3.
4.
5.
6.
7.

8.
9.

Date must be current;

Amount in words must tally with the amount in figures;
Payee must be the name of the company;
Must be signed by drawer;
Any erasure or adjustment must be validated by the full
signature of the maker/drawer;
If company check, corporate title must be indicated. Also,
ensure all required signatories sign the check;
Whenever more than one receipt is issued for a single
check, write the amount of the check after the check
number on all receipts covered by it;
When payment is part cash and part check, indicate how
much is cash and how much is the amount of check;
On the third party checks, be sure check is not crossed
A/C of payee only.

1. Give any copy of the official receipt to

customer other than the collectors copy;
2. Issue an official receipt in postdated
checks;
3. Accept fake or mutilated currency;
4. Issue receipt for replacement of
dishonored check unless original receipt
previously issued is surrendered.

ALD
CO
CSU
CB
CLD
FND
ID
MO
NMCB
OCSR
OV

- Attorneys Letter Delivered

- Cahier Out
- Check Still Unsigned, ready on (date)
- Call Back on (date)
- Company Letter Delivered
- Foreclosure Notice Delivered
- Invoice Delivered
- Manager Out, expected to return on (date)
- No Money yet, Call Bank on (date)
- Office Closed, see Special Report
- On Vacation, expected to be back on (date)

Detailed Report is required on space provided at

the bottom of Daily Collectors Report. The following
should be covered by a Special Report:
1.
2.
3.
4.
5.

Office closed
Transfer of residence (specify new address)
Collection at another place (specify place)
Request for statements or invoices (specify)
All other findings or requests not covered by the
above codes

COD Sales
1.
2.
3.
4.
5.

COD Collect on Delivery

Customers who are frequent defaulters on COD terms
should be considered only as cash-basis customers.
Delivery of merchandise done at one place and payment
to be effected in another place must be avoided.
The delivery man should request for instructions to the
place of delivery.
Purchase Order or Letter Order

6. When merchandise is ready for delivery, the customer

should be contacted by phone or by other means.
7. COD Shipment via common carriers should be properly
indicated as much on common carriers bills of lading or
airway bills.
8. The place of the delivery and the person authorized to
receive the merchandise must be specifically stated on
the Invoice or Delivery Receipt.
9. Delivery Receipt, Sales Invoice or any document used in
effecting delivery must be stamped on every page in big
letter either:
(a) COD [Cash Only]
(b) COD [Postdated Check Not
Acceptable]

10. COD sales is a Cash Sale. Acceptance of postdated check will make
the nature of the transaction a credit sale.
11. The Credit Manager should be authorized to decide whether the
COD sale can be paid by check.
12. If a check is to be accepted for COD sale, the following precautions
are suggested:
a. Cleared with the bank
b. Clearance of checks
c. Out-of-town checks or irregular ones should not be
accepted
d. Avoid third party check or drawn to Cash
e. Name of the bank and check numbers should be
written
on receipt issued
f. In all cases, check payment on COD is only acceptable from
a known person or customer.
g. Trial period for new customer

h. Avoid accepting check on COD sales on Friday

afternoons and Saturdays.
13. Original copy of the Delivery Receipt or Sales Invoice must
not be entrusted to the customer.
14. Delivery crews must be authorized and responsible for the
safe delivery of the merchandise and for the collection of the
correct amount.
15. A cash deposit of 50% of total amount is sometimes
required from transient and new customers and balance to be
paid on COD term, nevertheless, the precautions suggested
about should be observable at all cost.

DE GUZMAN, SHAIRA
GARCIA, GELLIE
JOBLI, JAMAICA PRINCESS
VARGAS, KRIZIA