Credit transactions are regarded as transactions done in good faith. From the time credit is granted to the debtor, he has every intention of meeting that obligation. However, the business of lending money is risky. Sometimes, account receivables are declared as bad debts because they have become uncollectable. Learning to handle debtors effectively can increase the chances of a full payment.
Handling Objections and Excuses of Debtors
Debtors are more likely to invent all types of excuses to avoid payment. The same goes for people who have made a career out of borrowing money. When attempting to collect and ask payment for a past-due account, an objection will always come up. Look at this type of situation as an opportunity and not an obstacle. Objections from debtors can become opportunities. When a debtor uses an excuse, the creditor can always counter that excuse by offering a payment solution to the debtor.
Most of the problems in collecting started from an objection. Objections are stated reasons or excuses for not paying what is owed. These objections may be personal misconceptions, other priorities and other factors used by debtors. Objections are different from conditions. A condition is a real and tangible reason. For example, a debtor cannot pay because he is on the verge of bankruptcy. A certain company may not be able to pay debts because of a foreclosure or merger.
If the debtor presents his personal financial condition as the reason that he cannot pay his obligations, further investigation should be done to verify the information. The credit bureau is a good place to start since a creditor can get information regarding the debtor’s current financial transactions. Verifying information provided by the debtor is important in planning the next course of action. If the debtor is telling the truth about his dwindling finances, the creditor can ask for a meeting again and try to work out some form of payment arrangement.
Handling Professional Debtors
Professional debtors are people who go around borrowing money from different creditors. They are called professionals because they have become experts in what they do best: non-payment of debts. Professional debtors are smooth operators who can talk their way with creditors. A thorough credit and background investigation should always be done as part of standard procedure. Collection payments should also have a certain process for all debtors to follow. Specific date and time of payment must be indicated in the terms and conditions. If the debtor signs the document, this means he or she has understood and accepted the obligation to pay within specified terms.
Keeping payment terms and collection procedures specific, and thorough background checks are sure-fire ways of deterring fraudulent debtors. Creditors should be prompt in collecting due accounts since any delay may cause the debtor to think about non-payment. Making a firm stand on collection and payment procedures will encourage debtors to remember to pay their debts. Professional debtors may want to stay away from tough creditors.