The Right Time to Start Payment Plan Negotiations
When it comes to setting arrangements for a payment plan with the customer, there are many ways for collectors to start negotiations on the right foot.
As an example, assume that a given customer has a legitimate reason to try to set up an arrangement for installment payments. Two common instances are insufficient income or assets that allow the customer to file for Chapter 7 bankruptcy. These situations make it nearly impossible to collect on all the debt owed. As a result, working out a payment plan can be advantageous when the risk of collecting nothing is so high.
Utilize Smart Negotiation Tactics
The simple rule when it comes to any form of negotiation is to never bid against yourself. If a customer explains they can’t come up with a full and immediate payment, the response should always be “How short of the full amount are you?” Limit your own talking by concentrating on the debtor’s words, and use strategic pauses to draw more explanation from the debtor. These are two of the more important telephone negotiation practices to keep in mind.
The point is to extract from the customer the amount and frequency they claim they are capable of paying. If you give them a figure, you could quite possibly be bidding against yourself. Once that occurs, you’ve lost control of the situation. Also be aware that, no matter what figure or term he may offer, you can take for granted that it’s understated.
Therefore, you should always be prepared to make a counter offer. For instance, you could state “I may consider that offer, if you can make it more palatable by including a series of postdated checks” (or a promissory note or personal guarantee, etc.). While the customer on the other end of the phone may protest your suggestion, you are now in control.
Stay Realistic with Repayment Time Frames
Perhaps the most important aspect of negotiating payment plans is having a concrete understanding of what caused the customer’s delinquent payments. This helps discern whether settling a debt for less is suitable, and determines a proper time frame for their recurring payments.
Once you reach an agreement with the customer, always confirm payment arrangements in writing. This could be a promissory note, personal guarantee from the customer or even a signature from a third party guarantor. In the event that the customer defaults on their payments, you will have a legal safeguard in place. For promissory notes, it’s critical to highlight any clauses in yellow and be aware of legal considerations around the world.
In conclusion, it is always important to remember you should never, ever bid against yourself.
Check out these other commercial collections articles for tips and information on our website.