Collection Management HandbookThe Art of Getting Paid
third edition
A. Michael Coleman
John Wiley & Sons, Inc.
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Collection Management Handbook
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Collection Management HandbookThe Art of Getting Paid
third edition
A. Michael Coleman
John Wiley & Sons, Inc.
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This book is printed on acid-free paper.
Copyright 2004 by John Wiley & Sons, Inc., Hoboken, New Jersey. All rights reserved.
Published simultaneously in Canada
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or byany means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permittedunder Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permis-sion of the Publisher, or authorization through payment of the appropriate per-copy fee to the CopyrightClearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax 978-750-4470, or onthe Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the PermissionsDepartment, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, 201-748-6011, fax 201-748-6008, e-mail: [email protected].
Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts inpreparing this book, they make no representations or warranties with respect to the accuracy or completenessof the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for aparticular purpose. No warranty may be created or extended by sales representatives or written sales materi-als. The advice and strategies contained herein may not be suitable for your situation. You should consult witha professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or anyother commercial damages, including but not limited to special, incidental, consequential, or other damages.
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Library of Congress Cataloging-in-Publication Data:
Coleman, A. Michael.Collection management handbook : the art of getting paid / A. Michael Coleman.3rd ed.
p. cmIncludes index.ISBN 0-471-45604-7 (cloth)1. Collecting of accounts. I. Title.
HG3752.5.C65 2004658.8'8dc22
2004057667Printed in the United States of America
10 9 8 7 6 5 4 3 2 1
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http://www.copyright.comhttp://www.wiley.com
This volume is dedicated to the thousands of professionals charged with the formidabletask of converting credit sales into bank deposits. Whether they are titled as bookkeepers,customer service reps, salespeople, entrepreneurs, credit managers, collection agencies,attorneys, or bill collectorsthey all play a pivotal and important role in our economy.Without the combined, dedicated efforts of the people assigned to this function, charge-offs would metastasize to catastrophic dimensions, sufficient to drive our economic infra-structure to certain calamity. Fortunately, however, in our untiring quest to fulfill the creditsalegetting paidequilibrium is maintained, enabling stimulated circulation of currency,while in turn invigorating our economy.
This volume is dedicated to these indefatigable souls, who for whatever hats they maywear ensure that customers dutifully honor credit terms, and in so doing, contribute to oureconomic well-being.
Dedication
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About the Author
Reducing the complex to the simple is one of the most difficult aspects of writingbiographies of people who are at or near the pinnacle of their chosen field. When the sub-ject is Michael Coleman, the challenge is even greater. A grade-school dropout (his lastyear in the classroom was the seventh grade), Mr. Coleman traded a basic education forriding the rails in the pre-Amtrak era armed with an illegitimate pass. He accumulatedthousands of rail miles as a teenager, and by age 21, he acquired seven vintage rail carsallon credit. A tumultuous sales career during his twenties resulted in him settling for a menialjob in a tomato packing plant.
Along the way, Mr. Coleman built the foundation for his incredible rise to success,attaining paralegal status representing himself in hundreds of consumer lawsuits, achievingan enviable record of accomplishmentsall without an attorney. These lawsuits rangedfrom minor fender bender mishaps to complicated jury trials. Mr. Coleman consistentlysecures monies in difficult cases on which attorneys have given up, including the recoveryof voluminous judgments.
By age 35, he became an accomplished bill collector authoring a best-selling book, TheArt of Getting Paid, published by Prentice Hall and later updated and published by JohnWiley. He took to the lecture circuit, delivering more than 200 free talks before being paida $500 fee. Five years later, Mr. Coleman earned accolades as a professional speaker. Simul-taneously, he parlayed a $35,000 investment (mostly borrowed money) into a multimillion-dollar real estate portfolio. Today Mr. Coleman has delivered hundreds of speeches forAmericas most respected corporations and has authored countless articles and three books:A Passion for Trains, Consumers Day of Retribution, and The Art of Getting Paid.
He is a collector of antique automobiles and a die-hard ferro-equinologist (ferro =iron, equin = horse, ologist = study)the study of iron horsesa railroad buff. Mr.Coleman is also an avid international train traveler and serves as general partner to numer-ous real estate trusts.
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Contents
preface xiii
acknowledgments xvii
chapter 1 A New Collection Science Is Born 1
Preventive Remedies for Credit Grantors 3How to Incorporate Protective Legalese into Your Sale Origination Documentation 9
Law of the Jungle 10Building Blocks for Collection Success 14Debtor Profiles 16Delay Tactics 18Integrated Collections 19Problem-Solving Techniques 19Opening Statements 22Initiating a Collection Call 23Words and Phrases that Should be Removed 24
chapter 2 Oratory and Advanced Communication Skills 27
Grab the Debtors Attention 27Match the Debtors Background 28Body Language Carries 29Value of Communication Skills 29Build a Collection of Impact Words and Phrases 32Collectors Vocabulary 34Value of Humor 37Telephone Techniques for Collectors 44
chapter 3 Selling Psychology Applied to Collections 49
Change the Debtors Base of Thinking 50Formula for Handling Debtors Objections 50
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Handling the Higher Authority or Pass the Buck Stall 55Objection: Ill Think About It 56Objection: Go Ahead and Sue! 56Trial Closes 58Alternatives Technique 58Solving Built-In Debtor Objections 59Interim Collection Closing 60False Conclusion 60Of Ignorance and Intellect: How Veteran Collectors Outsmart Themselves 61
Art of Listening 66Reading the Debtors Temperature 67Deciding What Appeals to Use 67Maintaining Control in Telephone Collection Calls 68
chapter 4 Advanced Collection Techniques 71
Motivating Techniques: Withdrawal Method 71More Advanced Collection Techniques 75Postcollection Close 81How to Barter a Successful Collection 82Pay It With Roses 85Good Guy, Bad Guy Approach 88Collection by Draft 89Point of Diminishing Returns 92Debtor Localization 93Mixing-Bowl Concept 94How to Collect from a Hard-Core, Judgment-Proof Debtor 96Charitable Donations 100How to Establish Your Own In-House Collection Agency 103Attorney Letter Influence 108
chapter 5 Small-Balance Collection 111
Effective Techniques to Collect Receivables Less Than $500 112How to Implement the Time and Space Technique 113Choosing an Agency to Collect Small Balances 115Psychology and Framing of Effective Collection Letters 118Stamped Reminder or Printed Sticker 122Use of Mailgrams or Telegrams 123
chapter 6 Suing in Small Claims Court 125
How to Utilize the Small Claims Court System 125How to Sue in Small Claims Court 126General Information About Utilizing Small Claims Court 134How to Commence a Small Claims Action 135Filing the Complaint 136Preparation for Trial 137How to Prepare and File a Civil Suit 138
x contents
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chapter 7 Making Your Debtors an Offer They Cant Refuse 141
Risk Versus Reward 142Application of Legal Principles 142Positioning Your Nonpaying Customer in a Vexing Legal Predicament 143
Long-Arm Statute Litigation with Applicable Case Law 144California Long-Arm Statute Litigation Open Book Status 145Fear-Factored Recoveries 146Bankruptcy Remedies 150Creditor Remedies for Challenging Fraudulent Conveyances andAdversary Proceedings 150
U
