How can you get a customer to pay up? Some tips from the collection war's front lines.
Third generation debt collector Jim Bessenbacher Jr. tried certified letters, repeated telephone calls and finally the threat of legal action to squeeze $12,000 out of a company that owed one of his clients money. But when the usual tools of his trade failed to bet the bill paid, Mr. Bessenbacher found a measure of success in an unusual tactic: He held a yard sale with some of the debtors' equipment.
The debtor, a yard-equipment distribution on the verge of foreclosure, had no cash. But it did have some inventory, and it said Mr. Bessenbacher's company, Bessenbacher Co. in Kansas City, MO., was welcome to it. Eager to get what equipment he could from the debtor-and sell it for cash to pay his client-but lacking storage space, Mr. Bessenbacher asked that the goods be delivered to his father's home. Three days later, a tractor-trailer rig lumbered into his father's urban Kansas City neighborhood and dropped off the bounty: some 200 lawn mowers and assorted spare parts. With boxes of unassembled mowers filling the garage and teeming from the back porch, father and son quickly staged a three-day yard sale, finding buyers for every grass cutter - and raising nearly $8,000 for their client.
"We very rarely take inventory" instead of cash, says Mr. Bessenbacher, vie president of the commercial-collection company founded by his grandfather in 1933. "But our goal is just to get the job done."
Long Overdue
For many companies, the standard term for payment is 30 days after a product or service is received. But the reality is that it usually takes longer, sometimes much longer, to see a check.
Mr. Bessenbacher says that by the time a debt reaches his firm, a 35% collection rate is probably a good average." But there are wide variations among industries. In one of his speciality areas, animal health, including veterinary clinics, "if we don't collect 80% of what we received, we're very disappointed. "But in the construction industry, he says, a 20% rate is good.
Persistence Pays Off
"Any person who's had a delinquent account knows if there's a )a collection) agency involved, they will hear from that agency again," says, Ms. Fitch of Bonded Collection. That doesn't imply a threat, she says, just persistence.
"A professional collection agency has no reason to alienate a debtor because, in all reality, the client gives us the opportunity, but the debtor is who pays our bills," says Ms. Fitch.
But while more companies my be turning to collectors, if the economy continues to struggle, that doesn't mean collection will necessarily increase.
When business was good, collection were very good" because the money was there, say Mr. Bessenbacher. When times are tight, "we get strung out just like everybody else."
That may be when flexibility - like taking a bunch of lawn mowers in lieu of cash-pays off.
Mr. Bessenbacher settled a recent dispute by getting his hands dirty. A contractor refused to pay his client, a concrete company, $14,000 because of dissatisfaction with a job. The two parties became so entrenched, neither would budge. So Mr. Bessenbacher took his tools to the site of the contention, a house that had a flooding problem the contractor blamed on the concrete company. Mr. Bessenbacher worked until midnight and fixed the problem by raising the grade outside a window that was the source of the flooding. Both parties "were very please," he says, "and we got our 20% (commission) out of it."
