The Collections Clerk (#304)

In this podcast episode, we discuss the characteristics of the ideal collections person.

Requirements for a Collections Clerk

Consider just how difficult this job is. The ideal collections person needs to be an extrovert, because it requires a lot of time on the phone. And on top of that, it needs someone who’s a bit edgy – who not only doesn’t mind badgering people all day, but kind of enjoys it.

Also, the ideal collections person needs to be an introvert, in order to shut up and listen to what customers are saying about why they can’t pay. And they need to be a negotiator, to finagle the best possible payment terms out of the customer.

That right there is hard enough. But then, the collections person has to be super organized, in order to make contact with customers as soon as payments are overdue. And then if a customer makes a payment promise, the collector needs to track whether the cash came in when it was supposed to, and contact the customer again – immediately – if it doesn’t. This is more of a characteristic of an introvert.

And yes, I know – there are software packages that can help with the organizational side of collecting, right down to scheduling phone calls by time zone and incorporating an autodialer. Nonetheless, an inherently organized person will always do better in this job.

Not done yet. You might have heard that shit flows downhill. Well, in a company shit flows downhill to the collections person. This is because any mistake in product development, or procurement, or manufacturing, or shipping all ends up getting dumped on the collections person – and the reason is that customers refuse to pay because they don’t like whatever the company sold them.

The most awesome collections people listen hard to what customers are telling them about why the company’s products suck, and then work right back through the company to make sure that everyone knows about it.

Ideally, the collections person writes down internal process problems, and then badgers the people who are responsible for those problems, so that they get fixed. This is not easy. It means at least dumping the problem on the controller, and maybe going into a meeting to tell a bunch of department managers that they’re screwing up.

This is hard. It means telling the unvarnished truth to much more senior people, and as diplomatically as possible. And if the controller is a wimp, then the collections person might have to do this without any departmental support.

How to Measure a Collections Clerk

It might seem fairly easy to figure out which collections people are good, because you could just look at their collection rates. But that’s not the case. Someone might beat on customers to get paid sooner, but screw up the relationships so badly that customers end up buying from someone else. Or, someone who’s busy trying to solve an underlying problem doesn’t spend as much time making collection calls, so the collection rate doesn’t look so good.

So, it takes a more detailed analysis. You’ll need to chat with customers, to get their opinion. And talk to the other departments, to see if the person has been working problem resolutions back up through the company. It takes a lot of work. But you’ve got to find out, because someone with all of the right skills is very nearly priceless.

How to Build Up the Collections Department

Now, how can you build the reputation of the collections staff within the accounting department? One way is to set up a mandatory rotation through the group for anyone who wants to be promoted. By doing that, the assistant controllers and the controller will all understand how hard this is.

Another way to build up collections is to pay the best ones more money. And I’m not talking about a five percent pay boost. I’m talking about a fifty percent or a 100 percent pay boost. That might not seem economical, but consider two points.

First, collection people are the nearest thing to sales people in the accounting department. They save revenue from being lost through bad debts.

And second, if they can save revenue, then they’re worth way more than any other accounting clerks. By paying them a lot more, you’ll keep the best collections people for a lot longer.

I’m only talking about paying the best collections people a lot more money. Start new collection folks off at a normal pay rate, set high expectations for them, and provide massive amounts of training. Most of them will still fail, because this is a difficult job. But a few will be spectacular, and those are the ones to bury in cash.

And another point about a high rate of pay is that you won’t have any trouble attracting applicants for the job. Turnover will be high, because you’ll have to sort through the people who just aren’t going to be productive. That’s OK. The whole point is to dig through those applicants to find the few who can really do this job.

I’ll finish by returning to the earlier point about training. This is the only position in the accounting department that deals with customers all the time. So why would you have an untrained person contact a customer, and potentially piss them off? And then stop buying from the company. Instead, this position needs a lot of training, so you feel safe unleashing them on a customer.

Related Courses

Credit and Collection Guidebook

Effective Collections