The Power to Talk Versus the Power to Act—the Secret to Successful Collections

Threats are a two-way street.

You can make a threat, you can outline the consequences, but if the threatened party doesn’t perceive the likelihood of action there’s little to no incentive for them to heed your demand.

Think about it like this…

Speeding is illegal, and the law attempts to deter you from speeding through the consequence of a hefty fine.  Yet you, and millions of other Americans speed across highways and city streets every single day.

Why?

Because the perceived likelihood of action, of a police officer actually pulling you over and writing a ticket, is slim. It’s not enough for a consequence—even a severe one—to be clearly stated. There needs to be a strong likelihood of enforcement as well.

This line of reasoning applies directly to the collection industry.

Collectors LOVE to pester.  They LOVE to threaten. But when debtors call their bluff, there isn’t a whole lot traditional debt collectors can actually do legally speaking.

Traditional debt collection agencies…

  • Lack authority.
  • Lack legal credentials.
  • Lack a streamlined process that allows them to swiftly follow through on their collection claims with litigation.

Their words can be empty and debtors often times know it.

This is particularly true when it comes to high-value commercial collections which require in-depth understanding of business, industry law, and negotiation.

A high-value commercial debtor isn’t going to be intimidated by the stereotypical bullying tactics that would work with small-time consumer debtors.

Organizations must be able to do more than communicate the consequences

They must be able to explicitly outline the course of action, including detailed legal steps, to be taken if owed monies are not promptly paid. And they must have the legal wherewithal to back it up.

It is a process that involves understanding the debtor’s issues and where there may be confusion. It requires real credentials to sift through the situation and help the client understand why they are legally obligated to pay what’s due.  It avoids the empty threats and pestering so commonly associated with the collections business and focuses exclusively on using the precedent of commercial law to compel action.

How We Settled an International Collection and Helped a U.S. Based Tech Company Gain £17,000

Recently, my firm settled an international collection in which a UK-based company owed our client, a US-based company,—that’s roughly $25,000.  Did we fire off a flurry of hostile, combative emails to the debtor? Did we threaten to bring the debtors into financial and personal ruin like most traditional collection companies?

No.

We demonstrated how we had a streamlined process that can and will actually take the debtor to litigation if there is continued refusal to pay what’s due.  We discussed the results of which could be easily predicted by existing legal precedent.  Shortly after that our, the debtor paid the $25,000 in-full.

In reality, did we actually want to go to court? No, of course not, but the art of commercial collections isn’t in the conveyance of desire.  It’s in the conveyance of likelihood. We were able successfully convince the debtor of more than their own liability. We were able to convince them of our willingness, readiness, and ability to legally act – desire be damned.

And that’s the point…that’s what separates a legally-empowered commercial collections law firm from the average collections agency…a law firm actually has the power to act.

Our client secured the $25,000 they were owed not from our firm’s ability to talk the talk, but from our firm’s ability to walk to the walk if necessary. There was no empty bluffing. No pestering.  There are only these facts:

What’s owed versus what’s not owed…what’s threatened versus what can actually be done.

Next time your business is faced with an uncooperative debtor, think about how you, your finance and legal team or the commercial collections agency you use can demonstrate the willingness, readiness and ability to act. Think about how you will raise the debtor’s perception that there will actually be real consequences if they continue to be unwilling to cooperate and have a meaningful discussion that leads to a resolution that satisfied both parties.

Want to see more case studies? Here’s a case study on how we used collections law and effective negotiation strategies to help a software company collect $20,000 plus keep a $100,000 relationship intact.