by Raymond P. Wendolowski, Jr.
There are many tactics that you can use to try to make a debtor follow through on promised payments or to follow through on any promise in general, but the best technique I have found is also one of the simplest. When I first began practicing at Bernstein-Burkley, P.C., I learned that setting hard deadlines for debtors is possibly the most effective way to get a debtor to do anything.
The process is very simple. When you have a payment or some other action that you require from a debtor, provide them with a hard deadline, preferably in writing, by which they must perform the action.
Once you set a deadline, you then have to follow through on the deadline. This means that if a debtor violates the deadline, there must be genuine consequences for doing so. The consequences do not have to be Earth-shattering, but they must be punitive to the debtor in some way. For instance, if you have given a debtor five days to respond to an offer of settlement, any acceptance made after the fifth day should be rejected, and the debtor should be notified that the acceptable settlement range has now increased because of the debtor’s failure to respond in time.
You can also notify the debtor ahead of time that there will be consequences for failing to fulfill a promise. Doing so can be even more effective if a debtor has seen the consequences of breaking a promise in the past, because they now know that you will follow through on the proposed consequence.
This seems like a technique that is almost too simplistic to work, but in fact it works very well in practice. This practice is also very adaptable, because you can tailor your deadlines and consequences to each and every situation to ensure that your debtor will comply.
Ray outlines something extremely important in the negotiation process. Of course this is a negotiation. Everything related to collection of an account receivable is a negotiation. There are many ways to pursue a payment. Ray highlights one of the most important points. The analogy might not been perfect, but children are constantly testing to see what they can “get away with.” The old saying “give him and inch and he’ll take a mile,” is also appropriate. One has to set boundares and maintain them. If you tell a customer that you will cut off their shipments if they don’t pay by Tuesday, you can’t ship on Wednesday if they haven’t paid. If you do, then they won’t believe your threat the next time. Similalry, if you place your account with a lawyer or collection agency, don’t make any deals with the debtor without checking with your professionals. It may be that there was some threat or deadline of which you are not aware.