It is common among construction companies, especially material suppliers, to sell their products and services on credit. Instead of asking for upfront payment, suppliers provide the materials to their clients and issue invoices to be paid at a later date.
Selling materials on trade credit is popular among contractors and subcontractors precisely because immediate payment is not required. To avoid not getting paid for the materials that they provided, material suppliers must therefore know how to pursue and recover payments effectively.
Construction businesses typically have a staff member or an entire team dedicated to pursuing payments from clients. One of the things this team needs to know how to do is making effective payment collection calls. Knowing how to effectively call customers for payment is a necessary skill, especially in an industry like construction that is notorious for late payments and other delinquencies.
- Construction collection calls
- How to make effective payment collection calls
- How to prepare before making construction debt collection calls
- General construction collection call mistakes
- Construction collection calls mistakes to avoid
- Construction collection call tactics
- What are the Do’s and Don’ts when making a construction collection call?
- How to avoid construction collection call mistakes
Construction collection calls
Construction collection calls are essentially debt collection calls. These are phone calls made to clients who missed a payment deadline, and the goal is to get the clients to commit to pay and settle the debt.
Knowing how to effectively make payment collection calls is quite important for industries like construction. Late payments are a huge problem in this business. Clients who do not pay on time have been a massive headache for many construction companies, and so every construction business needs to have a standard procedure for payment recovery.
There are a few options for recovering payment from difficult clients, the most effective of which is arguably filing a mechanics lien. A mechanics lien can limit a property’s market value, and so it can urge property owners to step in and settle all outstanding debts.
However, filing a mechanics lien can be tedious. If possible, you do not want to escalate the payment problem into a bigger legal battle. This is where payment collection calls come into play. If you can call a client and get them to pay, you can solve the issue right away.
How to make effective payment collection calls
Review the details of the payment debt before making the call.
When making construction collection calls, it is imperative that you are prepared. You should study and review the details of the client in question, and you should make sure that you understand the details of the situation. For example, you should verify that the invoice has been sent to the client before calling your customer and asking to pay up.
Pay attention to details when taking notes.
You need to be a good note-taker when making construction collection calls. Taking notes allows you to jot down the important details about your client’s financial situation. When you have detailed notes, you can also easily pass the portfolio to a supervisor or a different member of the credit team without them having to start over once they talk to the client in question.
Provide alternative payment options.
Late payments can occur due to various reasons. Sometimes, a client can fail to pay on time simply because of the paperwork involved when processing their finances. So if, for example, you only accept payments in cheques or money orders, consider providing alternative payment options such as credit cards. Not only does the invoice get paid, but you may also nip the late payment issue in the bud.
Be open to negotiations.
Offering alternative payment options is part of being flexible with your clients. This flexibility is important when making payment collection calls. Even though you have a credit policy or a standard operating procedure for making payment calls, it is also important to remain open when it comes to negotiating with your clients.
The goal is to get your clients to commit to paying without causing major financial losses on your end. Sometimes, it can be worth offering flexible payment terms to loyal clients to keep them under your wing.
How to prepare before making construction debt collection calls
Because being prepared is important when making construction collection calls, here are some tips on how you should prepare before you make that call:
Know who your client is.
You cannot simply rely on generic niceties and questions when making construction collection calls. Your clients are not all the same, so you need to know who you will be talking to and what are the details of their portfolio. How long have they been working with you? How often do they miss the payment deadlines? Is there a credit limit? You should know the answers to questions like these before you dial your client’s number and ask them for payment.
Understand the company credit policy.
One big mistake that smaller construction companies make is not having a credit policy. Without a credit policy, all decisions surrounding credit sales and trade credit payment terms might be subjective with no data-driven basis. A credit policy is important to help you manage your trade credit, and you should know every page of your policy prior to making a payment collection call.
Plan what you are going to say.
Having a script that prompts you about the types of questions you ask can be a big help. However, you should strictly rely on the script as you still need to keep the conversation running naturally. The point of planning what you are going to say is to familiarize yourself with how you are going to launch the payment discussion and to prepare the possible answers in case the clients ask you questions.
General construction collection call mistakes
Failing to develop and implement a credit policy.
The heart of every credit management team, whether in construction or in other industries, is to have a robust credit policy. Without a credit policy, you expose yourself to higher risks of late payments and even insolvency.
For instance, you may end up approving a high credit limit for a big client without conducting a proper review of their finances. You can protect yourself from this scenario by ensuring that your credit policy requires a thorough risk analysis prior to approving any client.
Failing to standardize payment collection calls.
It is difficult to predict how every payment collection would go. However, it will make a world of difference if your procedures surrounding payment collection calls are standardized. This includes setting the timeline for when a payment collection call is required. Do you make the call the day after the payment deadline is missed? Do you wait for another week?
Part of standardizing your payment collection calls is also setting when the calls should be escalated. If, for instance, a staff member of the credit team was not able to get a client to commit to paying, they could either make a follow-up call or escalate the issue to a supervisor. You should study and determine these processes so you can be efficient with the construction collection calls you make.
Failing to provide training for the payment collection team.
Talking to clients is far from easy. Some people may have the natural charm to converse with others, but it takes practice and skills to know how to effectively speak with clients and get them to pay their debts. A regular training program can therefore have a huge impact on improving your and your team’s payment collection skills.
Other than training, regular evaluation is also as important. You should evaluate yourself and/or your staff to determine how effective you are in making the construction collection calls. You can use certain key performance indicators or KPIs to identify the specific strengths and weaknesses of you and your team.
Construction collection calls mistakes to avoid
Sticking to the script too much.
Having a script for making collection calls is highly recommended, but it does not mean that you should stick to the script at all times. Part of being effective is knowing how to drive the conversation naturally without letting the clients know that you have a prompt in front of you. You do not want the client to recognize that you are simply reading a script.
Threatening or harassing your clients.
You are strongly discouraged from threatening or harassing your clients into paying their dues. Even though you are responsible for recovering payment from these delinquent clients, you should still remain professional without being aggressively rude. You can, of course, remind your clients of the consequences of not paying their dues, but avoid using indecent and unprofessional language.
Being unprepared for the collection call.
Your clients can tell if you know what you are talking about or not, and they might feel unimportant if you do not prepare well enough for the call. Put all the relevant documents and files in front of you so you can easily search for the answer in case your clients ask a question. You might lose a client altogether if they feel that you are not prioritizing them or taking them seriously.
Construction collection call tactics
Be prepared and act professionally.
It begs to reiterate that being prepared is extremely important when making construction collection calls. You cannot call a client and ask for payment if you are not sure when the invoices were sent out. While you are not expected to know all the answers to all of their questions, you should at least know what to say if you do not have the answer on hand.
Do not multitask.
Do not make payment collection calls while doing other work or running other errands. For example, you do not want to call a client and ask them for payment while you are typing an email to a different client. The client on the phone would most probably feel offended if you are calling them while you are in the middle of another project.
Have all the details ready in front of you.
Open the files on your computer, click all the databases, and make sure that your notes are in front of you during a construction collection call. This will become handy in case your client has a question or in case you need a quick guide on how to handle the different turns of a collection call conversation.
Secure a commitment from the client.
The goal of making a collection call is to ensure that the client will commit to paying. Keep this goal in mind when calling your clients, as this should steer the direction of your conversation. You need to take down notes on when and how they will be paying.
Follow up with the client.
Always follow up with the client to confirm that they have already issued the payment. You can also do a follow-up collection call to ask the client if there were circumstances that could lead to yet another payment delay. Following up with a client ensures that the client indeed honored their commitment to pay and that your communication lines remain intact.
What are the Do’s and Don’ts when making a construction collection call?
Harassing the client
No matter how frustrated you are, make sure to conduct yourself professionally when calling a client. You must not harass them or use illicit language to scare them into paying their debts. Use firm language instead, and command certainty in your tone, so they know that you take payment debts seriously.
Speaking like a robot
Never rely on a payment collection script when making a construction collection call. You will end up sounding like a robot, and the client will know that you are simply parroting a company policy. You are less likely to secure a commitment to pay from your client if you sound robotic and insincere.
Appearing unprepared and/or unprofessional
You do not want to call your client by a different name, and neither do you want to ask them to pay the wrong amount; otherwise, you will appear to the client as if you do not know what you are doing, and it will reflect terribly on your company. This is why you need to prepare and review your client’s portfolio prior to making the call.
How to avoid construction collection call mistakes
Study the company credit policy and the clients’ portfolios.
Arming yourself with all the necessary knowledge will help you make effective payment collection calls and consequently convert all unpaid invoices into cash. Be sure to understand your company’s credit policy to heart; know which clients were given a low credit limit and why they were given such a limit; familiarize yourself with the client’s portfolio.
The more you know about the client’s account, the better your understanding is of their situation. Understanding your company’s credit policy will also help you come up with a good approach in getting the client to commit to paying what they owe.
Prepare and practice.
It may take multiple times before you start feeling more comfortable and natural when making construction collection calls, and this is understandable. The best people to do construction calls are those with the most experience.
However, newer staff members are not necessarily inefficient. The key is to practice and to always stay prepared. Charm and wit are also key characteristics, but being prepared can go a long way, especially for inexperienced credit management team members.
Provide and/or receive proper training.
To improve your and your team’s skills in making effective collection calls, you need to undergo proper training. Training can be done internally, or you can also hire a third-party trainer.
Whatever you choose, the idea is you need to properly train yourself and your staff on how they can be more effective when they make collection calls. Depending on the cost, providing professional collection call training to your credit team may be a low-hanging fruit that can significantly benefit your company.
Make a follow-up call.
Following up with the client is one way to secure payment and do further investigation. On top of this, following up with the client is also a good way to gather feedback. If you made an effective payment collection call, they probably already paid up. They would also be more open to continue speaking with you again and to continue working with your company.
On the other hand, a client could refuse to speak with you altogether. They could also avoid your calls and cut communication lines, in which case you need to escalate the issue and consider filing a mechanics lien to recover your payment.