We were dealing with the on-boarding of a new client recently and the following question was posed to us: “My customer is no longer responding to us, how are you going to get them to talk?”. Our response was that an AWOL debtor is the single biggest reason that JSP Credit Management will themselves be engaged by a creditor who has exhausted all their own available time and resources on the debt itself.
So, what is an AWOL debtor? Well, the term “AWOL” according to some accounts is a phrase that became common during the American Civil War to describe a situation in which soldiers had abandoned their duties without permission. However, there are some much earlier recordings of the phrase that date as far back as the 1600’s. In this case then an AWOL debtor is simply a debtor with whom contact has been lost.
So, you will not be surprised to know, we have dealt with one or two AWOL debtors in our time. Spoiler alert, not every case has a happy ending, however we feel quite strongly that there are a range of potential actions that a creditor can take that are likely to both reduce the likelihood of a debtor going AWOL in the first place and also re-establishing a channel of communication with the debtor who has since “abandoned ship”.
Now, for any of our more regular readers, the phrase “prevention is better than cure” will not be anything new to you. However, we are going to cover it again, from the perspective of a creditor who has suffered the consequences of a debtor going AWOL on them. But before we do, allow us to note, some of those consequences have the potential to be very serious to some creditors, and that is part of the reasons we are writing this blog.
We have written about some of the implications of this in our previous blog The Power Of Data, where poor data maintenance can result in problems with communicating with unenthusiastic former customers. It can also cause reputation problems too, particularly if your acting for as a third party debt collector in the transaction and your client is keen to see a positive result. And, of course it can cause financial issues too as without a paying debtor no money can be earned.
Our first claim to the importance of prevention being more important than cure comes from our understanding of what might be causing a debtor to avoid their obligations to pay. We have to acknowledge that facing up to fact that your company cannot pay for its invoices is not an easy thing to do. Its not always caused by cash-flow problems either but they certainly make it more difficult. Sometimes, overly complicated purchase ledger approvals processes, or pay when paid policies can be to blame.
So, if our assumption that debtors does not feel comfortable given the situation, they’re in, it would be reasonable to assume that their response to that is their coping mechanism. Were not judging that response in this blog, were just identifying it. Therefore, it poses the question, what is it that we could do as creditors or third-party representatives that could offer them the same solution that their response does whilst also serving our creditors interests?
We imagine you have already guessed; try and make them feel comfortable enough to face it! As humans, it is in our nature to project into the future. That critical capability has been essential to our survival as a race but what sometimes happens is our ability to project dominates our every thought and we can end catastrophising about what might happen without it being a guarantee. In some of our debtors’ minds, we imagine the insolvency practitioners have already arrived are already locking the doors for the final time.
Once, a debtor finds out that you might be willing to extend their payment terms or offer them a payment plan so they can pay it back in instalments, all of a sudden that once dry river bed of communication is awash with back and forth between yourself and your debtor and you might also have just done your credibility as a company some big favours too (not that were suggesting it needed it). Just make sure a written record of the plan is shared to all parties and explicitly agreed to for monitoring purposes.
Yet, we are also realistic enough to know that practising unconditional positive regard with every debtor that ever misses their scheduled payments does not equate to a magic wand for what has been a perennial problem to those who job it is to oversee the receipt of money owed into their business or on behalf of their clients who are owed money. Not everyone of the people who abscond on their duties as debtors are innocent victims. Some even have sinister intentions, but thankfully were prepared for that too.
Assuming that companies have done their due diligence on their customers before they agree to extend credit to them, as that is what we always advocate (and that is why we offer a credit risk reporting service), creditors are usually very well placed to deal with AWOL debtors. Sometimes all it takes is a well worded email, or letter to remind said debtor of the risks associated with missing payments on their financial obligations.
On other occasions they might take a bit more persuasion. This unfortunately has led to some debt collectors getting a bad reputation and calling on some less than ethical practices. Still now we come across people outside of the industry who imagine that were going round people’s houses with baseball bats when we introduce ourselves as “debt collectors”. Less dramatically but just as damaging, are tactics such as contacting family members or friends about the debt without consent to gain some leverage. The governments money claims online system is a relatively straight-forward system to use and can be used any creditor who is owed money by someone that is not demonstrating a willingness to pay. There are some factors to consider before attempting to submit a claim using the service. Taking this route will involve incurring some fees which are dependent on the size of the debt, and in some instances the claim can only be completed using the postal service. Last of all, the likelihood of success is dependent on how well you have your paperwork in order.
Then there is the topic of enforcement to consider. Even with a judgement in your favour, it does not automatically cause the money your owed to land in your bank account. It simply means the court has ordered your debtor to pay you within a certain period of time. Failing that, there are options available to have the judgement enforced, and yes you guessed it, that will incur more costs. However there are a range of different enforcement options available depending on the debtors circumstances.
Even after all of this, there is no absolute guarantee that you will be paid, but considering having all of those pieces in place, with each element to those different strategies, from the prevention at the beginning to the focus on the relationship whilst still a customer, to the various debt recovery tactics and then the legal action at the end, any creditor will be greatly enhancing their chances of getting paid, from even the most stubborn of debtors.
There is a great deal more to be considered when it comes to dealing with AWOL debtors, but we hope we have given you a brief insight into some of the important and contemporary factors that need to be considered. If you are interested in knowing more or wish to have a chat about a particular area of uncertainty that then get in touch for a free no-obligation discussion at www.jspcreditmanagement.co.uk or contact us on 01827 66820 to discuss your needs.