Use Psychology to Ease Your Debt-Collection Headaches

What are your choices when your accounts receivables reach 60 to 90 days past due? After all, cash flow is a paramount priority.

Stellar debt collection is all about emotions. Certainly, you don’t want to be too aggressive in debt collection and lose possible revenue from slow-paying customers – they might soon be able to pay you.

Even a court judgment isn’t a cure-all. Nor do you want to let your receivables cripple you.

Many businesses face this perplexing problem – unlike what we’ve experienced in recent recessions. Consumers don’t have money to spend so they’re not consuming.

Consumer spending usually helps end recessions. But they probably aren’t buying from your vendors.

So turn to psychology to understand how to ease your debt collection nightmare.

ID-10068612 imagerymajesticFirst, recognize four salient issues:

1. Tight credit has traumatized business. Many of your business customers can’t get credit. For countless businesses, the credit issue started with Advanta.

Advanta was the nation’s 15th-largest credit card company with about 360,000 small-business customers.

It declared bankruptcy in Nov. 2009 – five months after it cut off all credit to its customers. Advanta CEO Dennis Alter was quoted by CNN as claiming the economy hurt his company (Bankruptcy filing is a blow to small business).

That’s partially true, but there is plenty of evidence to the contrary. Advanta and other credit card companies helped create the Great Recession.

Advanta was repeatedly accused of bilking countless customers with predatory interest rates at higher than 30 percent for dubious reasons, and abruptly cutting credit lines without warning to unsuspecting businesses long before the recession was acknowledged by economists. 

Little wonder about Advanta’s downfall. Its business customers couldn’t pay their credit card bills. Here’s a representative sample of complaints.

2. Weaker sales and fewer exports. The red ink cycle in the gross domestic product isn’t over. GDP growth has been well-below average during the Obama presidency.

The majority of small business owners isn’t feeling relief. We continue to see universal evidence of the slow recovery from the Great Recession in loss-leader sales and empty commercial space.

3. The national debt. Government debt under the Obama Administration as a share of the nation’s GDP averaged 76 percent. The nation’s massive debt increases every split-second and is best illustrated by the U.S. Debt Clock.

4. Mounting healthcare costs. Employers are suffering from double-digit percentage increases. And the root causes of escalating healthcare costs haven’t been solved by ObamaCare. 

The majority of slow-paying customers are likely to be downtrodden, but not mean-spirited. If a slow-paying customer has an otherwise good track record with you, the odds are you’ll see your money when conditions improve – if you practice empathy.

Consider a different approach

So in view of these woes what can you do to improve your receivables? Consider using the Golden Rule and train your staff in empathy techniques.

The majority of slow-paying customers are likely to be downtrodden, but not mean-spirited. If a slow-paying customer has an otherwise good track record with you, the odds are you’ll see your money when conditions improve – if you practice empathy.

Empathy means a breezy, easy-going approach. Treat past-due accounts like you’d want to be treated. Ask friendly, open-ended questions to get your customers to talk with you. Listen to how they hope to repay you.

Case study

Admittedly, in my third year in business, I fruitlessly felt anger toward a client who didn’t follow my counsel and his company consequently fell on hard times. As I dragged my bag of resentment around, it grew bigger and bigger. My obsession was a drain on my emotions.

Fortunately, I remembered a passage in an old best-selling paperback book, “Love Is Letting Go of Fear,” in which author Gerald G. Jampolsky, M.D., related his experience with a non-paying client. Dr. Jampolsky, who was angry over the nonpayment, changed his mind and used a new g0-slow approach to the problem.

Soon, he unexpectedly received payment.  But that wasn’t his motive for an easy-does-it approach. He did it for his own serenity. For more on Dr. Jampolksky’s organization, visit:

I decided to try his approach. So when the client owed me more than $4,000, I decided to let go of the problem after being unsuccessful after months of collection efforts. To my surprise – a year later – I got a phone call with a promise to pay in full. Yes, the check arrived three days later and it didn’t bounce.

Two other lessons

Two other best-practices to avoid problems with your receivables:   

  • Don’t be so eager in taking on new clients, and be certain to practice due diligence. I politely turn down new businesses as clients if they’re not a right fit. There are  steps to consider before turning down new business
  • Closely monitor clients’ progress. Even if they pay me a retainer, I hold them accountable if they ignored my suggested best-management practices. They won’t succeed if they don’t follow recommendations.

FYI, five years after my $4,000 surprise, I got an opportunity to see if I indeed learned my empathy lesson:

As I was turning into a parking lot to meet buddies for our weekly sailboat race, a young waitress with a small child rear-ended my late-model vehicle. The damage was slight – about $100. The driver begged me not to report it and promised to reimburse me. I agreed.

Soon, I realized the joke was on me – she was not in a position to pay – so I decided to let go of it. My loyal accountant was more than chagrined with me.

But just an hour after deciding to let go of the matter, I unexpectedly met a person who formerly worked for one of my clients. He mentioned how my work benefited his ex-boss, and asked me to approach his new employer to offer my services.

A week later, I had a new client, who became my biggest. Not to be gauche, but it was six figures a year in revenue for nearly five consecutive years. Meantime, my accountant began to tire from my chortling soon after I won the disagreement.

The moral: Treat each situation differently. What goes around, comes around.

Don’t ignore your receivables

However, this doesn’t mean you should ignore collection problems. But don’t approach each customer with a sledge hammer. See the situations as opportunities for growth and more options for due diligence.

In conclusion, think long-term. As much as possible, treat your customers as partners and use the Golden Rule – treat others as you would like to be treated if you were in a similar plight. What goes around comes around.

Besides, if you use due-diligence with customers early on and use best-practices in management, you’ll be OK. The odds are the majority of your delinquent customers will remember your empathy and will remain loyal after their situations improve.

From the Coach’s Corner, for retailers, here’s a related resource: Plagued by Chargebacks? 5 Ways to Fight Back

“Interest on debts grow without rain.”

-Yiddish Proverb


Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry. 

Photo courtesy of imagerymajestic at

Seattle business consultant Terry Corbell provides high-performance management services and strategies.