The Truth About B2B Debt Collection Negotiation

 

Dispelling 5 Common Myths

Negotiating collections with debtors can be stressful, particularly when payment is not forthcoming. If you’ve reached a point where you need to arrange a repayment plan with a customer, your collections team will need to negotiate carefully to get the best deal possible. 

Unfortunately, this process doesn’t come naturally to everyone in Accounts Receivable and no matter whether you’re new to the Credit Department or years into a Delinquency Management role, it can be easy to misjudge debtor negotiations. 

Adopting a one-size-fits-all approach to debt collection negotiation just won’t work – not least because every debtor’s financial situation is unique. As such, active listening and effective communication are vital to establishing a win-win outcome for both parties. But that’s not the only potential pitfall in B2B debt collection.  

In this article, we will discuss five common misconceptions that may be affecting how well your debt collection negotiations are going. We will also give you five successful strategies for negotiating effectively. 

Misconception 1: Sympathy Works 

Navigating debt can be an anxious experience for debtors. Understanding your client’s worries can often form the basis of a mutually beneficial relationship. However, when this empathetic approach swings too far towards sympathy, negotiations become skewed.   

Empathy means understanding someone else’s situation, while sympathy is more about feeling sorry for them – a sentiment which not only misses the mark professionally but also reduces your capacity to forge a constructive deal. Instead, empathetic communication can establish trust, creating a more collaborative environment whilst maintaining a firm intention to find a resolution. 

Strategy 1: Build empathy with the debtor

Understand and acknowledge the other party’s perspective to build trust and find common ground. 

Discover what the best debt collection companies know about the psychology of negotiation in our article: Does your collection agency understand debtor behavior? 

Misconception 2: Win/Lose Mentality 

One of the most important tips for improving your debt collection negotiations is ditching the win/lose mentality. It’s a common misconception that the only successful outcome is repayment in full. In reality, the most fruitful negotiations achieve a win/win outcome for both parties.  

Forging a tailored solution that matches the debtor’s ability to pay increases the likelihood of a successful resolution where both parties feel they have gained something of value. This approach fosters more sustainable agreements and promotes long-term relationships with your clients.   

Strategy 2: Aim for win-win solutions

Focus on creating payment solutions that benefit both sides, enhancing the likelihood of a sustainable agreement. 

At Brennan & Clark, our first core value when it comes to collections is to collect all that can be collected. However, our second is to protect your client relationships! 

Misconception 3: Emotional Involvement  

It’s often said that getting emotionally involved is not an effective negotiation strategy with debtors.  Although it’s true that excessive emotion can cloud your judgment, neither is it helpful to behave like an automaton. 

Channel any feelings of stress or anxiety into excitement and engagement, using your emotions strategically to express commitment, passion, or seriousness about certain issues. Above all, work to manage your emotions carefully and don’t let them control the negotiation process. 

As Dr Mike Wheeler of the Harvard Business School comments: “You can’t control other people’s behavior, but you do have a say about how you react to it.” 

Strategy 3: Manage emotions wisely

Use emotions strategically to convey commitment and passion while maintaining objectivity and control. 

Misconception 4: Emails Achieve More 

When it comes to negotiating collections with a debtor, it’s easy to assume that emails work better than face-to-face or verbal conversations since they improve clarity and encourage direct communication. Wrong. 

In fact, negotiation over email can pose more problems than it solves and is often fraught with misunderstandings. Email lacks the nuances of tone, emotion, and body language that can be crucial in understanding the other party’s position and building positive rapport. 

Strategy 4: Prioritize direct communication & conversations

Whenever possible, use face-to-face or verbal conversations to capture nuances and build rapport. Reserve emails for documentation purposes. 

A First-Party Collections Service, like Brennan & Clark’s, can streamline all aspects of your accounts receivable process. Acting as an extension of your company, not as a third-party collection agency, we develop a customized approach using calls, letters, emails, and voice broadcasts to manage your collections effectively. 

Misconception 5: Dictating Results Works

A top-down negotiation strategy, which encourages debt collectors to start every conversation by asking for payment in full, is often seen as the most effective approach. But in reality negotiation is never this simple. If the debtor could pay that easily, they probably wouldn’t have reached this point. 

Debt collection negotiations rely on effective communication to find a mutually acceptable solution. In this context, asking open-ended questions can be more helpful to uncover underlying interests and enable both parties to explore creative solutions.  

Strategy 5: Ask open-ended questions

Encourage open dialogue and uncover underlying points of view by asking open-ended questions to find mutually acceptable solutions. 

This approach ensures that all perspectives are considered and often results in a higher likelihood of payment, as when debtors are involved in the negotiation process, they are more likely to commit to debt management plans, payment plans or settlements. 

 

Expert B2B Debt Negotiation Services: Maximize Your Returns

If you would like help in understanding the commercial debt management negotiation process, or training to improve the skills of your in-house collections team, Brennan & Clark are more than willing to share our expertise on how to negotiate with creditors. 

Alternatively, our unbeatable Contingency Collections service delivers high returns and outstanding performance, returning 20% above the industry average. As one of the best commercial debt negotiation companies, we prioritize protecting and respecting customer relationships throughout the process. 

Contact our team online or reach out to us directly at 800-858-7600 for an informal chat about the collection issues you are facing today.