Feb/Mar 2010- Effective Use of Communication

Effective Use of Communications

An effective communications strategy is a key part of any collections process. Not only can such a strategy improve overall customer responsiveness, it can also lead to reducing costs associated with your in-house collection efforts. Initiating customer contact that results in zero net dollars recovered has a direct negative effect on your bottom-line (even before considering opportunity costs).

Following are the key factors in putting together an effective communications strategy.


The basis of an effective communications strategy is that customers are all different. What may overwhelm one individual may leave another completely unaffected. Because of this it is critically important not to rely on a single communication mechanism when attempting to rectify a customer’s account.

The modes of communication that are available in an accounts receivable department are relatively diverse. Typically, A/R staff can choose to contact customers via telephone calls, mail, text message, email, or pre-recorded voice messaging.


The message within each of these modes can be varied according to severity, for example; customer service, gentle, firm and implied referral to a third-party. In an effective collection strategy, a mix of these communications tones will be used within the various modes in order to reach the entire customer base rather than the sub-segment that only responds to a certain communications mode or tone.


The time factor is also important in developing communication strategies. A longer, incrementally escalating approach is likely to be appropriate when attempting to regularise low risk accounts, while a shorter, intense approach is required when dealing with higher risk accounts.


The correct communications strategy seeks to optimize the balance of the cost of communicating with the customer, against the reward of the customer regularising their account. It has become more commonplace to indirectly charge customers for such communication, in an attempt to reduce the overall operational costs of collections, by including a late penalty policy (ie. Net 30 Days – 2% per month on overdue accounts) as part of customer sighed credit agreements or work orders.


In building a set of collection strategies, the idea is to segment customers according to their risk profiles and then apply communication actions accordingly.

Based on the above, a strategy for lower risk customers would ideally have many communication points of different types. These would begin with gentle reminders and would then escalate until the account is settled or passed on to a third-party for collections. The higher risk customer should be subjected to a quicker escalation process, before they are passed on to third-party collections in order to keep the potential of complete financial loss as low as possible.

From 19th century philosopher, Ralph Waldo Emerson (1803-1882)
“Speech is power: speech is to persuade, to convert, to compel.
It is to bring another out of his bad sense into your good sense.”

…Some food for thought.