Are you a debt collector or creditor looking to understand behaviour in debt collection for some effective strategies to find more success in your debt recovery process?
If so, you may be feeling a little stressed about your current collection methods as chances are, they are not working properly for you if they are something that you are looking to change.
Your business likely relies quite heavily on these processes for your income also, so this can only add to the stress!
So, what can you do to help improve your debt collection process?
Well, as far-fetched as it may sound, considering the psychological elements of your practice, and understanding understand behaviour in debt collection can be very helpful in finding more success.
As with many things relating to people and things that they have to do, paying debts involves some internal thought and resistance.
By finding ways to appeal to your clients, you may find it easier to collect debts from them, and find that they are paying the debts by themselves without too much prompting from you!
In this article, our debt collectors will discuss some of the great tips and tricks that you can use to understand psychological behaviours to better collect debts from clients and how this can look for you.
Behaviour in Debt Collection - Show Empathy
The first tip that you can use to better understand the psychology of debt collection for better results is to show some empathy to your debtors.
Debtors have things going on in their lives other than their debts.
This can sometimes interfere with their ability to pay their debt or simply remember to do so.
As irritating as this can be for you, especially if you have a lot of debts to collect or a lot of debtors not paying, it can be helpful to show some empathy to your debtors.
Empathy should be something of a foundation for your collection practices.
It can make your debtors feel understood and like they can come to you with their concerns about their debts, which can significantly help your process.
By doing this, you find out about issues early and can deal with them as you see fit, rather than debtors lying, or hiding their struggles from you.
Behaviour in Debt Collection - Shame and Guilt
Another great tip that you can use to better understand the psychology of debt collection for better results is to recognise the impact of shame and guilt.
Shame and guilt are big factors in people’s lives and can sometimes cause them to hide potentially important details from people that need to know them.
When in financial turmoil, or simply struggling with another factor in their life, these elements may prevent them from coming to you with their issues.
To combat this, try to approach these sorts of issues with sensitivity and understanding.
This way, debtors may feel more comfortable coming to you in the future with their issues so that you can both find an alternative that works, rather than finding out about these issues when they declare insolvency or something similar.
Behaviour in Debt Collection - Motivation
Another great tip that you can use to better understand the psychology of debt collection for better results is to understand the client’s motivation.
There are several reasons that clients will be propelled to pay the debt.
Debt repayments are, of course, a legal requirement and your debtor can face issues with the law if they don’t make their payments.
However, there are reasons that people will feel more compelled to pay debts, which can be helpful to understand.
For example, if you have a client that is making early or on-time payments consistently, they may be doing this to improve their credit, alleviate stress, or maybe they just want it paid so they can move on with their life.
By understanding these reasons, you can better appeal to your clients and feed into these motivations
Use Positive Reinforcement to Collect Debts
Another great tip that you can use to better understand the psychology of debt collection for better results is to use positive reinforcement.
Positivity is always a great thing to have. This applies to your debts and collection processes too!
Positive reinforcement can be a very effective way of collecting debts by helping your debtors to feel more positive about their debt payments.
Encourage and potentially reward early and on-time payments, instead of just punishing late payers
Behaviour in Debt Collection - Reciprocity
Another great tip that you can use to better understand the psychology of debt collection for better results is to utilise reciprocity.
When someone does something nice for you, you probably feel the need to do something nice back, right?
This is a psychological term called ‘reciprocity’, where people generally feel compelled to return a positive act when someone does something for them.
You can simply provide your debtors with some financial information and tips to help them out or be a little more understanding when someone makes a first-time late payment to implement this principle into your practice
Communicate Effectively to Collect Debts
Another great tip that you can use to better understand the psychology of debt collection for better results is to communicate effectively.
Communication is key.
We’re sure you have heard that phrase before, but it is true and can help a lot with your debt collection process!
Try to avoid using too much legal or debt collection terminology that the average person wouldn’t understand and may feel a bit confronted by.
Also, reach out every now and then (not too often) to check in and see if all is okay in the financial sense
Continuously Support and Follow-up
Another great tip that you can use to better understand the psychology of debt collection for better results is to continuously offer support and follow-up.
Debt collection is a long-term process.
Consistently follow up with your debtor to offer support and follow-up.
This way, they may feel a little more supported in their payments and like there is a way to get help with payments if needed.
Understanding Behaviour in Debt Collection - Key Takeaways
Paying debts can be difficult for debtors.
It can also be difficult to collect for creditors, but implementing some psychological strategies can be helpful! Remember to research and apply these strategies effectively for your particular business, however, as not all strategies will work for everyone!
If in doubt, then contact our debt collectors and we can collect your debts for you.
Advance debt collection is an Australia-wide commercial debt collection agency and credit and accounts receivable management. We can recovery your debts, conduct skip tracing, and manage your accounts receivable. We collect your debts for commission only. This means no collection, no commission. We are professional debt collectors with combined 20 years of experience to help you collect your debts. We are partnered with expert litigation lawyers with years of experience in debt recovery, enforcement, and insolvency. Under the Agents Financial Administration Act 2014 Advance Debt Collection Pty Ltd hold authority number 4583821 to act as a debt collector. ADC Advance Debt Collection® is a registered trademark.