Effective credit and collection strategies

How to convert receivables into payments

If you think about it, the words “credit” and “collection” should be inseparable. One does not extend credit unless one is assured of collection, given the agreed term length. Hence, as important as knowing whom to extend credit to, it is important to know if collections are assured to be timely and in full. An effective credit investigation entails an effective collection process as well.

We asked Dennis Areño, a subject matter expert of Inquirer Academy about credit and collection strategies.

Effective collection

Creditors need to ask, “How does a good creditor make effective collection strategies happen?” Like any objective that you wish to achieve, you first examine how you begin. Just like in constructing a building, the basic foundation structure of your building needs to be strong and will stand the test of time. In extending credit, the basic foundation of every collection effort is knowing who you are extending credit to and how sure collections can be drawn. In other words, you must apply KYC—or know your customer. This is where any effective credit and collection strategy should begin and where you move on from.


In today’s times where there is a stiff competition happening everywhere, every account officer’s business strategy should be based on putting the customer first. The core priority should be to always provide positive experiences and to build long-term relationships with their customers. This is called “customer-centricity”. Knowing your customer well will allow you to achieve this.


One example of a customer-centric debt collection strategy is self-service. These days, consumers want to be able to sort things out for themselves. They don’t want to wait in a call queue to speak to an agent or to have to visit an employee in a branch. They want to “serve themselves” when making their payments. As you would note, there is now an influx of mobile and computer applications that allow customers to do this themselves.

Remain calm, and be in control

We encounter a variety of clients every day and with the fast-paced life that we have, some people are stressed out and are generally tense. Because of this, some do not respond very well to collection calls. In fact, in some cases, some customers use offensive language toward a collection agent. This is why the job of a collection agent may not always be easy. However, the only way to respond to this is to remain calm and not take the comments personally. In such cases, it may be necessary to continue the discussion later.

After extending credit to a customer, it may be that even though you considered all the factors to look at when considering a loan application (e.g. income, debt ratios, etc.), some still experience bad days. Without sacrificing appropriate collection assertiveness and your resilience to collect the payments due you, you must also be careful not to be considered a “fair-weather creditor”—someone who is only friendly to clients when they can pay without missing a beat. Are you covered?

On the other hand, a good creditor needs to constantly and continuously be aware of the client’s business so that when there are substantial indications that a real financial problem is already looming, you need to be able to prepare them for remedies as soon as possible. This may come in the form of loan restructuring, or in worse scenarios, calling on their collateral.

This is also why the use of appropriate collection letters is crucial in any collection strategy. For one, because you had documented your efforts well, should your collection eventually lead you to the courts, you will be covered in terms of how diligent you were in giving the client enough allowances to make up for delayed payments.

Finally, be proud of who you areIn all of these, you need to do everything professionally so that should the client become creditworthy again, he or she will always think of you. Doing things professionally will help you gain respect from your clients and your colleagues. You can then say, with all sincerity, “I am a collection agent and I love my job!”


Areño will facilitate a course on “Effective Credit and Collection Strategies: Turning Receivables into Payments” on June 5. This in-person workshop will be held in Makati.

For more information, email [email protected], or send an SMS to 0919.3428667 and 0998.9641731.

For your other earning needs, Inquirer Academy could assist you in designing and facilitating a live workshop, a webinar, or a self-paced online course for your organization.

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(The author is the executive director of the Inquirer Academy.)

TAGS: credit and collection, Trailblazer

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