Collection agencies make a number of mistakes, but refusing to accept a payment plan should not be one of them. We recently collected a file that was very close to be uncollectible because of the statute of limitations. Why were we successful? We offered her a payment plan. The consumer was elderly and told us that the previous collection agency refused to allow her to make monthly payments. We set up an auto monthly payment with her credit card, and sent her a written confirmation. She was so overjoyed that she offered to send our client a letter praising our efforts.

Many consumers become overwhelmed by the total amount of a debt, but if you break it down for them, it often becomes manageable. It is important to remember some simple rules about payment plans.

Document. Document! DOCUMENT! Memories fail us. It is important to detail of the plan in writing and make sure both parties sign to indicate their agreement:

1. Amount of money to be paid, number of installments, number of installments (Example: “…will pay the sum of one thousand dollars ($ 1,000 USD), payable in 10 equal installments of 100.00 each)

2. When, where, and how each payment is to be made – exact details. (Example: Payments should be made payable to {Company Name} must be mailed to {Company Name, Full Address} so that payments are received by the 15th of every month.) Also, don’t forget that this agreement should list whether interest will accrue on unpaid balance.

3. Consequences for default on agreement – Will default void the agreement? Will you charge a late payment fee? Will the file be sent to a debt collector? Make sure to specifically detail what happens if the terms are not met exactly as agreed. 

There are also several ways you can use payment plans to enhance your cash flow and make it easier for people to pay you. 

1. Obtain a larger down payment up front with small back end payments.

2. Consider an online payment portal. Ours has increased payments by 30%.

3. Accept all forms of payment, including PayPal, Apple Pay and others.

4. Set up automatic credit/debit payments, keeping a card on file (VERY important to get a signed consent to use the card in the case of any dispute)

5. Payment coupons – Very old school, but some people like them. Some people like a monthly statement and envelope.

6. Offer an incentive for early payment of balance.

Be smart about your payment plans and make sure your collection agencies are too. Remember that people are busy. Make it easy for them to pay. Convenience is key!