Sure-Fire Ways to Improve Your Collections
What happens when customers get behind on instrument rental payments or rental instruments aren’t returned? At 2015 Summer NAMM, Robin Sassi and Kimberly Deverell of San Diego Music Studio gave music retailers the lowdown on collections for rental instruments. Sassi and Deverell spoke frankly from 21 years of experience in business and shared valuable tips on how to avoid pitfalls, improve collections and help the bottom line. (Note: This is not legal advice. For more information, consult a legal professional.)
When do you start the collection process?
Deverell stated that it’s best to start collections right away. “The longer you wait, the more likely you are to lose the instrument or income,” she said. With Autopay, if a credit card gets declined, Deverell is notified and can investigate right away. Sassi noted that staying on top of collections has yielded a lower customer delinquency rate of 2–3 percent.
Establish a timeline.
Sassi and Deverell outlined their process for collections:
Week 1. Phone call. Give people the benefit of the doubt. Make it friendly.
Week 2. Phone call, letter and email. Sassi and Deverell keep customer hard files, and when they get too thick, the customers are flagged and removed from promotional lists and coupon giveaways.
Week 3. Phone call and email. Be consistent with your follow-up.
Week 4. Phone call, email and in-person visit. Sassi and Deverell go to the customer’s home, knock on the door or leave a note if there’s no response. They recommended sending two people to customer homes for safety. Deverell stated that many times, they’ve had payoffs at the door or customers who’ve simply handed the instrument back. Also, San Diego Music Studio’s rental agreement states that the company charges $65 to pick up an instrument.
Week 5. Formal letter and small claims court packet via certified mail. The letter tells customers what you’re going to do if you take them to small claims court and serve them a summons.
Sassi and Deverell emphasized that you must be aggressive. As a small business, you don’t have the luxury of losses for instruments or rental income, however minor.
Do’s and Don’ts
Do keep a paper trail. Document everything in case you have to go to court.
Do make it friendly. You don’t know a person’s circumstances until you follow up.
Do call from a private number (*67). The person might not pick up if he or she has caller I.D. and you’re calling from your store’s number.
Do follow through. If the person still hasn’t paid, decide if you’re going to file with small claims court. “It might not be worth it [for example, if there’s under $100 left on the instrument payment],” Sassi said.
Don’t harass the customer. Always be polite and correct.
Going to small claims court.
Sassi and Deverell shared some hard-won tips on going to small claims court:
Before you file.
• Know where your customer is employed.
• Know where your customer banks.
• Know the last four digits of your customer’s social security number.
• Google the customer. Use social media, such as Facebook, to gather more information.
Before the trial.
• Get the small claims forms. (You can print them from online.)
• Follow the directions for completing the forms or use small claims advisors for guidance.
• Serve the defendant. Sassi advised that you hire a professional processor, which costs $60–$90. Many times, the customer doesn’t show up. His or her wages can then be garnished when you receive a court judgment in your favor. Instruments can be returned at any time.
• Have your paperwork organized. Bring the timeline and the customer hard file. Make sure you have three copies of the file: one for the judge, one for the defendant and one for you.
• You must complete a proof-of-service form, and it must be mailed 10 days before the trial.
• Be prepared to argue your service.
After the trial.
• Your options are outlined as part of the court judgment.
• More paperwork needs to be filed.
• You can garnish wages or pursue a bank levy on their accounts.
• You can file an order to appear. They must come, and you can ask them questions, such as where they bank.
And there may come times when you just can’t get the instrument. “You have to let it go,” Sassi said.