Don't let your outstanding payables hinder your growth

Pioneer Blog


How and When To Write A Collection Letter

04-15-2013

The prompt collection of accounts receivable is vital to keeping your business running, but many customers are taking longer and longer to pay their invoices. When late-paying customers don’t respond to your phone calls or emails requesting payment, you may need to send a collection letter. When that time comes, you should take great care in drafting the letter.

If your letter sounds too threatening, you run the risk of losing whatever goodwill may remain with the client. But if you’re not serious enough, the client may disregard your letter and go on ignoring your collection efforts.

Finding the right tone in your collection letters is a balancing act. You must communicate the urgent need for payment while trying not to alienate the customer. Try to be positive and nonthreatening, especially with your initial letters, because your customer may have simply misplaced the invoice or overlooked payment for some other reason. Become progressively more firm in tone in each subsequent letter.

At what point should you send a collection letter? Each circumstance is different, but here’s one example of how you might proceed.

If your customer has not responded to two or three phone calls in the first two weeks an account is past due, send a past-due invoice along with a firm but friendly letter on day 45 (past the initial invoice). It could read something like this: “Because I haven’t been able to reach you by phone to discuss your outstanding invoice, I’m following up in writing to make you aware of the past-due status of your account. Please remit payment at once or feel free to contact me if you have any questions about the invoice.”

If you still do not get a response by day 60, consider sending a second letter with a sterner tone. For example: “This is my second attempt to reach you in writing with regard to your outstanding invoice. According to the terms of your credit with our company, your payment was due within 30 days of the invoice date, which was February 15 2012. Please remit payment at once, or your account will be turned over to a debt collection agency  .”

If there is still no response from your customer, it may now be time to hire a commercial collection agency. In doing so, make sure the collection agency provides the debt collection service  you require.



 




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