To keep your cash flowing smoothly, smart businesses use carefully scheduled letters and phone contacts to convince clients to pay. These contacts start out friendly and gradually become more serious and insistent as payments become increasingly late. How you structure your collections approach is your choice. The important thing is to have a tight system and to use on every account to it. The following outline will help start designing yours.
1. CLIENT APPROVAL PHONE CONTACT
Approximately 3 days after your product or service has been delivered make your first phone contact. Dissatisfied clients are more likely to pay late. Head off early issues by making a friendly phone contact. This will help you talk with your client about your company’s performance to make sure you have met their expectations. Did the delivery of your goods or service arrive on time, in the correct quantity, was there damage, is the pricing correct. End these calls by mentioning that an invoice will be arriving shortly, and underscore its due date.
2. OVERDUE NOTICE, 5 DAYS PAST DUE
You are just giving them a friendly notice reminder that the due date has passed. You give them the benefit of the doubt and let them know that you are assuming that the client has forgotten, misplaced, or lost the bill in the A/P department and will pay with this reminder. You may want to mail or email a duplicate invoice with “past due” stamped on it in red ink.
3. SECOND OVERDUE NOTICE, ADDITIONAL 10 AFTER THE FIRST
This should still be another easygoing reminder to the client that the account needs immediate attention. This can be a short form letter or email with a duplicate invoice attached. Keep it friendly and non-threatening. TRY THIS:
We are writing to remind you to make payment on your overdue balance, which may have been overlooked. Please remit a check for $ in the enclosed envelope to bring your account up to date. Thank you for your cooperation.
4. FIRST COLLECTION PHONE CALL, 7 DAYS AFTER SECOND PAST DUE INVOICE
Make a phone call to find out what is the reason for non-payment. The client may now be dissatisfied with your product or service, or may be experiencing cash flow problems. Be polite but firm and make sure that you get a commitment to pay. Expect excuses and be prepared the handle them on this call. If the debtor says the check is in the mail, ask when it was mailed and to what address.
5. FIRST COLLECTION LETTER, 29 DAYS AFTER ORIGINAL DUE DATE
This letter should still be polite, but more probing and straight forward. Confirm in this letter what was promised in your previous contact in the call, and remind the debtor their promise to pay. TRY THIS:
Per our previous conversation on (Date), you had indicated that you would send us your payment in full. Let’s finalize this matter now. Please mail you payment in full today.
6. SECOND COLLECTION PHONE CALL, 39 DAYS AFTER ORIGINAL DUE DATE
The claim is almost 40 days past due. Be polite yet firm, and ask for full immediate payment. Work to resolve excuses. Find out what the real problem is. If the debtor cannot pay in full immediately try to get a partial payment today. Failing that, get him or her to commit to a payment date. This date should be in no more than 2 weeks.
7. SECOND COLLECTION LETTER, 49 DAYS AFTER ORIGINAL DUE DATE
Now you should be ramping up the tone and letting the debtor know that you consider this a serious delinquency. This letter should demand immediate payment, and discuss the short-term consequences of failure to pay. Send this letter ? and any correspondence that follows ? via certified mail or overnight mail to give you a record that it was received. TRY THIS:
Our numerous attempts to resolve your long overdue account have not been successful. If payment is not received within 7 days, we will be forced to suspend your credit privileges with our company. Please promptly contact us with an explanation for nonpayment or a payment plan for your overdue account.
8. THIRD COLLECTION PHONE CALL, 60 DAYS AFTER ORIGINAL DUE DATE
No is the time stress the seriousness of the situation. This is the contact where you explain there no more options available to payment in full. You are prepared to turn this account over to a collection agency and if necessary take further legal action. Be sure to let them know the benefits of taking care of this issue now, such as continuing good relations and their good credit. Offer to pick up the payment by overnight carrier or give them your bank information so they can do a bank to bank wire.
9. FINAL COLLECTION LETTER, 67 DAYS AFTER ORIGINAL DUE DATE
You now are taking a demanding tone. State that if payment is not received by the agreed-upon date, you will turn the account over to a collection agency. TRY THIS:
We have turned your account over to (name of collection agency), our collection agency to collect your overdue balance of $ . There remains one final opportunity to resolve your account while avoiding needless additional costs and embarrassment. If we receive your check for $ within the next 5 days (or reach an acceptable payment arrangement) then we will stop further collection action.
10. TURN OVER TO COLLECTION AGENCY
The account is now 70+ days in past due and may require a professional collection approach. Your collection agency can send a ten day demand, a 48 hour fax demand, whatever you require. Receiving a letter from a 3rd party collection agency often will prompt a debtor to pay. If you have not received a response to the last collection letter within five days you should immediately place account with a professional and licensed agency.