Slow Pay Customers
Collecting money owed from customers can sometimes be difficult, even more so with the present economic situation we are now experiencing. Debt collection letters can be a useful debt collection tool in helping your or your business collect on past due accounts.
A collection letter from your business is a key element to the debt collecting process and serves as legal confirmation and documentation of your attempts to collect monies owed. However, collecting for services rendered or goods sold when due dates on payment pass should be acted on immediately in order to show the seriousness of the situation.
The Debt Recovery Letter Process
Once the due date for payment has passed, a demand letter should be sent the debtor, although a phone call could be used for the initial approach on demand for payment. If after a series of phone calls there is still no response to your demand for payment, it is wise to begin sending debt collection letters on a regularly scheduled basis, for example once a week. Once the debtor receives the first letter, they usually understand the seriousness of the situation in collecting the money owed to you or your business.
The first debt recovery letter should provide all of the current information about their debt. Including the amount due, how much time you are willing to provide them to pay the balance of the debt, the interest accruing on the amount owed and any other necessary information. The character of the first letter should be such that the debtor understands you empathize with them and understand their possible financial difficulty, yet firm about the need for them to pay the balance. Always emphasize your wish to continue in a business relationship with them and ask what the reasons are for late payment. It is important at this point that you make sure the debtor is aware you are open to solutions to the payment problem and are willing to alternative payment arrangements.
If after five to seven days you’ve had no response form the first letter is time to send a second letter with a slightly more aggressive since of urgency. Remain open to discussion about payment options but make sure they understand you are serious about collecting the debt. Outlining the original payment agreement and a copy of the original contract along with the invoice could be included to remind them of their original agreement and responsibility.
If after another business week has passed, it is time to send a third in a series of debt collection letters. In this letter you will be more aggressive, repeating all the steps in both letters one and two but also include a statement about the possibility of legal steps if the balance is not paid on the money owed. You have the rights as a creditor to collection money from a debtor and used the legal system to enforce payment.
If there is still no response after the third letter, it is time to send a fourth letter. In this letter you will omit any feelings of sympathy as this will be a demand letter. You will again provide all information regarding the account, balance owed, original invoice and contract and also inform them you are about to employ the services of a collection agency. At this point, you could offer to settle the dent for less the original amount of the invoice. This is entirely up to you since you are the business owner or creditor. If after the fourth letter you still have has no response from the debtor, it is time to consider utilizing third party services which specialize in debt collections.
Collection of monies owed can be a slippery slope. Many times arrangements can be made by a simple phone call and discussing the situation with the debtor. Other times it’s necessary to utilize tools such as debt collection letters and in some cases, outside collection agencies. In the event you have a customer withholding payment, collection letters should be used before employing third party services which sometimes can cost more than the balance of the invoice you are trying to collect.
Written by abdulrahman
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