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Writing Collection Messages |
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The excuses for overdue accounts are as different as the individuals and companies they represent. Maybe the bill got overlooked during a vacation. Maybe it was accidentally thrown out with the junk mail. Possibly the customer is having a temporary cash flow problem. Or it may just be that the customer is so far in debt, it appears that the account is never going to get paid. So, what is a business to do if overdue accounts are becoming a problem? The best solution is to have a collection system in place to address this issue. Most individuals and companies are responsible and want to pay their bills. Their reputation is important to them, and they prefer to keep a good credit rating. Therefore, a good collection system generally gets the results you want. Think of collection as a process, not a single demand. You want to get your money due to you and maintain goodwill with your customer while you are collecting your money. Don’t assume your customer is a deadbeat and not going to pay you. A conscientious customer would be embarrassed to find out that his account was overdue. If you have a customer that always pays her bills on time and then is late on a bill, take the time to find out what happened. You don’t want to blame the customer; you simply want to provide information that the account is overdue. Ensure that overdue accounts are flagged early and send out simple reminders on a timely basis. Create a series of collection form letters that increase in seriousness as the overdue account continues to remain unpaid. Generally, a collection series is broken down into five letters: notification, reminder, inquiry, urgent notice and ultimatum. Notification Notification is basically the monthly statement received each month by customers. It includes the terms of the credit agreement, the amount currently due, date payment is due, penalties for late payment and the full amount remaining on the account. Reminder A reminder notice will go out a few days after the payment due date is missed. You simply want to let the customer know the payment date was missed. The idea is not to be aggressive, only concerned. The situation is still looked at as a minor problem. Instead of using a separate form letter for a reminder, some companies resend the original invoice with a hand written note indicating that payment has not been received. Inquiry Companies may not get a response after the reminder notice, but this doesn’t necessarily mean the customer is unwilling to pay the debt. What it probably indicates is that the customer is having unusual financial or personal circumstances that are preventing the bill from being paid. Continue to try to maintain goodwill with the customer and not assume all is lost. This is especially true if the customer has always paid his bills on time in the past. When you are confronted with a situation that is more than an oversight, the correct action is to be personal in your approach. Ask the customer why the invoice has not been paid and ask them to call you to discuss the situation. Your willingness to be human at this point will often solve the problem. Once the customer opens up the lines of communication and tells you what the problem is, you have a better idea of how to handle the situation. Urgent Notice The urgent notice is where you take on a more serious tone-- yet avoid threats. You still want to maintain customer goodwill and help them save face, if possible. A good technique is to have the letter signed by someone high up in the company. Clearly state the amount due and indicate consequences if the overdue account is not paid. Again, ask them to call you and also offer to work out a payment plan with them. Ultimatum Unfortunately, for some people the ultimatum letter is necessary to get their attention. Remind them again of the negative consequences of not paying their debt. Be polite and business like, but you don’t need to be personal. You should use your most serious tone in clearly reemphasizing what monies are due and setting a specific deadline before the account is turned over to a collection agency.
This article reprinted from the Riverside Business Journal |
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