If you are handling your own debt collections in house, then you already recognize the need to periodically send demand letters to delinquent customers.
Most business owners opt for the gentle option of sending a friendly reminder notice to act as their collection letter, hoping that payment has simply slipped the customers mind temporarily.
These are often effective, but they can be improved by learning some tips to help you write a better demand letter. This can help make customers want to pay you sooner, as opposed to later.
1. Careful Professional Wording
Demand letters should never be written in a threatening, harassing or abusive tone. Some delinquent customers may get defensive, perceiving your letter as threatening, even if it wasn't meant as such. This can have negative consequences, not the least of which is that the customer won't be in the mood to pay you. It can even result in legal retaliation.
Always keep your collection letters professionally worded so that your customer is reminded of their unpaid debt and encouraged to pay. The gentle encouragement is usually enough to reassure your customers that theyre not being attacked and many will find a way to pay their debt.
2. Be Accurate
Your collection letter should state the exact amount the customer owes and when the payment was due. You may also want to mention the services or goods provided as a reminder, although this isnt always necessary. Where possible, try to keep your letters brief and to the point.
3. Payment Settlements/Arrangements
If some customers are avoiding all contact, you might want to offer a payment arrangement. They might be ashamed of admitting financial difficulties, and a payment plan with smaller payments over time might be more financially manageable for your customer.
They could become more cooperative after being offered payment arrangements, because smaller payments are less financially stressful.
4. Penalties And Late Fees
Mentioning the possibility of late fees or penalties might be a further incentive for some customers to pay. Your demand letters could mention tacking on additional late fees if the account continues to remain delinquent. Faced with the possibilities of still more fees, some customers will find the money needed to pay the debt.
These suggestions can increase the cash flow to your business, by receiving smaller payments over a period of time. They will also encourage your late-paying customers to pay their past due accounts.
If youre dealing with your debt collection procedures in-house and writing your demand letters yourself, you must not imply that a debt collection agency is involved in the collecting.
You also have to exercise caution, that none of your language contains any threatening language of any kind. For instance, you cannot threaten legal action if you're not actually working with an attorney. You can't threaten to garnish a debtor's wages, nor can you imply that you're working with a government agency to collect your debt.
Its also a violation of federal statutes to try to make your demand letter look like its been written and sent by a state or federal agency or from a court.
Use your own regular business stationary and keep your writing tone professional and encouraging. As a general rule, send two letters approximately 30 days apart. If youre still not meeting with any success, then it may be time to consider alternative methods of debt collection, which may include appointing an agency to assist your collection methods. - 31979
Most business owners opt for the gentle option of sending a friendly reminder notice to act as their collection letter, hoping that payment has simply slipped the customers mind temporarily.
These are often effective, but they can be improved by learning some tips to help you write a better demand letter. This can help make customers want to pay you sooner, as opposed to later.
1. Careful Professional Wording
Demand letters should never be written in a threatening, harassing or abusive tone. Some delinquent customers may get defensive, perceiving your letter as threatening, even if it wasn't meant as such. This can have negative consequences, not the least of which is that the customer won't be in the mood to pay you. It can even result in legal retaliation.
Always keep your collection letters professionally worded so that your customer is reminded of their unpaid debt and encouraged to pay. The gentle encouragement is usually enough to reassure your customers that theyre not being attacked and many will find a way to pay their debt.
2. Be Accurate
Your collection letter should state the exact amount the customer owes and when the payment was due. You may also want to mention the services or goods provided as a reminder, although this isnt always necessary. Where possible, try to keep your letters brief and to the point.
3. Payment Settlements/Arrangements
If some customers are avoiding all contact, you might want to offer a payment arrangement. They might be ashamed of admitting financial difficulties, and a payment plan with smaller payments over time might be more financially manageable for your customer.
They could become more cooperative after being offered payment arrangements, because smaller payments are less financially stressful.
4. Penalties And Late Fees
Mentioning the possibility of late fees or penalties might be a further incentive for some customers to pay. Your demand letters could mention tacking on additional late fees if the account continues to remain delinquent. Faced with the possibilities of still more fees, some customers will find the money needed to pay the debt.
These suggestions can increase the cash flow to your business, by receiving smaller payments over a period of time. They will also encourage your late-paying customers to pay their past due accounts.
If youre dealing with your debt collection procedures in-house and writing your demand letters yourself, you must not imply that a debt collection agency is involved in the collecting.
You also have to exercise caution, that none of your language contains any threatening language of any kind. For instance, you cannot threaten legal action if you're not actually working with an attorney. You can't threaten to garnish a debtor's wages, nor can you imply that you're working with a government agency to collect your debt.
Its also a violation of federal statutes to try to make your demand letter look like its been written and sent by a state or federal agency or from a court.
Use your own regular business stationary and keep your writing tone professional and encouraging. As a general rule, send two letters approximately 30 days apart. If youre still not meeting with any success, then it may be time to consider alternative methods of debt collection, which may include appointing an agency to assist your collection methods. - 31979
About the Author:
David P. Montana has been a renowned industry expert, business consultant and author in collection agencies services for thirty years. He provides more valuable tips and resources on writing an effective demand letter.
