Writing collection letters to non-paying clients is an inevitable task of every business owner. To increase your odds of getting paid what you’re owed, craft a detailed payment policy in advance of issuing credit and use tact and professionalism when attempting to collect on past-due accounts.
Create a Payment Policy
Before you allow a customer or client to defer payment, pay on credit or pay after delivery of products or services, develop a payment policy that outlines your terms. This should include details on when you consider a payment past-due, such as 10 days or 30 days after an invoice is issued. It should also include details about what will happen if non-payment continues, such as issuing penalties and late fees, discontinuing services or taking legal action.
Address the Specifics
Refer to your contractual agreement with the customer in drafting your collection letter. Reference the order, the invoice number, the date of service or purchase and the date the original payment was due. If there were previous attempts to collect, mention those as well, and give the customer a total that includes penalties. For example, “Your order of 1,000 water bottles was delivered on October 1 and an invoice for $250 was issued via email October 3 with a payment date of November 3. Your account is now 30 days past-due and your account has been assessed a $25 fee, making your outstanding balance $275, payable immediately.”
Be Sympathetic, Yet Firm
While some non-paying customers may be dodging their bills, others may have forgotten their payment date or have serious cash flow issues. Give customers the benefit of the doubt when writing collection letters to avoid putting them on the defensive. For example, “We understand unforeseen circumstances can arise and we’re committed to working with you to resolve this matter.” This approach doesn’t insult the customer, but makes it clear that payment must be made regardless of circumstances.
Attach Verification Documents
Attach to your collection letter copies of previously issued invoices, past correspondence over the issue, a copy of any signed contract or written agreement and excerpts from your payment policy. If you are willing to negotiate on the balance or take partial payments, outline the specific terms of your offer. Provide a number to call if the customer has questions and include a pre-paid, self-addressed envelope for easy payment.
Use an Attorney
If repeated attempts to collect on past-due accounts doesn’t prove fruitful, you may opt to have an attorney send the collection letter on your behalf. Your lawyer may recommend threats of small claims court, a referral to a collection agency, credit reporting or other legal actions. Weigh the cost-benefit of what it would take to farm out your collection efforts to a legal professional versus the amount you can potentially collect from your customer. For example, using an attorney to write a collection letter for a $50 bill might not be cost-effective, but employing professional help for collection on a $10,000 account would almost certainly be worth the expense.